There are multiple opportunities and obstacles facing affordable housing projects during their life span. One of the more complex decisions is to determine how and when to exit the project. There are several items to consider when making this determination in order to effectively and efficiently exit the project with the least amount of legal and tax ramifications.
The first step in the process is to review and become familiar with all of the legal documents associated with the project including the partnership agreement, loan documents, development agreements, and other restrictive covenants. These agreements give a baseline as to what, if any, constraints the project will face at the time of disposing either the property or the partnership interest.
Analyzing the debt structure of the project and any discrepancies with the original underwriting is a necessary step to take early in the life span of the project. If there is a substantial amount of debt on the project, then a determination needs to be made regarding the payment or forgiveness of this debt prior to end of the project. It is imperative to determine the type of debt on the project and what limitations are associated with the debt. Refinancing the project prior to exiting might also be a viable solution.
Once a determination is made that an exit strategy is warranted, then the strategies associated with the project may range from selling the property itself to having one or more of the partners selling their specific interest. Depending upon the strategy taken, the exit taxes, from a federal, state and local perspective may be substantially different.
With the various agreements, covenants, financing sources, physical and market conditions of the project, it is never too early to begin planning for the disposition of an affordable housing project. If you would like more specific information on this topic, please download the attached presentation
The document summarizes a request for information from developers interested in an affordable housing development in College Station, Texas. It provides background on housing needs, current rental market conditions, and proposals received. One proposal, the Huntington at College Station, a 148-unit mixed-income elderly development, is discussed in detail. The developer, MGroup Holdings, is seeking city support for their competitive 9% housing tax credit application to the state. Staff recommends the city adopt a resolution of support and provide $100,000 in funding.
Wha is the Low-Income Housing Tax Credit Program in ArizonaCharles Lotzar
The Low-Income Housing Tax credit program is a federal tax credit program that was created by the Tax Reform Act of 1986. Details about the Low-Income Housing Tax Credit Program (LIHTC) can be found in the Internal Revenue Code (IRC), Section 42.Learn more about low-income housing tax credit program in this presentation.
The Oklahoma Affordable Housing Act of 2014 established a state low-income housing tax credit to encourage the development and preservation of affordable rental housing. The tax credit is capped at $4 million annually and allocated by the Oklahoma Housing Finance Agency. To receive the credit, qualified projects must reserve federal low-income housing tax credits and be located in counties with populations under 150,000. The Act aims to increase the availability of affordable rental units while being reviewed every five years to ensure effectiveness.
This document is a 16-page spreadsheet created in 1994 by William E. Bryant, CPA for projecting cash flows and valuations for low income housing tax credit developments. It includes assumptions, cash flow projections for 30 years, projected costs and tax credits, capital accounts, balance sheets, and graphs. It provides an example for clients to review and understand Bryant's analysis for these types of real estate projects.
The document provides information about the Low Income Housing Tax Credit (LIHTC) program, including:
- It was established 28 years ago and has financed over 2.6 million affordable housing units, creating 95,000 jobs annually and raising $100 billion in equity capital.
- Each state receives tax credits based on its population that it awards competitively to affordable housing developments. Developers sell the credits to investors to raise equity capital.
- The program has been very successful, with a low foreclosure rate of 0.65%, and it creates safe, decent affordable housing while also stimulating local economies and job growth.
- However, the need for affordable housing still outpaces production, with a shortage of over 5
The document provides background on the Affordable Housing Tax Credit program and discusses legislative changes that have impacted the program. It describes how the Housing and Economic Recovery Act of 2008 and American Recovery and Reinvestment Act of 2009 increased tax credits and other funding to boost affordable housing development during the economic downturn. It also outlines how Midwest Housing Equity Group invests in low-income housing tax credit projects to raise equity for development.
EE in Affordable Rental Housing Brief_FINALAlise Newman
This study analyzed energy usage data from 15 low-income housing tax credit properties in Virginia to evaluate the impact of energy efficient design and construction. It found that apartments built to higher energy standards used 17% less energy than estimated. Residents saved an average of $648 per year on electricity bills. With over 13,000 such units certified in Virginia since 2007, total annual savings amount to over $8 million. However, resident surveys showed opportunities for further savings through better education on efficient energy behaviors.
The document summarizes a request for information from developers interested in an affordable housing development in College Station, Texas. It provides background on housing needs, current rental market conditions, and proposals received. One proposal, the Huntington at College Station, a 148-unit mixed-income elderly development, is discussed in detail. The developer, MGroup Holdings, is seeking city support for their competitive 9% housing tax credit application to the state. Staff recommends the city adopt a resolution of support and provide $100,000 in funding.
