Transcript THE LIHTC Program

Tax Credit Basics
Nebraska Investment Finance Authority © 2005
Source of Funds
• Funds originated from the Internal Revenue Code,
Section 42.
• Tax Reform Act of 1986.
• The amount of tax credits issued to each state is
based on $1.90 per capita per year.
• Amount to Allocate in 2006 (estimated): $3,319,707
• Generally over-subscribed: 3:1
Nebraska Investment Finance Authority © 2005
Types of Credits and Unit Requirements
• To qualify:
20% of Units at 50% AMI* or
40% of Units at 60% AMI*
*AMI = Area Median Income
• Types of Credits:
– Annual “9% cycle” for construction (new/rehab)
• First Round Applications Due: 9/12/2005
• Second Round Applications Due: 2/20/06
• CRANE Applications: Accepted monthly
– 4% credits with Tax Exempt Bonds: Applications accepted
monthly.
Nebraska Investment Finance Authority © 2005
Ownership Structure
Tax Credit Apartments,
Limited Partnership
General Partner
(Sponsor\Developer)
1%
Tax Credits
Equity
Limited Partner
(Tax Credit Investor)
99%
Nebraska Investment Finance Authority © 2005
Ownership Structure
• The Limited Partner (L.P.) owns 99% or
more and receives 99% or more of the
credits.
• The L.P. pays the General Partner
(Applicant/Developer) generally between
$.75 and $.85 per credit.
Nebraska Investment Finance Authority © 2005
Commitment to Affordability
• Only get credits for the low income units (qualified
basis).
• Retain affordability period for 15 year compliance
period plus a 15 year extended use period.
• Income and rent restrictions.
• NIFA offers points for longer affordability periods.
Nebraska Investment Finance Authority © 2005
Syndication Rate and Gap
Equity is generated from an award of Tax
Credits.
• Annual credit amount x 10 year credit
period x syndication rate.
• Cash from sale of credits fills the gap
between the permanent loan and the
total development cost.
Nebraska Investment Finance Authority © 2005
2006 Set-Asides
2006 Per Capita Allocation: $3,139,707
• At least 10% to Qualified Non-profits
• 50% Rural \ 50% Urban (MSAs)
• $1 million for CRANE projects
Nebraska Investment Finance Authority © 2005
Qualified Allocation Plan and Rules
• The QAP governs the annual distribution of tax
credits.
• Points are awarded for specific items.
• Applicants must meet threshold requirements.
• The QAP and Application can be downloaded
from NIFA website: www.nifa.org
Nebraska Investment Finance Authority © 2005
Threshold Requirements
• Development Costs Determined
• Preliminary Plans and Specifications
• Site Control (valid for 90 days)
• Zoning Approved (or conditional use permit)
• Utilities are available and adequate
• List of Board of Directors
• State and/or Local Subsidies
Nebraska Investment Finance Authority © 2005
Threshold Requirements Continued
• Syndicator Interest Letter (valid for 6 months)
• Construction/Permanent Financing (valid for 6
months)
• 15 Year Operating Proforma
• Site Specific Market Study
• Pre-notification to the Mayor
• Capital Needs Assessment (for Rehab Only)
Nebraska Investment Finance Authority © 2005
Underwriting
• Site information
• Construction design
• Estimated development costs
• Financing structure
• Organization Structure (capacity at G.P level?)
• Market Study
• Financial Feasibility
Nebraska Investment Finance Authority © 2005
Calculations of Tax Credits & Equity
Total Development Cost
Less: Non-eligible (i.e. land-soft cost)
Eligible Basis
$3,000,000
(200,000)
$2,800,000
Applicable fraction (% of LIHTC units)
Qualified Basis
X
100%
$2,800,000
Tax Credit Applicable Percentage
Annual Tax Credit
X
9%
$ 252,000
Tax Credit Period
X
10 yrs.
$2,520,000
Equity at $.80 per Credit
X
.80
$2,016,000
Total Development Cost
Less: Equity
Required Debt
$3,000,000
(2,016,000)
$ 984,000
Nebraska Investment Finance Authority © 2005
In today’s market the average
development must has a least two or
three sources of funding.
• Low-Income Housing
Tax Credits
• Affordable Housing
Trust Fund
• Federal Home Loan
Bank
• HOME funds
• USDA – Rural
Development funding
• CDBG
• TIF funds
• Historic Tax Credits
• Tax Exempt Bond Financing
• Developer Note
• Grants
Nebraska Investment Finance Authority © 2005
Other Important Dates
• Conditional Reservation:
– Follow-up information due within 60 days of Board
approval.
• Carry-over Application:
– Due November 1 for projects receiving allocations prior to
June 30. Projects receiving allocations after June 30 have
5 months from the date of conditional reservation.
• Cost Certification Application
– Due 60 days from the Placed In Service (PIS) date.
• Annual Compliance Reports:
– Due by January 15th following the PIS date, and each
year thereafter.
Nebraska Investment Finance Authority © 2005
LIHTC Fees
• Application Fee: Greater of 1% of annual credit
request or $500. (CRANE Application fee = $500)
• Reservation/Carry-over Fee: 2% of annual credit
request.
• Allocation Fee: Due at Cost Certification: 2% of
annual credit actually allocated.
• Annual Compliance Fee: 2% of annual credit
actually allocated.
Nebraska Investment Finance Authority © 2005
Maximums
• NIFA does not prescribe maximum per unit
costs.
• NIFA allows no more than 18% of annual
LIHTC authority per development.
Developers no more than 34% of total
annual allocation.
• Developer Fees and Contractor
Profit/Overhead combined can be no more
than 20% of eligible basis.
Nebraska Investment Finance Authority © 2005
Compliance Monitoring
• Annual Owner Certification of Continuing
Compliance Report required.
• File review and inspection required no later
than the end of the 2nd year following PIS.
• On-site reviews and inspections required at
least every three years thereafter.
Nebraska Investment Finance Authority © 2005
Contact for Allocation Questions
• Robin A. Ambroz
Manager of LIHTC Program
1230 “O” Street, Suite 200
Lincoln, NE 68508
Phone: 402-434-2947
Fax: 402-434-3921
Email: [email protected]
Nebraska Investment Finance Authority © 2005
Contacts for Compliance
Dudley Beyer
402-434-6931
[email protected]
Jim Hubka
402-434-6939
[email protected]
Kelly Schultze
402-434-3907
[email protected]
Teresa Kile
402-434-3916
[email protected]
Nebraska Investment Finance Authority © 2005
NIFA Website
http://www.nifa.org
Nebraska Investment Finance Authority © 2005