Massey Knakal Multifamily Summit AFFORDABLE HOUSINGThe Changing Fundamentals of the Low Income Housing Market Federal Tax Credits Chilly Climate on the Hill Friedman LLP 1700 Broadway, New York, NY 10019 Wednesday, November 16, 2011 presented by Steven C. Barranca, Principal
Federal Tax Credits (indirect financing) Low-Income Housing Rehab/Historic New Markets Tax Credit Tax Credit Tax CreditFed Tax Law IRC Sec. 42 IRC Sec. 47 IRC Sec. 45D% credit on 4% - 9% each year 10% re: pre-1936 bldg 5% each year foreligible/qualified for ten years 20% re: historic structure three yearscapital investment (one year only) 6% each year for four years (7 years total)Subject to Yes (15 year) Yes (5 year) Yes (7 year)recapture on earlydispositionSubject to complex Yes Yes Yescompliancerequirements
Low-Income Housing Tax Credit STRUCTURE S/H LENDER Investors Loan ProceedsEquityInvestment Development Developer Corp Affiliate LLC 99% LP (cash basis) Property 1% GP Management Fee Contribution Investor Tax Credits or Partnership - LIHTC Development (accrual basis) Development 99% LP 1% GP Affiliate LLCEquity (cash basis)Investment Tax Credits Operating - LIHTC Development Fee Partnership (accrual basis)
Combined LIHTC and HTC Pass-Through STRUCTURE General Partner Investors Investors in LIHTC in HTCEquity Tax Credits Developer Equity Tax Credits - LIHTC - HTC Developer Fees Pass thru HTC Limited Limited Partnership Rent Partnership (Property Owner) (Master Lease) Equity or Loan Rent Tenants
New Markets Tax Credit STRUCTURE $3,000,000 Equity Investor • $3,900,000 tax credits • Interest /Return on capital $7,000,000 Loan Community Development Investment Fund (99.99% owner Entity Lender of Sub-CDE (0.01% owner of Sub-CDE) Interest $10,000,000 Qualified • $3,900,000 tax Fees Equity Investment credits • Interest /Return on capital Sub-CDE• $7,000,000 Senior 30-year loan (QLICI)• $1,500,000 Subord 30-year loan (QLICI) Interest /Return on capital• $1,500,000 Equity Invest. (QLICI) Borrower (QALICB) Project Costs Project
Federal Tax Credits Under AttackLIHTCHISTORIC TAX CREDIT Government officials discuss possible reduction in credit ratesNEW MARKETS TAX CREDIT Scheduled to expire 12/31/11. Pending legislation to extend to 2016.Recent FEDERAL Case (Fourth Circuit):Virginia Historic Tax Credit Fund 2001 LPBAD RESULT
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