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Affordable Housing Legal Update What's New for the Section 1602 and TCAP Programs Presented By Miller Nash Attorneys Ronald Shellan, Steven Christensen, & Ryan Nisle
Agenda • Introduction by Ronald Shellan • Section 1602—Tax Credit Exchange Program by Steven Christensen • TCAP—Tax Credit Assistance Program by Ronald Shellan • Oregon Program Administration by Ryan Nisle This presentation is a publication of Miller Nash LLP in conjunction with each of the presenters. It is provided for informational purposes only and does not constitute legal advice or legal opinion as to specific situations. Participants are urged to consult with the individual presenters for further information about the contents of this presentation.
Section 1602 – Tax Credit Exchange Program • Program Description: HFAs receive a “Prepaid Credit Card” by monetizing unused LIHTCs. HFAs may exchange credits for $.85 for each $1 of credit exchanged. – Up to 100% of unused 2008 LIHTCs and 40% of unused 2009 LIHTCs may be exchanged. – The HFA then makes subawards in the form of grants to project owners to construct or acquire and rehabilitate qualified low-income buildings. – Receiving a prior allocation of credits is not a prerequisite to receiving a subaward.
Section 1602 – Tax Credit Exchange Program: Current Hot Topics • Use of Subawards – ARRA requirements – Treasury Q&A – Contradictory Guidance • No use on land • No tracing required – Cap on Amount: Limited to 85% of eligible basis
Section 1602 – Tax Credit Exchange Program: Current Hot Topics • Subawards as Grants or Loans – Changing Treasury Position – Possible Modifications
Section 1602 – Tax Credit Exchange Program: Current Hot Topics • Taxable Income? – Grants: No – Forgivable Loans: ?
Section 1602 – Tax Credit Exchange Program: Current Hot Topics • Recapture – 1602 Recapture Scheme • Entire subaward is recaptured upon trigger less 1/15 th for each full year of compliance • Trigger: – If 1602% > applicable fraction, then recapture occurs when the building’s applicable fraction is less than the greater of (1) minimum set aside or (2) 1602 building percentage. – If 1602% < applicable fraction, then recapture occurs when the building’s applicable fraction is less than the greater of (1) minimum set aside or (2) the applicable fraction in the extended use agreement.
Section 1602 – Tax Credit Exchange Program: Current Hot Topics • Recapture (continued) – Possible Modifications • LIHTC Working Group letter – Partial recapture – Casualty Loss – Building Disposition During the Compliance Period
Section 1602 – Tax Credit Exchange Program: Current Hot Topics • Compliance with Section 42 – 10% Test – Form 8609 • Application of other Federal Laws – Davis-Bacon – NEPA – “Buy American”
TCAP - Tax Credit Assistance Program • Program Description. TCAP awards are made to holders of 2007, 2008, and 2009 LIHTC to provide gap financing for low-income housing projects. The LIHTC must have been received between October 1, 2006, through September 30, 2009.
TCAP: Current Hot Topics • Eligibility • Defined Terms • Application of Other Federal Laws • Grants or Loans • Taxable Income • Eligible / Depreciable Basis
TCAP: Current Hot Topics • Eligibility – Nominal Amount of Credits – Nominal Amount of Equity – Will 2010 Credits Qualify? – Completed Projects – TCAP Agreement – Return of LIHTC
TCAP: Current Hot Topics • Defined Terms – "Award" vs. "Allocation" – "Capital Investments“
TCAP: Current Hot Topics • Application of Other Federal Laws – Davis-Bacon – NEPA – Other Federal Statutory Requirements: • Lead Based Paint • Nondiscrimination under Title VI of the 1964 Civil Rights Act • Age discrimination • Affirmative marketing • No handicap discrimination • And many more
TCAP: Current Hot Topics • Grants or Loans • Taxable Income • Eligible / Depreciable Basis
Oregon Program Administration • Awards Will Be Through a Competitive Process • Initial (only?) Round August 10, 2009 • Limited to “Pipeline” Projects
Oregon Program Administration • Point System Categories – OHCS Priorities (preservation) – Readiness – Capacity and Community Impact – Defined Tie Breakers
Oregon Program Administration • General Project Eligibility Requirements – Hold an OHCS offer to reserve credits that was made between 10-1-06 and 9-30-09 and not have had 8609's issued. – Have no investor or have an investor but with a funding gap. – Have not changed materially from the original LIHTC application. – Be able to meet ARRA funding timelines
Oregon Program Administration What is Ahead in Oregon? • Housing Council • Fund-by Dates • Second Funding Round?
Questions & Answers
Thank you! Contact Miller Nash’s 17th Ronald A. Shellan Annual Affordable ron.shellan@millernash.com Housing Conference (503) 205-2541 will be on May 6, 2010 Steven L. Christensen steve.christensen@millernash.com (503) 205-2528 Ryan R. Nisle ryan.nisle@millernash.com (503) 205-2521
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