While a project is typically acquired on a specific date

Transcription

1 A Presentation of the National Association of Home Builders While a project is typically acquired on a specific date Building rehab (if there are multiple buildings) is typically completed building by building. Credits flow is by building (BIN) so that different buildings can begin credit flow before or after other buildings (BINS) in a project Management agents must know the project and building definitions in order to manage credit flow effectively. Management agents must know credit delivery timeframes in order to manage credit flow effectively. 1

2 Management agents must know the project and building definitions in order to manage credit flow effectively. credit delivery guarantees in order to manage credit flow effectively. What is the proposed date of acquisition? What is the proposed building rehab schedule? In what year will credits begin? Year project is acquired? A year after project is acquired? Watch this schedule for changes. 2

3 Acquisition often occurs later than originally proposed This can affect the pre-qualifying timing to initially certify families into Section 42 Rehabilitation can also suffer delays Date changes can affect timing for credit delivery Buildings is not eligible for any tax credits prior to the DATE of acquisition Buildings can have no acquisition or rehab credits until the year in which the building rehab is complete. Revenue Rule 91-38; Answer #6 3

4 When rehab is completed in the same year as acquisition How can credits flow? When can families be certified? 8823 Guide p. 4-25: Income Certifications Where Owner Acquires or Rehabilitates Existing Building For households occupying a unit at the time of acquisition (39) by the owner, Footnote #39 The date of acquisition is the date the building is acquired by purchase under IRC Section 179(d)(2). 4

5 the initial tenant income certification is completed within 120 days after (40) the date of acquisition using the income limits in effect on the day of acquisition. (40) Alternatively, if the new owner has access to the property before the acquisition date, tenant income certifications may be completed before the acquisition (Up to 120 days prior) using the current income limits. The effective date is the date of acquisition. The effective date of the tenant income certification is the date of acquisition since there is no move-in date. What is the move-in date if there is no official move-in date? Date the family actually moved in to the unit Could be years ago Tax credit effective date since the family is effectively move-in to the tax credit program on that date? 5

6 8823 Guide p Income Certifications Where Owner Acquires or Rehabilitates Existing Building Third paragraph In the event that the household occupies at the time of acquisition, but the tenant income certification is completed more than 120 days after the date of acquisition, the household is treated as a new move-in. Owners use the income limits in effect at the time of the tenant income certification and the effective date is the date the last adult member of the household signed the certification, (this is an exception to the general rule for effective dates because there is no move-in date). In-place families not certified within 120 days And new move-ins Credits do not pull back to the date of acquisition They are effective the date the last adult member of the family signed the Tenant Income Certification if the family is in place the date of move-in for new move-ins 6

7 Proposed Date of Acquisition: May 1, 2010 Rehab completion schedule: Building A July 15, 2010 Building B September 1, 2010 When can management begin the certification process? ACQUISITION: May 1, 2010 Building A- 100% LIHTC Building B- 100% LIHTC A 101- OCC A OCC B OCC B 201 OCC A 102- OCC A 202- OCC B102 - OCC B 202 OCC A 103- OCC A OCC B 103- OCC B 203 OCC A 104- OCC A OCC B OCC B 204 OCC A 104- OCC A OCC B OCC B OCC Rehab complete by 7/15/2010 Rehab complete by 9/o1/2010 7

8 Date of Acquisition: May 1, 2010 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC No Ownership No Credits Ownership + Qualified Occupants = CREDIT Delivery Management can pre-qualify in-place families up to 120 days PRIOR TO May 1 using current income limits. JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Management can post-qualify in-place families up to 120 days AFTER May 1, (August 29, 2010) using income limits that were current as of May 1. 8

9 Proposed Date of Acquisition: May 1, 2010 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC No Ownership No Credits Ownership + Qualified Occupants = CREDIT Delivery Actual Date of Acquisition: June 1, 2010 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC No Ownership No Credits Ownership + Qualified Occupants = CREDIT Delivery Management can pre-qualify in-place families up to 120 days PRIOR TO June 1 using current income limits JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Management can post-qualify in-place families up to 120 days AFTER June 1, (September 29, 2010) using income limits that were current as of June 1. Families certified in January must be re-qualified due to delay 9

10 Building A- 100% LIHTC A 101-6/1/10 A 201-6/1/10 ACQUISITION: June 1, 2010 Certifications Complete by September 29, 2010 Building B- 100% LIHTC B 101-6/1/10 B 201 6/1/10 A 102-6/1/10 A 202-6/1/10 A 103-6/1/10 A 203-6/1/10 A 104-6/1/10 A 204-6/1/10 A 104-6/1/10 A 205-6/1/10 B102-6/1/10 B 202 6/1/10 B 103-6/1/10 B 203 6/1/10 B 104-6/1/10 B 204 6/1/10 B 105-6/1/10 B 205-6/1/10 Rehab complete by 12/31/10 Rehab complete by 12/31/10 When rehab is completed in a year after the acquisition How can credits flow? When can families be certified? 10

