1. HOUSING TAX CREDITS COMPLIANCE MATTERS SONIA A. NAYAK NOVEMBER 1, 2007

2. Low Income Units Threshold of Election of: – 20% of Units at 50% of Area Median Income (AMI), or – 40% of Units at 60% of AMI Election Upon Placement in Service Must Meet Minimum by End of 1st Credit Year HUD Publishes Area Income Figures Annually

3. Low Income Units (contd) Adjustments for Family Size like Section 8 – Family of 4 Qualifies at 60% (50%) AMI – Family of 3 Qualifies at 54% (45%) AMI – Family of 2 Qualifies at 48% (40%) AMI – Single Household Qualifies at 42% (35%) AMI

4. Rent Restricted Rent (including utilities) Cannot Exceed 30% of Qualifying Income for Assumed Family Size; Based on Bedrooms Per Unit Occupancy Assumptions: – One Person for Studio – 1.5 Persons per Bedroom

5. Rent Calculation Example Median Income = $60,000 Two Bedroom Unit 3 Person (2BR x 1.5) Income Limit = $32,400 30% of Income Limit = $9,720 Monthly Rent (1/12) = $810

6. Additional Rent Rules Rent Limits Change Annually with Publication of New Area Median Incomes Rent Will Not Decrease Below Original Floor Gross Rent Does Not Include Section 8 (or Similar Rental Subsidies) Gross Rent Must Include Utility Allowance for Tenant-Paid Utilities (i.e., Deduct from Rent to Owner)

7. Continued Compliance 15-Year Compliance Period Continued Tenant Qualification: – 40% Increase Above Eligibility OK – Vacant Units/Over-Income Units OK if Next Available Unit Rule Followed

8. Recapture Recapture on Non-Compliance: – Accelerated Portion of Credit Recaptured (1/3 of Credit 1st 10 years, Decreasing Through Year 15) – If Minimum Set-Aside Fails, All Accelerated Credits Recaptured – Otherwise, Unit-by-Unit (Extent of Decrease in Qualified Basis)

9. Recapture (contd) Recapture on Change of More Than 1/3 in Ownership of Sale of Project Bond Posting Procedure New Owner Steps into Sellers Shoes Upon Sale of Project

10. Extended Use Recorded Extended Use Commitment Extended Use Period: – At Least 30 Years, May be Longer to Gain Points Termination (with three-year vacancy de-control) – Upon Foreclosure – Qualified Contract

11. Qualified Contract State to Find Buyer If Requested by Owner After 14th Year Pursuant to Qualified Contract – Contract = Outstanding Debt + Adjusted Investor Equity + Other Capital Contributions, Less Cash Available for Distribution

12. Qualified Contract (contd) Adjusted Investor Equity = Initial Investor Equity to Project Inflated by COLA (up to 5% per year) If No Buyer Found Within One Year, Property May Be Sold or Converted to Non-Low-Income Housing, Subject to 3-Year Vacancy Decontrol

13. Compliance Monitoring State Credit Agencies Monitor Projects Owners Recordkeeping Requirements: – Number of Low-Income & Total Units – Income Certifications/Annual Re-Certifications & Backup Verifications – Qualified Basis & Eligible Basis Amounts – Rent Amounts Owner Annual Compliance Certifications

14. Qualified Allocation Plans State Must Adopt QAP to Allocate Credits QAP Must Set Forth Allocation Priorities QAP Must Give Preference to: – Lowest Incomes – Longest Period of Low-Income Use – QCT Projects Contributing to a Concerted Revitalization Plan

15. Additional QAP Rules QAP Must Provide Procedure for Notifying IRS of Non-Compliance Bond Financed Projects Must Satisfy QAP