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Novogradac Journal of Tax Credits Volume 4 Issue 12

The December 2013 issue of the Novogradac Journal of Tax Credits

Journal cover December 2013


Kimberly Taylor

Sunday, December 1, 2013

As the affordable housing portfolio in the United States grows, so does the responsibility to maintain compliance at the property level. Every year it seems to get a bit more difficult to find all of the funding sources needed to put a deal together. Gone are the days when tax credit equity was all that was needed to build or rehabilitate a property. Layered funding is really the only option for affordable housing developers – and with more funding sources come the need for adequate and comprehensive compliance monitoring and staff who understand the requirements and implications of non-compliance. Many sponsor organizations wonder where this responsibility should fall. For many, this monitoring is done by the asset manager. There is a direct relationship between compliance and asset management – both areas of focus need the other to maintain a healthy property.

Mark O’Meara

Sunday, December 1, 2013

A popular Silicon Valley idiom that has been heard across the nation is particularly appropriate in conveying the state of mind of community development professionals working with the opportunity zones (OZ) incentive: “We’re kind of flying the plane while we’re building it.”The OZ incentive is available, but many questions are unanswered. As a consequence, many users of the incentive are moving forward, but doing so slowly, cautiously and in limited ways.  As myriad OZ tax questions are answered and, as importantly, patterns of practice develop, use of the OZ incentive will greatly expand, larger dollar amounts will be invested and the great potential of opportunity zones will begin to be realized.   To continue to do our part in helping develop a more in-depth understanding of the OZ initiative, the Novogradac Journal of Tax Credits this month is launching an OZ section–highlighted by an interview with an author of the original OZ legislation, Sen. Tim Scott, R-S.C., on page 8. In addition to coverage in these pages, Novogradac will offer its first Opportunity Zones Conference Oct. 2-3 in New Orleans.Opportunity Zones BasicsLast winter’s landmark tax legislation had substantial highlight provisions–a reduction of the top corporate and individual rate, an increase in the standard deduction, a cap on state and local tax deductions and more–but it also created the first significant community development tax incentive introduced and signed into law since the Clinton

John M. Tess

Sunday, December 1, 2013

Question: Can land qualify as opportunity zone business property?Answer: Land will not likely qualify under the “original use” standard under the opportunity zones statute. Therefore, land will likely need to be substantially improved to qualify. Land may qualify as substantially improved property through a sufficient amount of new construction or through the substantial improvement of an existing building located on the land. However, it is likely that only the portion of the land that is integral to the business using such improvements will qualify. Example: A qualified opportunity fund (QOF) purchases 100 acres of vacant land in an opportunity zone for $5 million and builds a hotel for $10 million. Only 10 acres of the land is integral to the hotel business. QOF made $400,000 of improvements to the remaining 90 acres and used it in a farming business. QOF will likely have $10.5 million of qualified opportunity zone business property and $4.9 million of nonqualified property assuming that land can be substantially improved.General RuleThe term “qualified opportunity zone business property” means tangible property used in a trade or business of the qualified opportunity fund if:such property was acquired by the qualified opportunity fund by purchase after Dec. 31, 2017,the original use of such property in the qualified opportunity zone commences with the qualified opportunity fund or the qualified opportunity fund substantially improves the property, andduring substantially

Michael J. Novogradac

Friday, November 1, 2013

Barring a last-minute legislative reprieve, on Dec. 31 the 9 percent tax credit percentage floor for the low-income housing tax credit (LIHTC) will expire, leaving many affordable rental housing properties under development with a large equity gap. However, in addition to possible legislative resolutions, some of these LIHTC developments may be able to offset the effect of this change, with the aid of state allocating agencies.

News Briefs

Sunday, December 1, 2013

The Internal Revenue Service (IRS) released LIHC Newsletter #53 on Oct. 18. The newsletter includes information on developer fees for low-income housing tax credit (LIHTC) properties and addresses four basic issues to consider when examining developer fees:...

Sunday, December 1, 2013

On Oct. 24, the U.S. Department of Housing and Urban Development (HUD) released a notice regarding the final rule for combining and streamlining the former legacy public housing modernization programs...

Sunday, December 1, 2013

On Oct. 21, the Community Development Financial Institutions (CDFI) Fund added new reference materials to its online Capacity Building Initiative Resource Bank. These are for the “Strengthening Small and Emerging CDFIs” training series, which provides capacity...

Sunday, December 1, 2013

The House of Representatives on Oct. 28 passed House Resolution (H.R.) 1742, the Vulnerable Veterans Housing Reform Act of 2013 and H.R. 2481, the Veterans Economic Opportunity Act of 2013. H.R. 1742 changes how the U.S. Department of Housing and Urban Development (HUD) ...

Sunday, December 1, 2013

Illinois House Bill (H.B.) 383 House Amendment No. 3 was filed on Nov. 4 by state Rep. Jeanne Ives. The bill would amend the Illinois Income Tax Act by expanding the state’s Economic Development for a Growing Economy tax credit (EDGE) program...

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