Overview of the Housing Tax Credit Program 2015 Nebraska NAHRO Conference.

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Presentation transcript:

Overview of the Housing Tax Credit Program 2015 Nebraska NAHRO Conference

Source of Funds Internal Revenue Code, Section 42. Administered by the Nebraska Investment Finance Authority (NIFA) What is a housing tax credit? A dollar for dollar credit against federal income tax liability. In 2016, NIFA’s per capita Tax Credit authority is projected to be approximately $4.3 million. Generally over-subscribed: 4:1

Qualified Allocation Plan (QAP) The QAP governs distribution of tax credits Developer expertise required to meet application requirements Points awarded for specific items contained in the application NIFA provides a set-aside for non-profit sponsored projects. Housing Authorities are eligible under this set-aside.

Lancaster County Income Limits (2015) Household Size50% AMI60% AMI 1 person$24,850$29,820 2 person$28,400$34,080 3 person$31,950$38,340 4 person$35,500$42,600

Lancaster County Rent Limits (2015) 50% AMI60% AMI Efficiency$621$745 1 Bedroom$665$798 2 Bedroom$798$958 3 Bedroom$923$ bedroom$1030$1236

Key Program Restrictions Only get credits for the number of units that are designated as “low income”. Minimum affordability period is 30 years (15 year compliance period plus a 15 year extended use period) Income and rent restrictions.

Ownership Structure The limited partner (L.P.) owns 99.99% of the project, and receives 99.99% the credits. The general partner (G.P.) owns.01% of the project, but has 100% of the responsibility of property operation / management L.P. sells property to GP after 15 th year. If not-for-profit (i.e. housing authority) selling price is outstanding debt plus exit taxes.

Partners in a Typical Tax Credit Development Tax Credit Investor (Limited Partner) Tax Credit Investor (Limited Partner) Non-profit or For Profit Sponsor (General Partner) Non-profit or For Profit Sponsor (General Partner) NIFA New Limited Partnership (Project Owner) New Limited Partnership (Project Owner) Other Federal / State Funds (HUD, VA) Lender City or other Local Funds Consultant

Role of the General Partner A general partner can be a non-profit or for-profit entity. Develop the Project (may need a consultant) Serve as General / Co-General Partner Serve as the project manager or contract with third party property management company Provide specific guarantees to the investor (construction completion, operating deficit, tax credit recapture).

Role of Investor Partner Provide equity financing through sale of credits Monitor project during construction Ensure compliance by working directly with property manager. Exit partnership at the end of the 15 th year.

Hypothetical Project New Construction 28 units All two-bedrooms Duplex Design Owner Pays water, sewer, trash pick-up Hard Construction Cost: $120,000 per unit Senior Independent

Michael D. Fallesen