Wha is the Low-Income Housing Tax Credit Program in ArizonaCharles Lotzar
The Low-Income Housing Tax credit program is a federal tax credit program that was created by the Tax Reform Act of 1986. Details about the Low-Income Housing Tax Credit Program (LIHTC) can be found in the Internal Revenue Code (IRC), Section 42.Learn more about low-income housing tax credit program in this presentation.
The Oklahoma Affordable Housing Act of 2014 established a state low-income housing tax credit to encourage the development and preservation of affordable rental housing. The tax credit is capped at $4 million annually and allocated by the Oklahoma Housing Finance Agency. To receive the credit, qualified projects must reserve federal low-income housing tax credits and be located in counties with populations under 150,000. The Act aims to increase the availability of affordable rental units while being reviewed every five years to ensure effectiveness.
This document is a 16-page spreadsheet created in 1994 by William E. Bryant, CPA for projecting cash flows and valuations for low income housing tax credit developments. It includes assumptions, cash flow projections for 30 years, projected costs and tax credits, capital accounts, balance sheets, and graphs. It provides an example for clients to review and understand Bryant's analysis for these types of real estate projects.
The document provides information about the Low Income Housing Tax Credit (LIHTC) program, including:
- It was established 28 years ago and has financed over 2.6 million affordable housing units, creating 95,000 jobs annually and raising $100 billion in equity capital.
- Each state receives tax credits based on its population that it awards competitively to affordable housing developments. Developers sell the credits to investors to raise equity capital.
- The program has been very successful, with a low foreclosure rate of 0.65%, and it creates safe, decent affordable housing while also stimulating local economies and job growth.
- However, the need for affordable housing still outpaces production, with a shortage of over 5
The document provides background on the Affordable Housing Tax Credit program and discusses legislative changes that have impacted the program. It describes how the Housing and Economic Recovery Act of 2008 and American Recovery and Reinvestment Act of 2009 increased tax credits and other funding to boost affordable housing development during the economic downturn. It also outlines how Midwest Housing Equity Group invests in low-income housing tax credit projects to raise equity for development.
EE in Affordable Rental Housing Brief_FINALAlise Newman
This study analyzed energy usage data from 15 low-income housing tax credit properties in Virginia to evaluate the impact of energy efficient design and construction. It found that apartments built to higher energy standards used 17% less energy than estimated. Residents saved an average of $648 per year on electricity bills. With over 13,000 such units certified in Virginia since 2007, total annual savings amount to over $8 million. However, resident surveys showed opportunities for further savings through better education on efficient energy behaviors.
The presentation summarized the District of Columbia's approach to affordable and mixed-income housing. It discussed defining affordable housing, population growth driving the need for more units, tools used to finance development like tax incentives and the Housing Production Trust Fund, and innovative programs promoting mixed-use development and tenant ownership. Challenges included slow delivery of inclusionary zoning units due to the economy and lack of staff to monitor affordability requirements. Moving forward, the mayor committed $287 million in additional funding with a goal of producing 10,000 affordable units by 2020.
This document summarizes information presented by David Kunhardt on affordable housing in San Rafael, California. It discusses the housing continuum from homeownership to supportive housing solutions. It provides data on income levels and housing costs. It also outlines various federal housing programs and subsidies over time. Additionally, it highlights how the Low Income Housing Tax Credit program works to incentivize private investment in affordable rental housing. The document emphasizes that affordable housing benefits communities and outlines actions that can be taken to support more housing choices in Marin County.
General introductory information regarding Midwest Housing and the Low Income Housing Tax Credit. Information regarding using the Low Income Housing Tax Credit to assist in meeting CRA requirements.
Midwest Housing Equity Group, Inc. (MHEG) was created in 1993 to raise equity capital for affordable rental housing. MHEG has since expanded to invest in properties across Nebraska, Iowa, Kansas, and Oklahoma, creating over 6,700 affordable units. The document provides details on MHEG's mission, portfolio growth, organizational structure, investment process, and benefits for participating financial institutions.
Example of Low Income Housing Tax StructureWilliam Bryant
Organizational Chart showing the Tax Structure of the Entities in a Limited Partnership. Note the percentage of Ownership for the Limited Partner that is acquiring the Flow-Thru of the Low-Income Housing Tax Credits.
Ivan Kaufman gives insight on the Low Income Housing Tax Credit Program (LIHTC), including when it was founded, what it's main objective is, how it's administered, who is eligible to apply, and its reduction on taxes.
