Low-Income Housing Tax Credits News Briefs – June 2020

Monday, June 1, 2020

LIHTC Industry

The Office of the Comptroller of the Currency (OCC) May 20 published a final rule amending Community Reinvestment Act (CRA) regulations. The final rule clarifies and expands the banking activities that qualify for positive consideration, updates how banks delineate the assessment areas in which they are evaluated, provides additional methods for evaluating CRA performance and requires timely and transparent reporting. The final rule evaluates banks on both the number of CRA-eligible loans and investments and the total amount of loans and investments to communities.  The final rule’s emphasis on the dollar volume of loans and the repeal of a separate investment test raises concerns it could deemphasize low-income housing tax credit (LIHTC) and new markets tax credit (NMTC) equity investment as compared to lending.

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The Internal Revenue Service (IRS) issued two types of guidance May 4 concerning tax-exempt private activity bonds (PABs), which are used with 4 percent low-income housing tax credits (LIHTCs) to finance affordable housing. In Revenue Procedure 2020-21, the IRS provided temporary guidance to allow hearings held by teleconference due to the COVID-19 pandemic to meet the statutory public approval requirement for PABs. Notice 2020-25 temporarily expanded the circumstances and period for which a PAB is treated as “continuing in effect” without requiring the reissuance or retirement. There also is relief regarding a holding period and qualified hedge. The IRS said the allowances are being made in recognition of the need for liquidity and stability in the market during the current period of economic disruption. Notice 2020-25 is in effect retroactive to Jan. 1.

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Reps. Richard Neal, D-N.Y., and Suzan DelBene, D-Wash., sent a letter to Treasury Secretary Steven Mnuchin April 10, asking that Treasury and the IRS extend certain deadlines for the LIHTC incentive. The “deadlines and barriers” mentioned in their letter include the 10 percent test for carryover allocations, placed-in-service dates and rehabilitation expenditures. Neal and DelBene also asked the Department of the Treasury and the IRS to consider relief for related deadlines such as an extension of the 25-month rehabilitation period for properties the suffered a casualty loss.

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Rep. Suzan DelBene, D-Wash., and a bipartisan group of three other members of the House of Representatives sent a letter April 16 to House leadership. The letter requests that a minimum 4 percent rate for the LIHTC and a decrease in the 50 percent test threshold for bond-financed affordable housing properties both be included in the next COVID-19 relief legislative package. The letter highlights rising unemployment and disruptions in the ability to operate build and preserve affordable housing. The authors reference as a precedent the minimum 9 percent LIHTC rate, which was enacted during the Great Recession as part of the Housing and Economic Recovery Act of 2008.

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The IRS released guidance April 17 allowing taxpayers to change depreciation for qualified improvement property (QIP) under Internal Revenue Code 168. The guidance is based on changes from the CARES Act. Revenue Procedure 2020-25 also allows a taxpayer to make a late election or withdraw an election for bonus depreciation of certain qualified property, including QIP. The guidance applies to any QIP placed in service after Dec. 31, 2017, and applies to taxable years 2018, 2019 and 2020.

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The IRS published a revenue procedure in May to temporarily allow taxpayers to electronically submit requests for private letter rulings and other guidance. Revenue Procedure 2020-29 modifies an earlier revenue procedure and will allow both paper and electronic requests for advice until Revenue Procedure 2020-29 is modified or superseded.

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The OCC released a list May 1 of CRA performance evaluations from April. Of the 20 national banks, federal savings associations and insured federal branches of foreign banks that were evaluated, 16 were rated satisfactory and four were rated outstanding.

LIHTC State

Indiana Housing and Community Development Authority (IHCDA) instituted two forms of relief for low-income housing tax credit (LIHTC) properties April 6 due to the COVID-19 pandemic and altered the application plan for both 4 percent and 9 percent LIHTCs. The IHCDA will grant a six-month extension to meet the 10 percent test for properties that received a 2019 LIHTC allocation and will grant a 12-month extension of the placed-in-service deadline for properties that received a 2018 allocation. The next application deadline for 9 percent LIHTCs was delayed from July 27 until 120 days after the end of the stay-at-home restrictions. IHCDA will not accept any new 4 percent LIHTC applications.

