Tax Credit Assistance Program
Nominal LIHC Term Sheet
On February 17, 2009, President Obama signed the American Recovery and
Reinvestment Act of 2009 (ARRA). Title XII of ARRA appropriated $2.25 billion for a
Tax Credit Assistance Program (TCAP) to assist Low-Income Housing Credit (LIHC)
projects. On June 16th 2009, the U.S. Department of Housing and Urban Development
(HUD) approved the Division of Housing and Community Renewal's (DHCR) request for
TCAP funds. In order to be eligible for TCAP funding from DHCR, projects must have
already applied for an award of LIHC prior to March, 2009.
In areas of New York State experiencing an absence of LIHC investor interest, this term
sheet explains the conditions under which DHCR, acting through the Housing Trust Fund
Corporation (HTFC), may consider TCAP requests to fill financing gaps resulting from
the current economic crisis for projects that have been unable to secure an equity
investor. In order to be eligible for TCAP, at least a Nominal Amount of LIHC equity
must be included in the financing of the project.
Given the additional compliance risk associated with projects that do not have equity
investors, DHCR/HTFC will subject projects with only a Nominal Amount of LIHC to
more stringent requirements.
In order for a project with a Nominal Amount of LIHC to be considered for TCAP, the
following conditions must be met:
The project must have a currently valid LIHC reservation from DHCR;
The project sponsor has submitted a letter to the appropriate DHCR Regional
Director requesting consideration as a Nominal Credit project;
The project sponsor has secured construction financing;
The project sponsor must have been involved in previously completed
DHCR/LIHC projects that have remained in compliance with LIHC
programmatic, statutory and regulatory requirements;
Consistent with DHCR/HTFC’s Increase Guidelines for Credit Equity Loss
and TCAP guidance provided by HUD, the project sponsor has submitted
documentation demonstrating that good faith efforts have been made to secure
a tax credit equity investor to purchase the LIHC reserved for the project;
The project demonstrates readiness to proceed to construction based on the
priority criteria listed in DHCR’s TCAP Selection Process and Criteria
approved by HUD;
The project sponsor must demonstrate that the project can close on permanent
financing no later than January 16, 2011; and
The project sponsor has satisfied the requirements of DHCR/HTFC’s Increase
Guidelines for Credit Equity Loss and submitted all updated documentation
required by those Guidelines to the appropriate DHCR Regional Office.
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If a project is determined to have met the above conditions, the following requirements
must be met:
One-third of the developer fee must be deposited into a restricted guarantee
reserve that will be first available, upon authorization by DHCR/HTFC, to
address physical and operating needs of the project that if left unaddressed
might jeopardize the economic viability of the project or safety of tenants.
Funds remaining in the reserve at the end of the LIHC compliance period will
be released to the project sponsor. In addition, the project sponsor must
purchase an allocation of LIHC that will provide financing to the project in an
amount at least equal to 10% of the developer’s fee. In calculating the
minimum implied price of the LIHC, DHCR will use the equity pay-in per
dollar of credit assumed by the project sponsor at the time of application.
For non-profit project sponsors acting as sole general partner of an LP or
operating member of an LLC, and unable to meet the LIHC purchase
requirements for the amount reserved for the project, one-half of the developer
fee must be deposited into a restricted guarantee reserve that will be first
available, upon authorization by DHCR/HTFC, to address physical and
operating needs of the project that if left unaddressed might jeopardize the
economic viability of the project or safety of tenants. Funds remaining in the
reserve at the end of the LIHC compliance period will be released to the
project sponsor. In addition, the non-profit project sponsor must purchase an
allocation of LIHC that will provide financing to the project in an amount at
least equal to the lesser of two percent of the developer fee or $10,000. In
calculating the minimum implied price of the LIHC, DHCR will use the
equity pay-in per dollar of credit assumed by the project sponsor at the time of
application.
Required contributions to the above restricted guarantee reserves will count
toward the minimum developer fee deferral or contribution required under
DHCR/HTFC’s Increase Guidelines for Credit Equity Loss.
In lieu of the above restricted guarantee reserve, DHCR/HTFC may accept an
irrevocable letter of credit (LOC) in an amount equal to the amount that would
otherwise have been deposited into the restricted guarantee reserve. The cost
of the LOC will not be a considered a project expense and the cost will be the
sole responsibility of the project sponsor.
In order to qualify for TCAP financing, the project must meet the terms and
conditions of the LIHC reservation letter.
Project sponsors should contact their assigned DHCR project manager with any questions
if they are interested in pursuing TCAP funding under the terms outlined above.
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