Presenting a live 90-minute webinar with interactive Q&A Multi-Family Affordable Housing: Opportunities and Legal Considerations Navigating Financing Options and Structuring Transaction and Financing Documents WEDNESDAY, APRIL 10, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Stuart D. Poppel, Partner, Berman Indictor & Poppel , Philadelphia Sheldon P . Winkelman, Partner, Honigman Miller Schwartz & Cohn , Detroit Christopher L. LaGrand, Deputy Director, Michigan State Housing Development Authority , Lansing, Mich. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
Sound Quality If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory and you are listening via your computer speakers, you may listen via the phone: dial 1-866-871-8924 and enter your PIN when prompted. Otherwise, please send us a chat or e-mail sound@straffordpub.com immediately so we can address the problem. If you dialed in and have any difficulties during the call, press *0 for assistance. Viewing Quality To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again.
FOR LIVE EVENT ONLY For CLE purposes, please let us know how many people are listening at your location by completing each of the following steps: In the chat box, type (1) your company name and (2) the number of • attendees at your location Click the SEND button beside the box •
If you have not printed the conference materials for this program, please complete the following steps: • Click on the + sign next to “Conference Materials” in the middle of the left - hand column on your screen. • Click on the tab labeled “Handouts” that appears, and there you will see a PDF of the slides for today's program. • Double click on the PDF and a separate page will open. • Print the slides by clicking on the printer icon.
Multi-Family Affordable Housing: Legal Considerations Low Income Housing Tax Credit Presented by: Stuart D. Poppel Berman, Indictor & Poppel LLP poppel@biplawgroup.com 215.825.9732
Multi-Family Affordable Housing: Legal Considerations Low Income Housing Tax Credit I. HISTORY, ALLOCATIONS AND ADMINISTRATION 1. History • The Low Income Housing Tax Credit ( “ LIHTC ” ) was created by the Tax Reform Act of 1986 and recently celebrated its 25 year anniversary! • The LIHTC program is not a funding program which provides monies directly to parties developing affordable housing. • Instead, under the LIHTC program a credit against federal income tax is provided to parties developing affordable housing which meet certain criteria and that satisfy a detailed set of requirements regarding tenant eligibility and occupancy for an extended period of time. • Among housing programs, the LIHTC program is unique in that (i) its benefits are not provided in the form of monies but rather as tax benefits and (ii) it is administered by the Internal Revenue Service and not the United States Department of Housing and Urban Development (or the Department of Agriculture with respect to federal rural housing programs). • The LIHTC program is currently the largest federal program designed to promote the development of affordable housing - in 2013 the program is expected to allocate approximately $7.0 billion in federal tax credits and produces annually approximately 100,000 rental units. 6
Multi-Family Affordable Housing: Legal Considerations Low Income Housing Tax Credit 2. Administration of the LIHTC Program • Both the federal government, through the Internal Revenue Service ( “ IRS ” ), and states, through state housing finance agencies, have a role in administering the tax credit program. • The basic rules and regulations governing the LIHTC are federal rules codified at Section 42 of the Internal Revenue Code of 1986, as amended (26 U.S.C. § 42) and Internal Revenue Service regulations found at Treasury Regulations 1.42 et seq. • Each state housing finance agency (an “ HFA ” ) is given a significant role not only with respect to regulatory oversight of the tax credits utilized in that state but also with the authority to allocate the tax credits to those eligible parties as the state HFA selects pursuant to selection criteria the state HFA establishes. • As a result, although the basic rules of the LIHTC program are the same throughout the country, each state ’ s HFA is free to impose additional restrictions and requirements on recipients, as well as to structure its LIHTC application in ways to encourage certain types of LIHTC developments (for example, developments that preserve existing affordable rental housing). 7
Multi-Family Affordable Housing: Legal Considerations Low Income Housing Tax Credit 3. Allocation by IRS to States of Tax Credits • Each year the IRS allocates a certain amount of LIHTC to each state using a formula established in Section 42 of the IRS Code. This is known as the formula allocation. • In 2013, the amount of tax credits to which each state will be entitled to allocate is $2.25 per each resident of the state with a minimum of $2,590,000 for each state. The amount is adjusted for inflation each year. • The IRS, issues a Revenue Procedure that sets forth the state HFA ceiling authority for the LIHTC Program, and then a few months later the IRS issues Resident Population Estimates for each state so that the amount of LIHTC available to each state can be determined. • All states, the District of Columbia, and United States possessions such as Puerto Rico and the U.S. Virgin Islands have LIHTC authority. 8
Multi-Family Affordable Housing: Legal Considerations Low Income Housing Tax Credit 3. Allocation by IRS to States of Tax Credits (cont.) • A project owner may claim LIHTCs on their federal tax returns for each of the first ten years after their project is “ placed in service ” (which is discussed below). • An allocation of tax credits from an HFA is really a one-time allocation of ten years of tax credits - as a result, a project that receives an allocation of $1 million in tax credits and is in full compliance with the LIHTC rules and satisfies all tenant leasing requirements would be entitled to claim $1 million of tax credits against federal taxes for each of the first ten years after their project is placed in service and the owner has started the period to claim credits. • In a given year, in addition to what the Formula Allocation, states are permitted to allocate LIHTC the state HFA receives due to the return by recipients of tax credits allocated in a prior year as well as tax credits from the previous calendar year that the state HFA did not allocate. • Tax credits that are not allocated by a state HFA within 2 years are lost by the state and placed by the IRS into a “ national pool ” of unused tax credits, which the IRS then reallocates each year to states that utilized their entire LIHTC authority for the prior calendar year. 9
Multi-Family Affordable Housing: Legal Considerations Low Income Housing Tax Credit 4. Administration by States • Section 42 of the Code requires state HFAs each year to prepare an allocation plan that identifies the states' priority housing needs and contains selection criteria for awarding tax credits - that plan is known as the Qualified Allocation Plan ( “ QAP ” ). • State HFAs are required under Section 42 to allocate no more LIHTC than necessary to allow the low income housing development to proceed, and so a state HFA must evaluate factors as the reasonableness of development costs and the sources and uses of project funds. • An HFA is an agency which the state authorizes by statute to make allocations of LIHTC; states may have more than 1 HFA (though only New York does). 10
Multi-Family Affordable Housing: Legal Considerations Low Income Housing Tax Credit 4. Administration by States (cont.) • Once an LIHTC project has been “ placed in service ” , the state HFA is responsible for confirming that the developer incurred the costs it indicated it would incur in its LIHTC application and that those costs support the amount of tax credits that were previously allocated by the state HFA. • The state HFA is also responsible for monitoring the LIHTC project for compliance with federal requirements concerning household income, rents, and project habitability. • If events of noncompliance occur, the state HFA is required to file a Low-Income Housing Credit Agencies Report of Non-Compliance with the IRS (using IRS Form 8823) and if the noncompliance is not corrected within a given period of time, the IRS may recapture previously used or issued tax credits and also disallow tax credits for future years. 11
Recommend
More recommend
