Novogradac Journal of Tax Credits Volume 10 Issue 10

From converting a rundown hotel to affordable housing to rehabilitating housing structures that existed for more than half a century, the six winners of the 2019 Novogradac Journal of Tax Credits Developments of Distinction (DOD) Awards exhibit the breadth of affordable housing incentives that change their communities.

Question: The Kentucky Department of Revenue (Kentucky DoR) recently announced that 19 community development entities (CDEs) were awarded $3,289,473.68 of state new markets tax credit (NMTC) allocation. How can a Kentucky CDE increase the potential gross NMTC benefit to a Kentucky qualified active low-income community business (QALICB) by using both Kentucky and federal NMTC allocation?Answer: While it will increase the complexity of the structure, a QALICB can use both federal and Kentucky allocation to fund their project.

State low-income housing tax credit (LIHTC) programs are powerful tools when financing affordable housing nationwide. 

When Congress included the average income test as a new set-aside for low-income housing tax credit (LIHTC) properties in the Consolidated Appropriations Act of 2018 (Act), most industry participants didn’t foresee the various road blocks with its implementation. 

It’s more than a year until the next presidential election and more than nine months from the conventions at which the major parties will settle on their nominees and their respective policy platforms, but Democratic Party candidates for president have already made affordable housing a key issue.

Two members of the House of Representatives introduced legislation Aug. 13 to extend the production tax credit (PTC) for some renewable energy technologies for which the credit expired in 2017. The types of facilities that would benefit from the extension are closed and open-loop biomass, geothermal, municipal solid waste, qualified hydropower facilities, and marine and hydrokinetic facilities. The bill will also provide these technologies the ability to take the investment tax credit. They would have to begin construction by Jan. 1, 2025, to be eligible under the bill. 

In a general information letter Aug. 9, the Kentucky Department of Revenue clarified to whom a nonprofit can transfer the state historic tax credit (HTC). The letter stated that any exempt entity that had earned a HTC could not transfer or give the credit to a newly formed single member limited liability company (LLC), unless the LLC is subject to the financial institution franchise tax. Any nonprofit that earned qualified rehabilitation expenses may only transfer or assign the credit to a different entity if that entity pays bank franchise tax pursuant to KRS 136.505. 

The Community Development Financial Institutions (CDFI) Fund announced Sept. 4 the opening of the calendar year 2019 allocation round of the new markets tax credit (NMTC). Applications are due Oct. 28. The CDFI Fund anticipates announcing 2019 NMTC awards in summer 2020. The CDFI Fund also posted the NMTC program application, the notice of allocation availability, an introduction to the NMTC program, an Awards Management Information System navigation guide, a frequently asked questions guide and an application roadmap presentation. Copies of these materials are available at www.newmarketscredits.com.

The U.S. Department of Housing and Urban Development (HUD) released a notice of demonstration Aug. 21 that proposes a shift to the National Standards for the Physical Inspection of Real Estate. HUD plans to solicit volunteers, approximately 4,500 properties, to provide a demonstration to assess all aspects of the physical inspection process of the Real Estate Assessment Center, and will include a new scoring model. HUD is soliciting comments on this proposal through Oct. 21. 

The Mississippi Home Corporation issued Program Bulletin #19-2308 Aug. 23, focused on 2019 development financial analysis reports for the state of Mississippi. The memo, sent to developers, owners and management agents of low-income housing tax credit properties, provides information on the Development Financial Analysis Report (DFAR), including a due date of Sept. 3 for the 2018 reporting period. The memo also clarified how to submit a DFAR and stated that first-time reporters must include loan closing documentation and existing reporters must include loan modification documentation. The memo also warned that failure to submit or properly complete the DFAR by the deadline would result in noncompliance fees and reporting to the IRS for noncompliance.