Housing Association of Nonprofit Developers

1

• Housing Association of Nonprofit Developers
• www.handhousing.org
• Operating in a Tighter Resource Environment
  1Getting the Most out of Tax Credits
• Sponsored by VHDA
• Legislative Overview
• Erik T. Hoffman
• Partner, Klein Hornig LLP
• Washington DC

2
Presentation Overview

• Format Review, then Discussion Questions
• Outline
• Proposals from Housing Associations and Advocates
• U.S. Congress
• House Appropriations Draft Stimulus Bill
• House Ways Means Draft Bill
• Barney Frank Proposal (Financial Services
  Committee)
• What is Missing? What is Next?

3
Legislative Proposals for LIHTCs

• Housing Associations and Advocacy Groups
• Wide Ranging and Many
• Affordable Housing Tax Credit Coalition
• National Preservation Working Group
• Mortgage Bankers Association
• The Others

4
Proposals of Housing Associations and Advocacy
Groups

• Affordable Housing Tax Credit Coalition (revd
  12/18/2008)
• Direct Subsidy through State Allocating Agencies
• 5 Billion FY09 (4B FY10 3 B FY11)
• HOME or other Funds as Soft Loans or Grants
• 5-year Carryback of Credits (count against AMT)
• Accelerate 1st Year Credit
• If achieve Minimum Set Aside, then full years
  credit
• Fix the 30 Credit at 4
• Refundable Credit
• Public/widely-held C Corps only
• Cash refund from Treasury for unused (no losses)
• More Info http//www.taxcreditcoalition.org/f
  eatures/164

5
Proposals of Housing Associations and Advocacy
Groups

• National Preservation Working Group (11/7/2008)
• Subsidy Funding
• 8 Billion 5 B, by formula for Public
  Housing Capital Funds
• 3 B, by competition for HUD-assisted (202,
  811, Sec 8. 221d, 236)
• Carryback of Credits
• 5 Years
• Temporary (credits awarded through 12/31/2010)
• Additional Tenant Relocation Assistance
• 200 MM
• Allow Enhanced Vouchers to be Project-based
  Support

6
Proposals of Housing Associations and Advocacy
Groups

• Mortgage Bankers Association (1/12/09 Letter and
  Proposal)
• Treasury Purchases Mortgage-backed Securities
  with Fannie, Freddie, Ginnie Mae Guaranty
• Limited to Properties financed with LIHTCs
• Terms
• 4.5 note rate
• 15-year Maturity (then refinance or sell)
• Appropriate 625 MM for FY 2009

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Proposals of Housing Associations and Advocacy
Groups

• The Others
• Monetizing the Tax Credits
• Joel Rubenzahl
• Up to 50 can be exchanged by State Allocating
  Agency for cash based on .85 pricing
• Recapture Provision (proportional to
  noncompliance)
• LISC Proposals
• Refundability for Investors of unused credits
• 5-year Carryback
• Extend GO Zone sunset
• 5 B in HOME for LIHTC transactions
• Housing Partnership Network, Center for American
  Progress, NHRA, Other Green Housing
  Organizations

8
Current Bills in Congress

• House Appropriations Committee Stimulus Bill
• House Ways Means Committee
• House Financial Services Committee

9
House Appropriations Committee Stimulus Bill

• Recovery Bill Draft 1/15/2009
• 16 B for Housing Programs
• Public Housing 4 B, by formula, 1 B by
  competition
• HOME Funds 1.5 B, by formula, no green reqt.
• CDBG 1 B, by formula
• Energy Retrofit 2.5 N, by competition 202,
  811, Sec. 8 should include 236 and 221(d)(4),
  but does not currently
• Neighborhood Stabilization 4.2 B (single
  family)
• McKinney Homeless Assistance Grants 1.5 B
• Lead Paint 100 MM
• Emergency Food/Shelter 200 MM
• MOST IMPORTANT Shovel Ready (120 days from
  award)
• Waiver Stated or Permitted for Certain
  Requirements

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House Ways Means Committee Draft Bill

• Recovery Draft Bill Provisions 1/17/2008 (yes,
  Saturday)
• State Credit Agency exchange of Credits for Grant
  Funds
• Maximum of 40 of 2009 Ceiling and 100 of
  National Pool Credits
• Price at .85 with a Reduction in Credit Ceiling
• Use or Lose Grant Funds by 1/1/2011
• Subaward for Low-income Buildings
• With or without tax credit allocation (if have
  allocation, good faith efforts to get investment
  commitment before get subaward)
• No impact on Basis (as a grant) not clear if
  exception for grant being taken into income if
  structured as a grant
• Same Section 42 Restrictions Apply
• Recaptureno detailed provisions, but must
  include recapture to Treasury

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More to Come?

• Financial Services Committee Proposals?
• Rep. Barney Frank proposed Treasury purchase 5 B
  in credits and adding 5 B of subsidy funds
  (12/31/2008).
• Ways Means cover letter indicated tax credit
  provisions were designed by Financial Services
  Committee
• Improving the Credits Appeal?
• Carryback AMT Acceleration or Reduce Credit
  Period
• Investor Exchange Provisions
• Increase CRA Footprint
• State Allocating Agencies
• NCSHA Underwriting Guidelines Recap Advisors
  Recommendations
• New Resident in Washington, D.C.
• http//change.gov/page/s/economy

12
Questions, Comments, Discussion?

• Circular 230 Disclosure Internal Revenue Service
  regulations provide that, for the purpose of
  avoiding certain penalties under the Internal
  Revenue Code, taxpayers may rely only on opinions
  of counsel that meet specific requirements set
  forth in the regulations, including a requirement
  that such opinions contain extensive factual and
  legal discussion and analysis. Any tax advice
  that may be contained herein does not constitute
  an opinion that meets the requirements of the
  regulations. Any such tax advice therefore cannot
  be used, and was not intended or written to be
  used, for the purpose of avoiding any federal tax
  penalties that the Internal Revenue Service may
  attempt to impose.