6 TAX CREDIT HOUSING MANAGEMENT INSIDER December 2008
How Housing Act Will Help site Developments
The Housing and Economic Recov- use rule as a result of occupancy “The owner could sell the build-
ery Act of 2008 (H.R. 3221), which restrictions or preferences that ing to a tax credit partnership of
generally applies to buildings with favor residents with special needs, which he is the general partner.
placed-in-service (PIS) dates occur- who are members of a protected Under the new rules, the owner
ring after July 30, 2008, is expected class under state or federal housing may retain a significant portion of
to provide a boost to developers, programs or policies, or who fall the building’s cash flow and still
says Glenn A. Graff, an Illinois within the category of “persons generate substantial tax credits to
attorney with Applegate & Thorne- involved in artistic or literary pur- pay for the building’s rehabilita-
Thomsen, PC, in Chicago. suits,” Graff says. Thus the law tion,” he explains.
alters a prior IRS policy, as found
One of the main reasons for The law applies to buildings
in the Form 8823 Guide, that
the boost is the provision that sets that are “substantially assisted,
housing projects cannot provide
the minimum credit percentage at financed, or operated under a
certain groups with a preference.
9 percent for both new construc- HUD or Rural Housing Service
tion and non-federally subsidized In addition, because the law (RHS) program or other state
major rehabs. applies retroactively on this point, program,” Graff says. Although
the IRS should terminate audits of the law does not define “substan-
“Because of the way the law is
buildings that certain states had tial,” experts seem to agree that
written, it doesn’t matter whether
encouraged to give preferences to having federal or state assistance
you were rate-locked,” Graff says.
if those buildings house persons for 20 percent of a building’s units
“As long as your building is placed
involved in artistic or literary pur- would be sufficient to meet the
in service after July 30 and before
suits. According to Graff, if state requirement.
Dec. 31, 2013, the 9 percent credit
housing agencies want tax credit
factor applies,” he says. “There are many other issues
buildings to provide preferences to
relating to the exception to the
However, projects will continue certain groups, the agencies must
10-year rule, the limitations of
to be limited by the dollar amount make it a formal policy. Giving
which may take the industry a
of a tax credit reservation unless projects competitive scoring points
while to figure out,” Graff says.
the allocating agency permits the for certain preferences on behalf of
Several industry groups rece