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Housing Tax Credit and Multifamily Bond Provisions of HR 3221

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... prior to enactment if taxpayer elects application of new provisions ... provides procedures for taxpayers electing to discontinue prior recapture bonds ... – PowerPoint PPT presentation

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Title: Housing Tax Credit and Multifamily Bond Provisions of HR 3221


1
Housing Tax Credit and Multifamily Bond
Provisions of HR 3221 THE HOUSING AND ECONOMIC
RECOVERY ACT OF 2008
  • Richard S. Goldstein
  • Forrest D. Milder
  • November 20, 2008

2
STATUS
  • Passed by the House on July 23 by a vote of 272
    to152
  • Final passage by the Senate on July 26, exactly
    as passed by the House

3
STATUS (Cont.)
  • President Bush signed the bill on July 30, 2008,
    which becomes the date of enactment for
    purposes of certain effective date provisions

4
ALTERNATIVE MINIMUM TAX PROVISIONS (AMT)
  • Housing credits and rehabilitation credits (under
    Section 47) may be used to offset AMTeffective
    for buildings placed in service after 2007 for
    housing credits and for rehabilitation
    expenditures incurred after 2007

5
ALTERNATIVE MINIMUM TAX PROVISIONS (Cont.)
  • Interest on residential rental bonds, mortgage
    revenue bonds and veterans mortgage bonds exempt
    from AMTeffective for bonds issued after
    enactment

6
TEMPORARY INCREASE IN HOUSING CREDITS
  • Per capita allocation increased by 0.20 for each
    of 2008 and 2009 to 2.20 in 2008 the 2009
    increase will be after the inflation adjustment
  • Small state minimum increased by 10 for 2008 and
    2009

7
EFFECTIVE DATES
  • Unless otherwise noted, provisions will generally
    apply to buildings placed in service after date
    of enactment

8
EFFECTIVE DATES (Cont.)
  • Result is that projects that previously received
    credit allocations or bond financing will be able
    to take advantage of many of the bills
    provisions
  • State credit agencies will need to adopt
    procedures to deal with potential additional
    credit allocations

9
CREDIT RATE
  • Provides a credit percentage of not less than 9,
    effective for buildings placed in service after
    enactment and before December 31, 2013 (i.e.,
    provision is sunsetted)
  • IRS Notice 2008-106 permits owners to use the 9
    credit even if there was a prior lock-in at a
    lower rate

10
CREDIT RATE (Cont.)
  • Applies to non-federally subsidized new
    construction and substantial rehab
  • No change for 4 credit for bond financed
    projects and acquisition of existing
    buildingsrate will continue to float, as under
    current law

11
DEFINITION OF FEDERALLY SUBSIDIZED BUILDINGS
  • Eliminates the concept of below market Federal
    loans
  • Result is that new construction and sub rehab
    expenditures will qualify for 9 credit even if
    the project receives a below market Federal loan

12
DEFINITION OF FEDERALLY SUBSIDIZED BUILDINGS
(Cont.)
  • Tax-exempt bond financed projects still
    considered federally subsidized and therefore
    only eligible for the 4 credit
  • Example HOPE VI and HOME financed projects will
    qualify for 9 credits even if interest rate is
    below the applicable Federal rate

13
CHANGES TO DEFINITION OF ELIGIBLE BASIS
  • Any buildings designated by housing credit agency
    as needing an increase in credit for financial
    feasibility may have eligible basis increased by
    agency by up to 30 by treating projects as being
    in difficult development areas - does NOT apply
    to bond financed projects

14
CHANGES TO DEFINITION OF ELIGIBLE BASIS (Cont.)
  • Joint Committee on Taxation (JCT) explanation
    provides that it is expected that housing credit
    agencies shall set standards for determining
    which areas shall be treated as Difficult
    Development Area (DDAs) and which projects shall
    receive additional credits in their QAP and
    publicly express reasons for increases

15
CHANGES TO DEFINITION OF ELIGIBLE BASIS (Cont.)
  • Minimum rehab threshold doubled to greater of
    6000 per low income unit (to be adjusted for
    inflation) or 20 of adjusted basis - effective
    for credit allocations made and bonds allocated
    after enactment

16
CHANGES TO DEFINITION OF ELIGIBLE BASIS (Cont.)
  • Allowable basis for community service facilities
    increased to 25 of first 15 Million of eligible
    basis plus 10 of additional basis

17
CHANGES TO DEFINITION OF ELIGIBLE BASIS (Cont.)
  • Treatment of federal grants is clarified
  • Rental, operating and interest reduction payments
    not considered federal grants requiring basis
    reduction
  • JCT report language clarifies that loans made
    from the proceeds of federal grants do not
    require basis reduction regardless of interest
    rate on loan (correcting a mistake in House
    report)

18
CHANGES TO RULES FOR ACQUISITION CREDITS
  • 10 percent related party rule (identity of
    interest between buyer and seller) liberalized to
    50

19
CHANGES TO RULES FOR ACQUISITION CREDITS (Cont.)
  • New exception to ten year rule the ten year rule
    does not apply to projects substantially
    assisted, financed or operated under HUD or RHS
    housing programs or similar state housing
    programsreplaces the Treasury waiver provisions
    re HUD and RHS properties