11 Date of Acquisition: July 1, buildings; 10 units each 100% LIHTC Rehab completion schedule: Building A June 1, 2011 Building B October 1, 2011 Credits to be claimed for all units for tax year 2011 Back to beginning of year in which rehab is complete January 1, 2011 When should in-place families be certified as eligible? Does the day window apply? 11

12 2010 Acquired June 1, 2010; Rehab complete 2011 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC No Ownership No Credits No Rehab Complete No Credits 2011 Acquired June 1, 2010; Rehab complete 2011 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Ownership + Qualified Occupants = CREDIT Delivery 8823 Guide, p Income Certifications Where Owner Acquires or Rehabilitates Existing Building, 1st paragraph plus footnote #38 Under Rev. Proc. (Revenue Procedure) , a unit occupied before the beginning of the credit period will be considered a low-income unit at the beginning of the of the credit period, even if the household s income exceeds the income limit at the beginning of the first year of the credit period, if two conditions related to income qualifications are met, and the unit must be rent restricted. 12

13 2010 Management can pre-qualify in-place families up to 120 days PRIOR TO the date of acquisition (June 1) based on current income limits JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Management can post-qualify in-place families and new move-ins during the year prior to the beginning of the credit period AND THESE FAMILIES CAN NOW BE OVER- INCOME as long as Applying Rev. Proc Guide, p Testing for purposes of the Next Available Unit Rule For purposes of Rev. Proc , the incomes of the individuals occupying a unit occupied before the beginning of the first year of the credit period are first tested for the purposes of the (AVAILABLE UNIT RULE) at the beginning of the first year of the building s credit period. 13

14 Testing for purposes of the Next Available Unit Rule The test must be completed within 120 days before the beginning of the first year of the credit period. The test consists of confirming with the households that sources and amounts of anticipated income included on the tenant s income certification are still current... Management can pre-qualify in-place families up to 120 days PRIOR TO June 1 based on current income limits JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Management can post-qualify in-place families and new move-ins during the year prior to the beginning of the credit period - AUR test period JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Any families initially qualified prior to Sept. 3 rd must be tested for increased income and the Available Unit Rule applied if their income is above 140% of AMGI 14

15 Applying Rev. Proc Guide, p If the effective date of the initial tenant income certification is 120 days or less before the required test, it is not necessary to test for purposes of the Available Unit Rule because the time period for completing the initial tenant income certification and the time period for completing the test is the same. 15

16 Page 4-29 to An owner acquired a building with 10 units and determined that 6 of the units (1-6) were occupied by nonqualifying households at the beginning of the first year of the credit period on January 1, Guide Example-Step 1 Status 1/01/05 1 Not Qualified, not rehabbed 2 Not Qualified, not rehabbed 3 Not Qualified, not rehabbed 4 Not Qualified, not rehabbed 5 Not Qualified, not rehabbed 6 Not Qualified, not rehabbed 7 HH Qualified, not rehabbed 01/01/05 8 HH Qualified, not rehabbed 01/01/05 9 HH Qualified, not rehabbed 01/01/05 10 HH Qualified, not rehabbed 01/01/05 16

17 Page 4-29 to The non-qualifying families moved out and the owner rehabilitated the six vacant unit. Five the rehabilitated units (1-5) were rented to new (assume qualified) households that moved into the units in August of Guide Example-Step 2 Status 8/01/05 1 HH Qualified Rehabbed 8/01/05 2 HH Qualified Rehabbed 8/01/05 3 HH Qualified Rehabbed 8/01/05 4 HH Qualified Rehabbed 8/01/05 5 HH Qualified Rehabbed 8/01/05 6 Rehabbed Vacant 7 HH Qualified, not rehabbed 1/01/05 8 HH Qualified, not rehabbed 1/01/05 9 HH Qualified, not rehabbed 1/01/05 10 HH Qualified, not rehabbed 1/01/05 17

18 Page 4-29 to The sixth rehabilitated unit (6) was rented in August to an existing tenant who transferred from unit 7, one of the four units qualifying on January 1, Guide Example-Step 2 Status 9/01/05 1 HH Qualified Rehabbed 8/01/05 2 HH Qualified Rehabbed 8/01/05 3 HH Qualified Rehabbed 8/01/05 4 HH Qualified Rehabbed 8/01/05 5 HH Qualified Rehabbed 8/01/05 6 HH Qualified Rehabbed 8/01/05 7 Was Qualified, not rehabbed 8 Qualified, not rehabbed 1/01/05 9 Qualified, not rehabbed 1/01/05 10 Qualified, not rehabbed 1/01/05 18

19 Page 4-29 to The owner may include units 1-5, the rehabilitated units occupied by new lowincome tenants in the applicable fraction computation under IRC 42(f)(2) for August September, October, November, and December of Page 4-29 to For the tenant who transferred between units within the building, the owner may include the unrehabilitated unit 7 that the tenant occupied from January through July in the computation of the applicable fractions for those months, but the unit is no longer a lowincome unit when the household moves to the rehabilitated unit 6 in August; Unit 6 is a lowincome unit for August through December. 19