The document summarizes changes to Connecticut's Low-Income Housing Tax Credit (LIHTC) program for 2015, including amendments to the Qualified Allocation Plan and procedures. Key points include $50 million available in tax credits, priorities for supportive housing and mixed-income developments, new scoring criteria, application deadlines in November 2015, and guidance on underwriting, construction requirements, and contacts for technical assistance.
Public Private Partnerships (Ppp) And Affordable Housing By David HoickaDavid Hoicka
Public Private Partnerships (PPP) and Affordable Housing by David Hoicka. Review of PPP as a £60 billion, $90 billion industry and its application to Affordable Housing
Monthly Market Risk Update: June 2024 [SlideShare]Commonwealth
Markets rallied in May, with all three major U.S. equity indices up for the month, said Sam Millette, director of fixed income, in his latest Market Risk Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
Dr. Alyce Su Cover Story - China's Investment Leadermsthrill
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
Navigating Your Financial Future: Comprehensive Planning with Mike Baumannmikebaumannfinancial
Learn how financial planner Mike Baumann helps individuals and families articulate their financial aspirations and develop tailored plans. This presentation delves into budgeting, investment strategies, retirement planning, tax optimization, and the importance of ongoing plan adjustments.
KYC Compliance: A Cornerstone of Global Crypto Regulatory FrameworksAny kyc Account
This presentation explores the pivotal role of KYC compliance in shaping and enforcing global regulations within the dynamic landscape of cryptocurrencies. Dive into the intricate connection between KYC practices and the evolving legal frameworks governing the crypto industry.
Poonawalla Fincorp’s Strategy to Achieve Industry-Leading NPA Metricsshruti1menon2
Poonawalla Fincorp Limited, under the leadership of Managing Director Abhay Bhutada, has achieved industry-leading Gross Non-Performing Assets (GNPA) below 1% and Net Non-Performing Assets (NNPA) below 0.5% as of May 31, 2024. This success is attributed to a strategic vision focusing on prudent credit policies, robust risk management, and digital transformation. Bhutada's leadership has driven the company to exceed its targets ahead of schedule, emphasizing rigorous credit assessment, advanced risk management, and enhanced collection efficiency. By prioritizing customer-centric solutions, leveraging digital innovation, and maintaining strong financial performance, Poonawalla Fincorp sets new benchmarks in the industry. With a continued focus on asset quality, digital enhancement, and exploring growth opportunities, the company is well-positioned for sustained success in the future.
Madhya Pradesh, the "Heart of India," boasts a rich tapestry of culture and heritage, from ancient dynasties to modern developments. Explore its land records, historical landmarks, and vibrant traditions. From agricultural expanses to urban growth, Madhya Pradesh offers a unique blend of the ancient and modern.
The presentation summarized the District of Columbia's approach to affordable and mixed-income housing. It discussed defining affordable housing, population growth driving the need for more units, tools used to finance development like tax incentives and the Housing Production Trust Fund, and innovative programs promoting mixed-use development and tenant ownership. Challenges included slow delivery of inclusionary zoning units due to the economy and lack of staff to monitor affordability requirements. Moving forward, the mayor committed $287 million in additional funding with a goal of producing 10,000 affordable units by 2020.
This document summarizes information presented by David Kunhardt on affordable housing in San Rafael, California. It discusses the housing continuum from homeownership to supportive housing solutions. It provides data on income levels and housing costs. It also outlines various federal housing programs and subsidies over time. Additionally, it highlights how the Low Income Housing Tax Credit program works to incentivize private investment in affordable rental housing. The document emphasizes that affordable housing benefits communities and outlines actions that can be taken to support more housing choices in Marin County.
General introductory information regarding Midwest Housing and the Low Income Housing Tax Credit. Information regarding using the Low Income Housing Tax Credit to assist in meeting CRA requirements.
Midwest Housing Equity Group, Inc. (MHEG) was created in 1993 to raise equity capital for affordable rental housing. MHEG has since expanded to invest in properties across Nebraska, Iowa, Kansas, and Oklahoma, creating over 6,700 affordable units. The document provides details on MHEG's mission, portfolio growth, organizational structure, investment process, and benefits for participating financial institutions.
Example of Low Income Housing Tax StructureWilliam Bryant
Organizational Chart showing the Tax Structure of the Entities in a Limited Partnership. Note the percentage of Ownership for the Limited Partner that is acquiring the Flow-Thru of the Low-Income Housing Tax Credits.
