LIHTC Conferences (415)

Transcription

1 Novogradac Search itunes Jim Kroger, CPA Wayne Michael, CPA LIHTC Conferences (415) San Francisco Las Vegas New Orleans May Miami Jan

2 Asking tax credit questions 2

3 Instructors: Play-by-play Color commentary/analysis Wayne Michael, CPA Director of Education and Business Development Jim Kroger, CPA Partner San Francisco Office Earning CPE Credit Polling Questions 3

4 Overview Total project costs Eligible basis Total project costs, fixed assets and eligible basis 333 Sewer 4

5 Total project costs Fixed assets Eligible basis Total project costs, fixed assets and eligible basis Land Total project costs, fixed assets and eligible basis Ineligible Commercial bldg SL Residential rental building SL Eligible Site work 150% DB Personal property 200% DB 5

6 Land Commercial bldg Total project costs, fixed assets and eligible basis Ineligible SL Residential rental building Commercial SL Eligible Personal Property Site work Off-site improvements 150% DB Personal property 200% DB Total project costs Fixed assets Eligible basis Total project costs, fixed assets and eligible basis Soft Costs Interest, utilities Marketing, org. costs 6

7 Soft Cost Capitalization Taxes/Fees Purchase price Tune up New paint Taxes/fees Total cost of asset $ 15, ,000 1,700 $ 19,500 wayne.michael@novoco.com 7

8 Interest Developer Fees Utilities Just like our example with the van, non hard costs paid (or payable) also get capitalized to the fixed assets. Security Architectural Fee Hard Costs Contractor Invoices Capitalization of soft costs: Indirect Direct Other Sometimes Always Never 8

9 Direct Soft Costs Exist because of development (directly related) 100% capitalizable to fixed assets Examples: Architectural fees Engineering fees Developer fees Local development impact fees Building permits Market studies Other Soft Costs Not related to construction, whether incurred during construction period or not Never capitalized to fixed assets Examples: Organization cost amortization Marketing Partnership management fees Syndication costs Permanent loan fees Reserves 9

10 Indirect Soft Costs Can exist before, during and after construction period (indirectly related) Portion incurred during construction is capitalized; otherwise expensed Examples: Interest Insurance Taxes Letter of credit fees Amortization of bond issuance costs and amortization of construction loan origination fees Registration Renewal Purchase price Tune up New paint Taxes/fees Total cost of asset $ 15, ,000 1,700 $ 19,500 Repairs EXPENSE $800 Registration EXPENSE $XXX wayne.michael@novoco.com 10

11 Placed in service Placed in service 11

12 Utilities Utilities Placed in service Interest Interest Placed in service 12

13 Placed in service Planning & Design Reg 1.263A-12(f) Production Period IRC 263A(f)(1)(A) Amortization of Intangible Assets Intangible assets assets that are not tangible but provide economic benefits through Placed the in rights and privileges associated with their possession service Intangible assets have lives independent of the lives of fixed assets Amortization of certain intangible assets is part of indirect soft costs and is capitalized to fixed assets Capitalizable: Bond issuance costs, construction loan fees, other financing NOT Capitalizable Production Period Perm loan fees, organization costs IRC 263A(f)(1)(A) 13

14 Bond Issuance Costs Example: BIC of $250,000; 30-year bond term Capitalized $250,000 2 years 28 years PIS Bonds Issued Bond Issuance Costs Example: BIC of $250,000; 30-year bond term Capitalized $200,000 $50,000 2 years 28 years PIS Bonds Issued wayne.michael@novoco.com 14

15 Bond Issuance Costs Example: BIC of $250,000; 30-year bond term Capitalized Expensed $16,667 $233,333 $250,000 2 years 28 years PIS Amortization of Intangible Assets Bond Issuance Costs HOME Loan Fees Constr. Loan Fees Permanent Loan Fees Org Costs PIS wayne.michael@novoco.com 15

16 Interest capitalization is a little different. Interest Capitalization Construction Loan New Construction Balance x Int Rate Capitalized Expensed PIS Date wayne.michael@novoco.com 16

17 Interest Capitalization Bond Loan New Construction Balance x Int Rate Expensed Capitalized Expensed PIS Date Interest Capitalization Construction Loan Acq/Rehab Rehab Balance x Int Rate Capitalized Expensed Acq Capitalized PIS Date wayne.michael@novoco.com 17

18 Interest Capitalization Bond Loan Acq/Rehab Rehab Balance x Int Rate Expensed Capitalized Expensed Acq Capitalized PIS Date And finally, before moving away from soft cost capitalization wayne.michael@novoco.com 18

19 Placed in Service: Multiple Buildings Jan 1 Dec 31 May 31 Jun 29 Aug 14 PIS PIS PIS 25% 30% 45% Placed in Service: Multiple Buildings Jan 1 Dec 31 May 31 Jun 29 Aug 14 PIS PIS PIS 25% 30% 45% wayne.michael@novoco.com 19

20 Placed in Service: Multiple Buildings 75% 25% 45% 55% Jan 1 Dec 31 May 31 Jun 29 Aug 14 PIS PIS PIS 25% 30% 45% Proper Classification of Fixed Assets wayne.michael@novoco.com 20

21 Demolition Land LIHTC Search Eligible Basis Demolition Costs 21

22 Eligible Basis Demolition Costs Building = $2,000,000 $50,000 Land = $350,000 Eligible Basis Demolition Costs Building = $2,050,000 $50,000 Land = $300,000 wayne.michael@novoco.com 22

23 Eligible Basis Demolition Costs Building = $2,050,000 $50,000 Land = $300,000 Relocation Costs Land vs. Land Improvements $50,000 Land = $350,000 wayne.michael@novoco.com 23

24 Land vs. Land Improvements Building = $2,030,000 $30,000 = Land Improvement $30,000 Eligible Basis inextricably associated Site work/landscaping TAM Rev. Rul wayne.michael@novoco.com 24

25 Total project costs Total project costs, fixed assets and eligible basis Site work Off-site improvements 333 Sewer Total project costs Total project costs, fixed assets and eligible basis Laundry 333 Sewer 25

26 February 8: February 29: 26

27 Novogradac Search itunes Jim Kroger, CPA Wayne Michael, CPA 27