20 8823 Guide Example-Step 2 Status 1/01/05 12/31/05 1 HH Qualified Rehabbed 2 HH Qualified Rehabbed 3 HH Qualified Rehabbed 4 HH Qualified Rehabbed 5 HH Qualified Rehabbed 6 HH Qualified Rehabbed 8/01/ /05 7 Qualified, not rehabbed 8 Qualified, not rehabbed 1/01/05 9 Qualified, not rehabbed 1/01/05 10 Qualified, not rehabbed 1/01/05 Page 4-29 to 4-30 Therefore, for the purposes of computing the applicable fraction for August, 2005, there are three low-income units that have not been rehabilitated (units 8, 9, and 10) and six low-income units that have been rehabilitated (units 1-6). Units 7 is not a lowincome unit. WHY NOT? 20

21 8823 Guide Example-Step 2 Status August HH Qualified Rehabbed 2 HH Qualified Rehabbed 3 HH Qualified Rehabbed 4 HH Qualified Rehabbed 5 HH Qualified Rehabbed 6 HH Qualified Rehabbed 8/01/ /05 7 Qualified, not rehabbed 8 Qualified, not rehabbed 1/01/05 9 Qualified, not rehabbed 1/01/05 10 Qualified, not rehabbed 1/01/05 During September, Unit #7 was rehabilitated and the tenant from unit 8 moved in. Therefore Unit 8 is now considered a vacant market rate unit 21

22 8823 Guide September Activity 1 HH Qualified Rehabbed 6 HH Qualified Rehabbed 8/01/ /05 2 HH Qualified Rehabbed 3 HH Qualified Rehabbed 4 HH Qualified Rehabbed 5 HH Qualified Rehabbed 7 Qualified, not rehabbed 9/01/05 12/31/05 8 Was qualified, now vacant market rate 9 Qualified, not rehabbed 1/01/05 10 Qualified, not rehabbed 1/01/05 Now considered a market rate / unqualified unit. To expedite completion of the rehabilitation of the remaining units, the owner also temporarily relocated the households in Units 9 and 10 in off-site quarters (and paid all expenses) and rehabilitated units 8, 9, and

23 For purposes of determining the applicable fraction for September, Units 1-7 are low income units and Units 9 and 10 are out of compliance low-income units While they are being rehabbed Unit 8 is a market rate unit that is being rehabilitated in September 8823 Guide Example- Status September HH Qualified Rehabbed 2 HH Qualified Rehabbed 3 HH Qualified Rehabbed 4 HH Qualified Rehabbed 5 HH Qualified Rehabbed 6 HH Qualified Rehabbed 8/01/ /05 7 Qualified, not rehabbed 9/01/05 12/31/05 8 Was qualified, now vacant market rate 9 Qualified, vacant 10 Qualified, vacant Now considered a market rate / unqualified unit. Credit flow stops during rehab 23

24 The owner completed the rehabilitation of the final three units ( 8, 9, and 10) in October and moved the two temporarily displaced households back into Units 9 and 10 during October Unit 8 remains an unoccupied market rate unit through December For purposes of computing the applicable fraction for October, units 1-7, 9, and 10 are all low-income units. The same is true for November and December. 24

25 8823 Guide Example- Status 1/01/05 12/31/05 1 HH Qualified Rehabbed 6 HH Qualified Rehabbed 8/01/ /05 2 HH Qualified Rehabbed 3 HH Qualified Rehabbed 4 HH Qualified Rehabbed 5 HH Qualified Rehabbed 7 Qualified, not rehabbed 9/01/05 12/31/05 8 Qualified, now vacant 9 Qualified, vacant 10/01/05 12/31/05 10 Qualified, vacant 10/01/05 12/31/05 Still considered a market rate / unqualified unit Guide, p. 4-28, 29, For units that house qualified families and are undergoing rehab; If the units are not suitable for occupancy during rehab The unit is not suitable for occupancy under IRC 42(i)(3)(B)(ii). These units including units being rehabilitated are considered out of compliance. (FOOTNOTE #44 The state is not required to file Form 8823 to report non-compliance during the rehabilitation period). 25

26 The non-compliance is corrected when the unit is again suitable for occupancy. The unit s character will be determined based on household that occupied the unit immediately preceeding the rehabilitation during the first year of the credit period. No time frame is mandated do not claim credits until the unit is rehabilitated. There is no requirement to re-initially qualify the family if they qualified the unit originally, vacated temporarily and then moved back into the unit Guide Example-Recap Status 1/01/05 12/31/05 1 HH Qualified Rehabbed 6 HH Qualified Rehabbed 8/01/ /05 2 HH Qualified Rehabbed 3 HH Qualified Rehabbed 4 HH Qualified Rehabbed 5 HH Qualified Rehabbed 7 Qualified, not rehabbed 9/01/05 12/31/05 8 Qualified, now vacant 9 Qualified, vacant 10 10/01/05 12/31/05 10 Qualified, vacant 10/01/05 12/31/05 Still considered a market rate / unqualified unit. 26

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