Novogradac 2016 Affordable Housing Conference Westin St. Francis, San Francisco, Calif. May 26-27, 2016

Transcription

1 Novogradac 2016 Affordable Housing Conference 1

2 LIHTC Acq/Rehab Issues MODERATOR Thomas Stagg Novogradac & Company LLP PANELISTS Levi Brooker JLL Eugene Cowan Bocarsly Emden Cowan Esmail & Arndt LLP Brad Bullock City Real Estate Advisors, Inc. Part II 2

3 Existing Tenants (at acquisition) 3

4 If initial certifications are done within 120 days, tenant qualifies as of the date of acquisition 4

5 Existing Tenants (Not previously an LIHTC property) 7/1/20XX 10/14/20XX 3/10/20XX Mar 10 Acquisition Building TIC Oct 14 Rehab Building Income Cert. Income Cert. Income Cert. Mar Days Acquisition Date Jul Days* Oct 29 Rehab completion date *The 120-day grace period is 120 days from acquisition; NOT 120 days from January 1 or 120 days from investor closing, etc Guide: Page 4-25, 4-26, 4-27,

6 Existing Tenants (Not previously an LIHTC property) 11/17/20XX Feb 26 What if... Over Income Apr 21 Acquisition Building 11/17/20XX TIC but the acquisition Nov 17 is delayed? Rehab Building Income Cert. Income Cert. Income Cert. Mar Days Acquisition Date Jul Days Oct 29 Rehab completion date 8823 Guide: Page 4-25, 4-26, 4-27,

7 Existing Tenants (Not previously an LIHTC property) What if... Apr 21 TIC Acquisition Building but the acquisition is delayed? Rehab Building Income Cert. Apr Days Acquisition Date 120 Days Aug 25 Dec 23 Rehab completion date 8823 Guide: Page 4-25, 4-26, 4-27,

8 Existing Tenants (Not previously an LIHTC property) 20XX Grandfathered TIC Acquisition Building Rehab Building Income Cert. Income Cert. Apr Days Acquisition Date 120 Days Aug 25 Dec 23 Rehab completion date 8823 Guide: Page 4-25, 4-26, 4-27,

9 Existing Tenants (Not previously an LIHTC property) 8823 Guide p Guide: Page 4-25, 4-26, 4-27,

10 Existing New Tenants 10/14/20XX 10/14/20XX Acquisition Building TIC Oct 14 Rehab Building Income Cert. NEW Income Cert. Mar Days Acquisition Date Jul Days Oct 29 Rehab completion date 8823 Guide: Page 4-25, 4-26, 4-27,

11 Income Limits for Acq/Rehab Acq Rehab PIS 2015 Income Limit 45 Days Tenant Certification 5/ Income Limit Applicable Income Limit 3/6 3/28 B MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NO

12 45-Day Rule Revenue Ruling provides that taxpayers may rely on the income limits published by HUD until 45 days after HUD releases a new list of income limits, or until HUD s effective date for the new list, whichever is later. 12

13 Income Limits for Acq/Rehab Acq Tenant Certification Rehab PIS 5/ Income Limit 45 Days 2016 Income Limit Applicable Income Limit 3/6 3/28 B MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NO

14 Income Limits for Acq/Rehab Acq Tenant Certification Applicable Income Limit Rehab PIS 2015 Income Limit Applicable Income Limit 3/6 3/ Income Limit B MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NO 5/11 45 Days LIHC Newsletter #35 May

15 Income Limits for Acq/Rehab Applicable Income Limit Tenant Certification 5/ Days Acq 2015 Income Limit 45 Days 2016 Income Limit More conservative 3/6 3/28 B MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NO

16 Income Limits for Acq/Rehab Resyndicated LIHTC Applicable Income Limit 100% Qualified (tenants grandfathered) Acq Tenant Certifications 2012 Income Limit Held Harmless 5/ Income Limit 45 Days 2016 Income Limit 8/5 3/6 3/28 B MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NO

