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Affordable Housing Legal Update

What's New for the Section 1602 and TCAP Programs

Presented By Miller Nash Attorneys Ronald Shellan, Steven Christensen, & Ryan Nisle

Agenda

• Introduction

by Ronald Shellan

• Section 1602—Tax Credit Exchange Program

by Steven Christensen

• TCAP—Tax Credit Assistance Program

by Ronald Shellan

• Oregon Program Administration

by Ryan Nisle

This presentation is a publication of Miller Nash LLP in conjunction with each of the presenters. It is provided for informational purposes only and does not constitute legal advice or legal opinion as to specific situations. Participants are urged to consult with the individual presenters for further information about the contents of this presentation.

Section 1602 – Tax Credit Exchange Program

• Program Description: HFAs receive a “Prepaid

Credit Card” by monetizing unused LIHTCs. HFAs may exchange credits for $.85 for each $1 of credit exchanged.

– Up to 100% of unused 2008 LIHTCs and 40% of unused 2009 LIHTCs may be exchanged.

– The HFA then makes subawards in the form of grants to project owners to construct or acquire and rehabilitate qualified low-income buildings. – Receiving a prior allocation of credits is not a prerequisite to receiving a subaward.

Section 1602 – Tax Credit Exchange Program: Current Hot Topics

• Use of Subawards

– ARRA requirements – Treasury Q&A – Contradictory Guidance

• No use on land
• No tracing required

– Cap on Amount: Limited to 85% of eligible basis

Section 1602 – Tax Credit Exchange Program: Current Hot Topics

• Subawards as Grants or Loans

– Changing Treasury Position – Possible Modifications

Section 1602 – Tax Credit Exchange Program: Current Hot Topics

• Taxable Income?

– Grants: No – Forgivable Loans: ?

Section 1602 – Tax Credit Exchange Program: Current Hot Topics

• Recapture

– 1602 Recapture Scheme

• Entire subaward is recaptured upon trigger less

1/15th for each full year of compliance

• Trigger:

– If 1602% > applicable fraction, then recapture occurs when the building’s applicable fraction is less than the greater of (1) minimum set aside or (2) 1602 building percentage. – If 1602% < applicable fraction, then recapture occurs when the building’s applicable fraction is less than the greater of (1) minimum set aside or (2) the applicable fraction in the extended use agreement.

Section 1602 – Tax Credit Exchange Program: Current Hot Topics

• Recapture (continued)

– Possible Modifications

• LIHTC Working Group letter

– Partial recapture – Casualty Loss – Building Disposition During the Compliance Period

Section 1602 – Tax Credit Exchange Program: Current Hot Topics

• Compliance with Section 42

– 10% Test – Form 8609

• Application of other Federal Laws

– Davis-Bacon – NEPA – “Buy American”

TCAP - Tax Credit Assistance Program

• Program Description. TCAP awards are

made to holders of 2007, 2008, and 2009 LIHTC to provide gap financing for low-income housing projects. The LIHTC must have been received between October 1, 2006, through September 30, 2009.

TCAP: Current Hot Topics

• Eligibility
• Defined Terms
• Application of Other Federal Laws
• Grants or Loans
• Taxable Income
• Eligible / Depreciable Basis

TCAP: Current Hot Topics

• Eligibility

– Nominal Amount of Credits – Nominal Amount of Equity – Will 2010 Credits Qualify? – Completed Projects – TCAP Agreement – Return of LIHTC

TCAP: Current Hot Topics

• Defined Terms

– "Award" vs. "Allocation" – "Capital Investments“

TCAP: Current Hot Topics

• Application of Other Federal Laws

– Davis-Bacon – NEPA – Other Federal Statutory Requirements:

• Lead Based Paint
• Nondiscrimination under Title VI of the 1964 Civil Rights

Act

• Age discrimination
• Affirmative marketing
• No handicap discrimination
• And many more

TCAP: Current Hot Topics

• Grants or Loans
• Taxable Income
• Eligible / Depreciable Basis

Oregon Program Administration

• Awards Will Be Through a Competitive

Process

• Initial (only?) Round August 10, 2009
• Limited to “Pipeline” Projects

Oregon Program Administration

• Point System Categories

– OHCS Priorities (preservation) – Readiness – Capacity and Community Impact – Defined Tie Breakers

Oregon Program Administration

• General Project Eligibility Requirements

– Hold an OHCS offer to reserve credits that was made between 10-1-06 and 9-30-09 and not have had 8609's issued. – Have no investor or have an investor but with a funding gap. – Have not changed materially from the original LIHTC application. – Be able to meet ARRA funding timelines

Oregon Program Administration

What is Ahead in Oregon?

• Housing Council
• Fund-by Dates
• Second Funding Round?

Questions & Answers

Thank you!

Contact

Ronald A. Shellan

ron.shellan@millernash.com (503) 205-2541

Steven L. Christensen

steve.christensen@millernash.com (503) 205-2528

Ryan R. Nisle

ryan.nisle@millernash.com (503) 205-2521

Miller Nash’s 17th Annual Affordable Housing Conference will be on May 6, 2010