Ivan Kaufman gives insight on the Low Income Housing Tax Credit Program (LIHTC), including when it was founded, what it's main objective is, how it's administered, who is eligible to apply, and its reduction on taxes.
The document summarizes changes to Connecticut's Low-Income Housing Tax Credit (LIHTC) program for 2015, including amendments to the Qualified Allocation Plan and procedures. Key points include $50 million available in tax credits, priorities for supportive housing and mixed-income developments, new scoring criteria, application deadlines in November 2015, and guidance on underwriting, construction requirements, and contacts for technical assistance.
Public Private Partnerships (Ppp) And Affordable Housing By David HoickaDavid Hoicka
Public Private Partnerships (PPP) and Affordable Housing by David Hoicka. Review of PPP as a £60 billion, $90 billion industry and its application to Affordable Housing
Monthly Market Risk Update: June 2024 [SlideShare]Commonwealth
Markets rallied in May, with all three major U.S. equity indices up for the month, said Sam Millette, director of fixed income, in his latest Market Risk Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
Dr. Alyce Su Cover Story - China's Investment Leadermsthrill
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
Navigating Your Financial Future: Comprehensive Planning with Mike Baumannmikebaumannfinancial
Learn how financial planner Mike Baumann helps individuals and families articulate their financial aspirations and develop tailored plans. This presentation delves into budgeting, investment strategies, retirement planning, tax optimization, and the importance of ongoing plan adjustments.
KYC Compliance: A Cornerstone of Global Crypto Regulatory FrameworksAny kyc Account
This presentation explores the pivotal role of KYC compliance in shaping and enforcing global regulations within the dynamic landscape of cryptocurrencies. Dive into the intricate connection between KYC practices and the evolving legal frameworks governing the crypto industry.
Poonawalla Fincorp’s Strategy to Achieve Industry-Leading NPA Metricsshruti1menon2
Poonawalla Fincorp Limited, under the leadership of Managing Director Abhay Bhutada, has achieved industry-leading Gross Non-Performing Assets (GNPA) below 1% and Net Non-Performing Assets (NNPA) below 0.5% as of May 31, 2024. This success is attributed to a strategic vision focusing on prudent credit policies, robust risk management, and digital transformation. Bhutada's leadership has driven the company to exceed its targets ahead of schedule, emphasizing rigorous credit assessment, advanced risk management, and enhanced collection efficiency. By prioritizing customer-centric solutions, leveraging digital innovation, and maintaining strong financial performance, Poonawalla Fincorp sets new benchmarks in the industry. With a continued focus on asset quality, digital enhancement, and exploring growth opportunities, the company is well-positioned for sustained success in the future.
Madhya Pradesh, the "Heart of India," boasts a rich tapestry of culture and heritage, from ancient dynasties to modern developments. Explore its land records, historical landmarks, and vibrant traditions. From agricultural expanses to urban growth, Madhya Pradesh offers a unique blend of the ancient and modern.
How to Invest in Cryptocurrency for Beginners: A Complete GuideDaniel
Cryptocurrency is digital money that operates independently of a central authority, utilizing cryptography for security. Unlike traditional currencies issued by governments (fiat currencies), cryptocurrencies are decentralized and typically operate on a technology called blockchain. Each cryptocurrency transaction is recorded on a public ledger, ensuring transparency and security.
Cryptocurrencies can be used for various purposes, including online purchases, investment opportunities, and as a means of transferring value globally without the need for intermediaries like banks.
1. Exit Strategies: Opportunities and Obstacles By: Nancy M. Morton |nmorton@doz.net| 317-819-6141 Jessica Cooper | jcooper@doz.net| 317-819-6152 Corrie McConnell|cmcconnell@doz.net |317-819-6144
2. Agreements to consider Right of first refusal Conversion to market Issues related to deferred development fee Refinance options Discharge of indebtedness Exit strategies Exit taxes Conclusion Outline
3. Initial Considerations What to consider: Agreements affecting year 15 Right of first refusal Evaluate the state of the project Extended use provisions and qualified contract Conversion to market units Re-financing options
4. Initial Agreements Know the exact terms of the agreements and whether a right of first refusal agreements is in place. Are there any buy-sell agreements? Provisions in the partnership agreements, lender agreements, or regulatory agreements that may contain restrictions and/or requirements on the disposition of the property.
5. Right of first refusal IRC 42(i)(7)(A) provides that a project, after the close of the compliance period, will not lose its federal tax benefit with respect to any qualified low-income building merely by reason of a right of first refusal held by the tenants or residential management corporation of the building or by a qualified nonprofit organization or government agency that purchases the property for a defined minimum price.
