This document summarizes key aspects of three federal tax credit programs - Low-Income Housing Tax Credit, Historic Tax Credit, and New Markets Tax Credit. It provides an overview of the percentage credit and eligibility requirements for each. Additionally, it discusses the common structures used for partnerships and pass-throughs involving tax credit investors. Finally, it notes that the federal tax credit programs are currently under political threat, with proposals to lower credit rates or allow credits to expire without extension.

1. Massey Knakal Multifamily Summit
AFFORDABLE HOUSING
The 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

2. Federal Tax Credits
(indirect financing)
Low-Income Housing Rehab/Historic New Markets
Tax Credit Tax Credit Tax Credit
Fed 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 for
eligible/qualified for ten years 20% re: historic structure three years
capital 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 early
disposition
Subject to complex Yes Yes Yes
compliance
requirements

3. Low-Income Housing Tax Credit STRUCTURE
S/H LENDER
Investors
Loan Proceeds
Equity
Investment
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 LLC
Equity (cash basis)
Investment
Tax Credits Operating
- LIHTC
Development Fee
Partnership
(accrual basis)

4. Combined LIHTC and HTC Pass-Through STRUCTURE
General
Partner
Investors Investors
in LIHTC in HTC
Equity 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

5. 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

6. Federal Tax Credits
Under Attack
LIHTC
HISTORIC TAX CREDIT Government officials
discuss possible
reduction in credit rates
NEW 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 LP
BAD RESULT