PISD & Qualification Issues Michael Kotin Kay-Kay Realty Corp. 2007
Placed-in-Service Dates
Two Types of Developments:
Placed-in-Service Dates Two Types of Developments: New Construction
Placed-in-Service Dates Two Types of Developments: New Construction Acquisition / Rehab
Placed-in-Service Dates New Construction
Placed-in-Service Dates New Construction By December 31st of year which is 2 years from allocation year.
Placed-in-Service Dates New Construction By December 31st of year which is 2 years from allocation year. Example: if allocation received in 2006, PISD must occur before December 31, 2008.
Placed-in-Service Dates New Construction By December 31st of year which is 2 years from allocation year. Defined statutorily by first certificate of occupancy in each building.
Placed-in-Service Dates New Construction By December 31st of year which is 2 years from allocation year. Defined statutorily by first certificate of occupancy in each building. May vary from building to building.
Placed-in-Service Dates New Construction By December 31st of year which is 2 years from allocation year. Defined statutorily by first certificate of occupancy in each building. Occupancy cannot predate PISD.
Placed-in-Service Dates Acquisition / Rehab
Placed-in-Service Dates Acquisition / Rehab Date chosen by Owner.
Placed-in-Service Dates Acquisition / Rehab Date chosen by Owner. PISD election need not be made until filing due date of tax return for year units are placed in service.
Placed-in-Service Dates Acquisition / Rehab Date chosen by Owner. Not dictated by Certificate of Occupancy.
Placed-in-Service Dates Acquisition / Rehab Date chosen by Owner. Not dictated by Certificate of Occupancy Rehab need not be completed.
Placed-in-Service Dates Acquisition / Rehab Date chosen by Owner. Not dictated by Certificate of Occupancy Rehab need not be completed. At least one unit in each building must be suitable for occupancy.
Placed-in-Service Dates Acquisition / Rehab Date chosen by Owner. Not dictated by Certificate of Occupancy. Rehab need not be completed Tenancies may predate PISD.
Acquisition / Rehab
Choice of PISD impacts:
Acquisition / Rehab Choice of PISD impacts: Aggregation period for expenses.
Acquisition / Rehab Choice of PISD impacts: Aggregation period for expenses. Capitalization period for construction interest.
Acquisition / Rehab Choice of PISD impacts: Aggregation period for expenses. Capitalization period for construction interest. Applicable credit percentage.
Acquisition / Rehab Choice of PISD impacts: Aggregation period for expenses. Capitalization period for construction interest. Applicable credit percentage. Start period for credits.
Acquisition / Rehab Aggregation period for expenses:
Acquisition / Rehab Aggregation period for expenses: Generally, rehab costs may be aggregated for 24 month period prior to PISD.
Acquisition / Rehab Aggregation period for expenses: Generally, rehab costs may be aggregated for 24 month period prior to PISD. PLUS
Acquisition / Rehab Aggregation period for expenses: Generally, rehab costs may be aggregated for 24 month period prior to PISD. PLUS Costs incurred through the end of the owner’s taxable year.
Acquisition / Rehab Aggregation period for construction interest:
Acquisition / Rehab Aggregation period for construction interest: Generally, may capitalize interest until property is placed in service.
Acquisition / Rehab Aggregation period for construction interest: Generally, may capitalize interest until property is placed in service. For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits.
Acquisition / Rehab Aggregation period for construction interest: Generally, may capitalize interest until property is placed in service. For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits. Best to delay PISD as long as possible in order to increase total eligible basis.
Acquisition / Rehab Aggregation period for construction interest: Generally, may capitalize interest until property is placed in service. For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits. Best to delay PISD as long as possible in order to increase total eligible basis. Careful to meet 50% test.
Acquisition / Rehab Applicable credit percentage:
Acquisition / Rehab Applicable credit percentage: PISD may be chosen by taxpayer after end of year.
Acquisition / Rehab Applicable credit percentage: PISD may be chosen by taxpayer after end of year. Chosen after all monthly credit percentages for year have been published.
Acquisition / Rehab Applicable credit percentage: PISD may be chosen by taxpayer after end of year. Chosen after all monthly credit percentages for year have been published. May choose the month with the highest published credit percentage.
Acquisition / Rehab Start period for credits:
Acquisition / Rehab Start period for credits: “Look back” applies no matter when in year units are placed in service.
Acquisition / Rehab Start period for credits: “Look back” applies no matter when in year units are placed in service. “Look back” goes back to LATTER of:
Acquisition / Rehab Start period for credits: “Look back” applies no matter when in year units are placed in service. “Look back” goes back to LATTER of: 1 st day of taxpayer’s taxable year, or
Acquisition / Rehab Start period for credits: “Look back” applies no matter when in year units are placed in service. “Look back” goes back to LATTER of: 1 st day of taxpayer’s taxable year, or Acquisition date.
Example
Assumptions:
Example Assumptions: One building project (for convenience).
Example Assumptions: One building project (for convenience). Calendar year taxpayer.
Example Assumptions: One building project (for convenience). Calendar year taxpayer. Property acquired July 15, 2006.
Example Assumptions: Placed in service October, 2006:
Example Assumptions: Placed in service October, 2006: Aggregation of costs through December 31, Capitalization of construction interest through October, 2006 at the latest (generally). Credit percentage for month of October, 2006 used. Credits may commence as early as August, 2006.
Example Assumptions: Placed in service October, 2007: Aggregation of costs through December 31, Capitalization of construction interest through October, 2007 at the latest (generally) Credit percentage for month of October, 2007 used. Credits may commence as early as January, 2007.
Example Assumptions: Placed in service October, 2008: Aggregation of costs through December 31, 2008 except that costs incurred from July, 2006 through October, 2006 may not be included. Capitalization of construction interest through October, 2008 at the latest (generally). Credit percentage for month of October, 2008 used. Credits may commence as early as January, 2008.
Tenant Qualification
Qualification may predate PISD.
Tenant Qualification Qualification may predate PISD. Qualification may predate “look back”.
Tenant Qualification Qualification may predate PISD. Qualification may predate “look back”. Qualification may NOT predate acquisition date.
Tenant Qualification Qualification may predate PISD. Qualification may predate “look back”. Qualification may NOT predate acquisition date. Recertification at PISD or “look back” date is NOT required.
Rev. Proc Is a safe harbor provision. Assumes tenant occupancy in advance of PISD or “Look back” date. Is NOT a requirement.
Rev. Proc Is designed to insure compliance with Next Available Unit Rule. Relevant on mixed- income properties with buildings which have applicable fractions under 100%. NOT applicable on 100% tax credit properties where ALL units are always rented to qualified households. NOT relevant on buildings in mixed- income properties which have 100% applicable fractions.
Rev. Proc Safe harbor provided if management “tests” eligibility of existing residents. Test may be retroactive as long as retroactive compliance with NAU can be demonstrated. Does NOT require that existing residents have incomes below either move- in or recertification limits. Does NOT require that “test” be a fully documented recertification. Standard may be substantially less.
Placed-in-Service Dates Other Considerations:
Placed-in-Service Dates Two Types of Developments: Investor in ownership
Placed-in-Service Dates Two Types of Developments: Investor in ownership Syndicator secondary sale completed