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The Housing and Economic Recovery Act of 2008 (H.R. 3221), which generally applies to buildings with placed-in-service (PIS) dates occurring after July 30, 2008, is expected to provide a boost to developers. One of the main reasons for the boost is the provision that sets the minimum credit percentage at 9 percent for both new construction and non-federally subsidized major rehabs. The law applies to buildings that are "substantially assisted, financed, or operated under a HUD or Rural Housing Service (RHS) program or other state program.
6 TAX CREDIT HOUSING MANAGEMENT INSIDER December 2008 PrOJect DeVeLOPment 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
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