How Housing Act Will Help Site Developments by ProQuest


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									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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