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Tax Credit BasicsTax Credit Basics
Nebraska Investment Finance Authority
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Source of FundsSource of Funds
Funds originated from the Internal Revenue Code, Section 42.
Tax Reform Act of 1986The amount of tax credits issued to
each state is based on $1.80 per capita per year.
Amount to Allocate in 2005: $3,130,724Generally over-subscribed: 3:1
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Types of Credits and Unit Types of Credits and Unit RequirementsRequirements
To qualify: 20% of Units at 50% AMI or40% of Units at 60% AMI
Types of Credits:– Annual “9% cycle” for construction (new/rehab)
First Round Applications Due: 10/1/04 Second Round Applications Due: 2/14/05 CRANE Applications: Accepted monthly
– 4% credits with Tax Exempt Bonds: Applications accepted monthly.
AMI = Area Median Income
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Ownership StructureOwnership Structure
Tax Credit Apartments, Limited Partnership
General Partner(Developer)
1%
Limited Partner(Tax Credit Investor)
99%
Tax Credits
Equity
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Ownership StructureOwnership Structure
The Limited Partner (L.P.) owns 99% or more and receives 99% or more of the credits.
The L.P. pays the General Partner (Applicant/Developer) generally between $.75 and $.85 per credit.
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Commitment to AffordabilityCommitment to Affordability
Only get credits for the low income units (qualified basis).
Retain affordability period for 15 year compliance period plus a 15 year extended use period. Income and rent restrictions.
NIFA offers points for longer affordability periods.
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Syndication Rate and GapSyndication Rate and Gap
The current syndication rate (value of the credits) is from $.75 to $.85 per $1 of credit.
Capital from an award of credits. Annual credit amount X 10 year credit period X
syndication rate.
Cash from sale of credits fills the gap between the permanent loan and the total development cost.
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2005 Set-Asides2005 Set-Asides
2005 Per Capita Allocation: $3,130,724
At least 10% to Qualified Non-profits
50% Rural – 50% Urban (MSAs)
$1 million for CRANE projects
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Qualified Allocation Plan and Qualified Allocation Plan and RulesRules
The QAP governs the annual distribution of tax credits
Points are awarded for specific itemsApplicants must meet threshold
requirements.QAP and Application can be
downloaded from NIFA website: www.nifa.org
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Threshold RequirementsThreshold Requirements
Development Costs Determined Preliminary Plans and Specifications Site Control (valid for 90 days). Zoning Approved (or conditional use permit) Utilities are available and adequate. List of Board of DirectorsState and/or Local Subsidies
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Threshold RequirementsThreshold Requirements
Syndicator Interest Letter (valid for 6 months). Construction/Permanent Financing (valid for 6
mos.) 15 Year Operating Proforma Site Specific Market Study Pre-notification to the Mayor Capital Needs Assessment (for Rehab Only)
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UnderwritingUnderwriting
Site information Construction design Estimated development costs Financing structure Organization Structure (capacity at G.P
level?) Market Study Financial Feasibility
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Calculations of Tax Credits and EquityCalculations of Tax Credits and EquityTotal Development Cost $3,000,000Less: Non-eligible (i.e. land-soft cost) (200,000)Eligible Basis $2,800,000Applicable fraction X 100%Qualified Basis $2,800,000Tax Credit Applicable Percentage X 9%Annual Tax Credit 252,000Tax Credit Period X 10 yrs.
$2,520,000Equity at $.80 per Credit X .80
$2,016,000
Total Development Cost $3,000,000Less: Equity $2,016,000Required Debt $ 984,000
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In today’s market the average In today’s market the average development must has a least two or development must has a least two or three sources of funding.three sources of funding. Low-Income Housing
Tax Credits Affordable Housing
Trust Fund Federal Home Loan
Bank HOME funds USDA – Rural
Development funding
CDBG TIF funds Historic Tax Credits Tax Exempt Bond
Financing Developer Note Grants
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Other Important DatesOther Important Dates
Conditional Reservation:– Follow-up information due within 60 days of Board approval.
Carry-over Application– Due November 1 for projects receiving allocations prior to
June 30. Projects receiving allocations after June 30 have 5 months from the date of conditional reservation.
Cost Certification Application– Due 60 days from PIS.
Annual Compliance Reports– Due by January 15th following the PIS date, and each year
thereafter.
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LIHTC FeesLIHTC Fees
Application Fee: Greater of 1% of annual credit request or $500.
Reservation/Carry-over Fee: 2% of annual credit request.
Allocation Fee: Due at Cost Certification: 2% of annual credit actually allocated.
Annual Compliance Fee: 2% of annual credit actually allocated.
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MaximumsMaximums
NIFA does not prescribe maximum per unit costs.
NIFA allows no more than $450,000 per development. Developers no more than 34% of total allocation.
Developer Fees and Contractor Profit/Overhead combined can be no more than 20% of eligible basis.
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Compliance MonitoringCompliance Monitoring
Annual Owner Certification of Continuing Compliance Report required.
File review and inspection required no later than the end of the 2nd year following PIS.
On-site reviews and inspections required at least every three years thereafter.
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Contact for Allocation QuestionsContact for Allocation Questions
Michael D. Fallesen
Manager of LIHTC and IDB Programs
1230 “O” Street, Suite 200
Lincoln, NE 68508
Phone: 402-434-3919
Fax: 402-434-3921
Email: [email protected]
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Contacts for ComplianceContacts for Compliance
Dudley Beyer 402-434-6931
Jim Hubka 402-434-6939
Kelly Schultze 402-434-3907
Teresa Kile 402-434-3916
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NIFA WebsiteNIFA Website
http://www.nifa.org