20
SIMPLIFICATION PROVISIONS
  • Prohibition on Section 8 Moderate Rehabilitation
    repealed
  • Period for satisfying ten percent test for
    carryover allocations increased to one year from
    date of allocation

21
REPEAL OF RECAPTURE BONDS
  • Recapture bond requirement on disposition of
    buildings or interests therein is repealed
  • Replaced with extended period for the statute of
    limitations3 years following the date that the
    taxpayer notifies Treasury of a recapture event

22
REPEAL OF RECAPTURE BONDS (Cont.)
  • Effective for dispositions after enactment and
    for dispositions prior to enactment if taxpayer
    elects application of new provisions
  • Result is that outstanding bonds may be retired
    if taxpayer elects application of these
    provisions election procedure not clear
  • Revenue Procedure 2008-60 provides procedures for
    taxpayers electing to discontinue prior recapture
    bonds

23
MISCELLANEOUS CHANGES
  • QAPs must take into account energy efficiency and
    historic nature of projectseffective for
    allocations after 2008
  • Student rule amendednew exception for students
    previously in foster careeffective for
    determinations after enactment

24
MISCELLANEOUS CHANGES (Cont.)
  • Income limits for rural projects (as defined in
    Section 520 of Housing Act of 1949) measured by
    reference to greater of area median income or
    national non-metro median incomedoes not apply
    to bond financed projectseffective for income
    determinations made after enactment

25
GENERAL PUBLIC USE
  • Project may still qualify for housing credits
    even if occupancy restrictions or preferences
    that favor tenants with
  • Special needs, or
  • Are members of a specified group under federal or
    state housing program or policy that supports
    housing for such group, or
  • Are involved in artistic or literary activities

26
GENERAL PUBLIC USE (Cont.)
  • However, housing must still be consistent with
    Federal Fair Housing laws
  • JCT Report language clarifies housing for social
    organizations, employer sponsored housing and
    various health care facilities do not qualify for
    housing credits, maintaining present law on the
    subject

27
GAO STUDY
  • GAO must submit report to Congress by 12/31/2012
    regarding the implementation of changes made by
    the Act
  • Study must include an analysis of distribution of
    credit allocations before and after the enactment
    of Act

28
MULTIFAMILY HOUSING BONDS
  • Multifamily housing bonds may be refunded (i.e.,
    no new volume cap required) if
  • Refunding bond is issued within six months of
    repayment of loan made with original bonds
  • Refunding bond issued within four years of
    original issuance
  • Maturity of refunding bond not later than 34
    years after original bond is issued
  • TEFRA approval process is followed

29
MULTIFAMILY HOUSING BONDS (Cont.)
  • Second (refunding bond) does not generate
    automatic credits
  • Effective for repayments of bonds made after
    enactment

30
HOUSING BOND AND CREDIT COORDINATION
  • Next available unit rule for bond/credit projects
    applied on a building (not project) basis
  • Housing credit student rules applied to bond
    projects

31
HOUSING BOND AND CREDIT COORDINATION (Cont.)
  • Housing credit single room occupancy rules
    applied to bond projects
  • New rules effective for determinations after
    enactment with respect to bonds issued before and
    after enactment

32
AREA MEDIAN INCOME RULES
  • Income determinations for bond and housing credit
    projects may not decrease for any year after 2008
  • For HUD Hold Harmless projects, median incomes
    may be increased by change in AMI from prior year

33
AREA MEDIAN INCOME RULES (Cont.)
  • HUD Hold Harmless projects are those whose
    incomes levels were not decreased after change in
    income determination methodology adopted by HUD
  • Result is that in affected areas, income and rent
    determinations for older projects will be higher
    than new projects

34
INCOME RE-CERTIFICATIONS
  • Income re-certifications not required for 100
    low income projects for bond and credit
    projectseffective upon enactment for all such
    projects

35
HOUSING BOND VOLUME CAP
  • Volume cap for residential rental and mortgage
    revenue bonds increased by 11 Billion for 2008
  • States share in increase on a per capita basis
  • May be carried forward through 2010
  • Bonds may be used to refinance sub-prime loans

36
HOUSING CREDIT COORDINATION ACT
  • Streamlines FHA multifamily insurance processing
    for Housing Credit transactions
  • Allows project-based voucher terms of up to 15
    years

37
HOUSING CREDIT COORDINATION ACT (Cont.)
  • Requires state Housing Credit allocating agencies
    to report Housing Credit tenant data to HUD
    annually, including tenant race, ethnicity,
    family composition, age, income, use of rental
    assistance or other similar assistance,
    disability status, and monthly rental payments 

38
HOUSING CREDIT COORDINATION ACT (Cont.)
  • Allows PHAs to set project-based voucher rents at
    up to 110 percent of the HUD Fair Market rent in
    units with Housing Credits, even if this rent
    level exceeds the maximum Housing Credit rent,
    and allows PHAs to agree in advance not to reduce
    the rent below the initial rent during the term
    of the contract 

39
HOUSING CREDIT COORDINATION ACT (Cont.)
  • Eliminates the requirement that PHAs make a
    separate rent reasonableness determination for
    tenant-based vouchers used in Housing Credit
    units if the rent charged is at or below the rent
    for similarly assisted units not occupied by
    voucher holders 
  •  

40
  • Thank You
  • Any Questions?

41
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