17 Income and Rent Limits for Acq/Rehab Resyndicated LIHTC Income Hold Harmless Income Limit New households Available Unit Rule 140% x new limit for existing households Need to reset immediately at acquisition to claim credits Rent Limit 1999 Rent Hold Harmless 2016 ALL UNITS

18 Income and Rent Limits for Acq/Rehab Resyndicated LIHTC Income Hold Harmless Income Limit New households Available Unit Rule 140% x new limit for existing households Need to reset immediately at acquisition to claim credits Rent Limit 1999 Rent Hold Harmless 2016 ALL UNITS 2016 HUD Rent and Income Limits and Your Tax Credit Property: Back to Basics Webinar

19 Income Limits for Acq/Rehab Resyndicated LIHTC 100% Qualified (tenants grandfathered) Acq Tenant Certifications 2012 Income Limit Held Harmless 5/11 8/ Income Limit 45 Days Gross Rent Floor Election Rev Proc. Rent Limit Held Harmless If you received your LIHTC allocation back here 2016 Income Limit 2015 Rent Limit 45 Days 2016 Rent Limit 3/6 3/28 B MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NO *Per the tack-back rule, credits cannot be claimed prior to the beginning of the year rehab is complete Reset for Credits * 19

20 Income and Rent Limits for Acq/Rehab Hold-harmless date begins when you start relying on (see LIHC Newsletter #35) the HUD-published income limit for qualifying tenants For acq/rehab projects, any hold-harmless (if it had been LIHTC previously) from the prior allocation would not carry over to new allocation (i.e. you don t get the limits that previous owners were able to utilize) 20

21 Managing old and new LIHTC regulatory agreements for resyndicated properties 21

22 Managing old and new LIHTC regulatory agreements for resyndicated properties A resyndicated property will likely have 2 regulatory agreements in place at the same time Typically states take 1 of 3 approaches: 1. Simultaneously adhere to provisions of both regulatory agreements 2. Combine the stricter provisions of each regulatory agreement into one combined regulatory agreement 3. The newer regulatory agreement supersedes the older regulatory agreement (least likely to happen) 22

23 Managing old and new LIHTC regulatory agreements for resyndicated properties OLD Regulatory Agreement % of AMGI 30% 40% 50% 60% Total Max Rent $300 $400 $500 $600 #Units NEW Regulatory Agreement % of AMGI Max Rent #Units 30% $ % $ % $ % $ Total 100 If combining both: % of AMGI Max Rent #Units 30% 40% 50% 60% Total $270 $360 $450 $ If combined, the property will lose the HERA special and hold harmless from old allocation (assume sometime after Year 15 because you can t combine before Y15). If Abiding by both (until the old regulatory agreement expires): 10 units at $ units at $ units at $ units at $540 Combine lower max rents with more stringent unit requirements 23

24 UNIT 1 Acq First-Year Applicable Fraction 38 60= 63.33% O/R 2 Tack-Back Rule 3 4 R XFER R XFER R 5 R Acq Qualifying LIHTC Household Qualified LIHTC Unit Move Out Move In (Qual.) R O/R XFER Rehab Period (unsuitable for occupancy) Occupied Rehab Period Transfer 24

25 Tips for Maximizing Credits Try to complete a rehab of a unit within a single calendar month (no credits lost for rehab) If you can t realistically project a rehab to be completed within a calendar month (say 40-day rehab per unit), make sure your unit isn t out of service at the end of two months If the investor is in place, make sure you certify all tenants as soon as possible to take full advantage of tack-back rule 25

26 Record Keeping Tips Keep record of who is in the unit at the close of each month For any unit that is vacant; if qualified, keep track of who qualified the unit and where they went (Move out? Transfer?) When does unit become suitable for occupancy? (If rehab completed prior to end of month even if vacant) 26

27 Common Loan Issues Subordinate debt Preservation of 10-yr chain of title Per unit rehab thresholds 27

28 LIHTC Acq/Rehab Issues MODERATOR Thomas Stagg Novogradac & Company LLP PANELISTS Levi Brooker JLL Eugene Cowan Bocarsly Emden Cowan Esmail & Arndt LLP Brad Bullock City Real Estate Advisors, Inc. Part II 28