6. Defined minimum price IRC 42(i)(7)(B) defines a minimum price as the sum of the principal amount of the outstanding indebtedness secured by building (other than any indebtedness incurred within the five-year period ending on the date of the sale to the tenants), plus all federal, state, and local taxes attributable to the sale.
13. Legal action by the housing credit agencies for breach of contract
14. Refusal by HFA to allocate tax credits or other local, state or federal resources to future development by the owner
15.
16.
17. Extended low-income housing contract No LIHTCs are allowed with respect to any building for the taxable year unless an extended low-income housing commitment is in effect at the end of such year.
23. At a minimum, this means that the obligation must have a definite maturity date and the partnership must be able to establish that it is likely to be paid on or before such date.
27. Taxable Income Discharge of indebtedness is included in gross income under IRC 61(a)(12) Cancellation of Debt (COD) results in ordinary income
28. Options for Excluding Income The discharge occurs in a title 11 case The discharge occurs when the taxpayer is insolvent The indebtedness discharged is qualified farm indebtedness For a taxpayer other than a C corporation, the indebtedness discharged is qualified real property indebtedness The indebtedness discharged is qualified principal residence indebtedness which is discharged before January 1, 2013
37. Basis adjustments are recovered in the manner described in Reg. 1.743-1Application of Exclusion Rules
38. Application of Exclusion Rules Three most helpful exclusions for real estate developers… Bankruptcy Insolvency Qualified Real Property Indebtedness In the case of partnerships, IRC 108 provisions are applied at the partner level
39. Deferral of COD Income IRC 108(i) – Deferral and ratable inclusion of income arising from business indebtedness discharged by the reacquisition of a debt instrument Created by the American Recovery and Reinvestment Act of 2009 Rev. Proc. 2009-37 provides guidance
40.
41.
42. Some partners might want the 108(i) election, while others might benefit from a IRC 108 exclusion provisionDeferral of COD Income
43. DeferralCaution When you make a deferral election for a particular amount of COD income, the income is generally ineligible for the COD income exclusions. Electing to defer will expose the taxpayer to whatever federal income tax regime exists in those years (2014-2018) COD income deferred under IRC 108(i) is accelerated if the partnership liquidates, sells its assets, ceases operations or goes bankrupt Amounts deferred at the partner level due to partnership elections are accelerated if the partnership interest is sold, exchanged, redeemed or abandoned, or if the partner dies or liquidates.
44. COD Arising from Debt Modifications Significant modification of debt terms can be considered an exchange of the old debt for the new New debt generates debt forgiveness income if the issue price of the new debt is less than the balance of the old debt
45. COD Arising from Debt Modifications Reg. 1.1001-3 explains what a significant modification is Some examples… Any change in a debt instrument that results in a substitution of a new obligor, the deletion or addition of a co-obligor. A change in the yield of a debt instrument if the change exceeds the greater of 25 basis points or 5% of the original yield of the instrument.
46. Significant Modification Examples 3. Change in timing of payment – safe harbor is the lesser of 5 years or 50% of the original term Generally, a change from a debt that is substantially all recourse to one that is substantially nonrecourse Change in security or credit enhancement that results in a change in payment expectations
48. Year 15 Issues for a LIHTC project Exit strategies available for investors and general partners and their tax consequences How a LIHTC partnership can better prepare for year 15
57. Gain/Loss on sale of propertyUnrecapturedIRC 1250 Gain (25%) IRC 1245 Depreciation recapture – ordinary income
58.
59.
60. Sale to general partnerOriginal partnership remains intact No real estate transaction costs GP owns both the GP and LP partnership interests and continues to service the debt
61.
62.
63.
64. Typically, the project must also meet the 10-year rule, as described in IRC 42(d)(6) to be able to claim acquisition credits.Per IRC 42(d)(2)(B)(ii), a federal assisted building is any building that is substantially assisted, financed or operated under section 8 of the U.S. Housing Act of 1937. Under the amended IRC 42(d)(6) by the Housing and Recovery Act of 2008, federal or state assisted buildings are exempt from the 10 year rule. Exit strategies – end of compliance period
65. Re-syndication Re-Syndication May need to be structured to generate acquisition credits or there might not be enough tax credit equity Depends on availability of tax credits Must conform to the qualified allocation plan for the respective state where the project resides
66.
67.
68. Reducing the Investor interest in the partnership in years prior to the potential exit year