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The California Tax Credit Allocation Committee (CTCAC) released a list of proposed regulation changes April 24 for allocating the state’s 2020 LIHTCs. The proposed changes also include details on the allocation of extra LIHTCs provided in the federal budget due to the 2017 and 2018 fires. CTCAC will allocate all the additional credit this year. CTCAC also proposed how the extra LIHTCs will be allocated among disaster-affected counties. The proposed regulations address other issues including allocations concerning the state’s opportunity area map and the allocation in consecutive years of state 4 percent LIHTCs.

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The Wisconsin Housing and Economic Development Authority (WHEDA) announced April 28 the award of $319 million in federal and state LIHTCs over 10 years to 34 properties that will build a combined 2,039 affordable homes. The awards include $159.9 million in 9 percent federal LIHTCs, $79.5 million in 4 percent state LIHTCs and $79.6 million in 4 percent federal LIHTCs, which will be paired with the state 4 percent credits. WHEDA said there were requests for $610 million in LIHTCs.

LIHTC Dealmaker

Boston Capital announced April 16 the closing of The California Tax Credit Fund IX. The $84 million portfolio includes six affordable apartment properties for families in California, two of which are new construction and four are rehabilitation. The portfolio includes properties that provide homes for people who are homeless or are at risk of being homeless in San Francisco and Los Angeles, and properties that will house families in areas affected by the California wildfires.

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Walker & Dunlop announced April 30 the largest transaction in company history: A $2.4 billion Fannie Mae Credit Facility to refinance 67 multifamily properties located in the Washington, D.C., metropolitan area. The portfolio includes more than 22,000 units, and 60 percent of those apartments qualify as mission-driven affordable housing under Federal Housing Finance Agency guidelines.

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Mutual Housing California announced final funding April 16 for two new affordable housing communities: Mutual Housing at 5th Street in Davis, Calif., and Lavender Courtyard by Mutual Housing in Sacramento, Calif. Mutual Housing at 5th Street is funded by $10 million in LIHTCs and tax-exempt bonds from the California Tax Credit Allocation Committee.

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Greenwich Housing Authority announced April 15 that it was awarded almost $10.5 million in LIHTCs from the Connecticut Housing Finance Authority. Equity from the credits will allow the housing authority to rehabilitate Armstrong Court in Greenwich, Conn. The redevelopment of the 144 homes at Armstrong Court will consist of at least four phases. The first phase, which is nearly complete, includes the construction of 18 new townhomes.

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The Michaels Organization announced April 1 that it received financing for the third phase of new housing at Jordan Downs, a redevelopment project in Los Angeles. The development is financed by 9 percent LIHTC equity from Berkadia, permanent loans from Freddie Mac and some of the apartments will incorporate rental project-based section 8 vouchers from HUD’s Rental Assistance Demonstration program.

LIHTC People

Enterprise Community Partners announced April 23 the hire of Angelique Kelly-Lara as chief people officer and the promotion of senior vice president Stephanie Shack to chief legal officer. Kelly-Lara will be responsible for all human resource services, including acquisition strategies that attract top, diverse talent, career development and the human resources business partner team. Shack will oversee legal operations across Enterprise’s entities nationwide.

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M&T Reality Capital Corporation announced April 20 the appointment of Jeffrey Rodman as its affordable housing program manager and Joanie Wilson as its director of affordable underwriting. Rodman and Wilson join M&T with significant experience in affordable housing and community development lending.

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Walker & Dunlop Inc. announced April 30 that it hired Steve Mentesana as the senior managing director on its FHA finance team. Mentesana is responsible for originating multifamily loans with a focus on the lending programs of the U.S. Department of Housing and Urban Development (HUD). Mentesana has more than three decades of experience and deep knowledge of HUD’s refinance, health care and construction lending products. 

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