Hccp Exam

Front 1

Congress enacted Section 42 of the Internal Revenue Code as part of the ___________________.

Back 1

Tax Reform Act of 1986

Front 2

Why was the Tax Reform Act done?

Back 2

Encourage production of affordable multifamily rental housing for low to moderate income persons

Front 3

What is the benefit to the owners/investors of a Tax Credit property?

Back 3

• It is a dollar for dollar reduction of federal income taxes owed by the owners/investors in qualified projects for tenants whose income is at or below 60% of the AMI.
• Tax Credits are typically sold to investors to raise capital for the project

Front 4

Who are the partners in a Tax Credit project?

Back 4

• Developer
• General Partner - this is usually the developer
• Limited Partner

Front 5

Developer

Back 5

• Forms the project
• Applies for the Tax Credits
• Receives the allocation
• Generally one of the owners and becomes the general partner
• Oversees the construction and/or rehab of the property
• Assumes all of the risk

Front 6

General Partner

Back 6

• Generally the Developer
• Assumes all of the risk
• Benefits from the sell of the tax credits to the limited partner because of the infusion of cash into the property

Front 7

Limited Partner

Back 7

• Typically purchases the tax credits and provides equity (cash)
• Assumes little to no risk
• Benefits from the purchase of the tax credits because of the tax benefits of the tax credits

Front 8

Non Profit Organizations

Back 8

• Each state is required to set aside at least 10% of its states housing credit allocations to qualified nonprofit organizations who own an interest in the project and materially participate in the development and operations of the projects
• Nonprofit must participate on a reqular, continuos and substantial basis in the development and operation of the project

Front 9

2 types of Tax Credits

Back 9

9% Tax Credits -

4% Tax Credits

Front 10

9 % Tax Credits

Back 10

• Most Competitive due to their being a limited "pool" of tax credits
• Used for New construction and substantial rehabilitation
• Developers must offer a lot of amenities, point items in the application
• Cannot be combined with other types of financing

Front 11

4% Tax Credits

Back 11

• Can be combined with other types of funding such as tax exempt bond money
• No limited pool of money like there is for 9% tax credits
• To obtain 4% credits, must first apply for an allocation of private activity bonds which if received leads to a non-competitive application process for the 4% tax credits
• Bond funding has its own set of Compliance Regulations

Front 12

Placed in Service Dates of the Building(s) and/or Project(s)

Back 12

• The date when the building was first made available for its intended purpose
• Date when the first unit is ready and available for occupancy under state and local law
• Must be placed in service for 30 days before credits can be claimed on a unit

Front 13

Why is Placed in Service date important?

Back 13

• Determines when tax credits can be claimed
• When residents can take occupancy of a unit
• What income limits are used

Front 14

Federal Set Asides

Back 14

• the number of units thoughout the project that must be set aside to comply with the Tax Credit Agreement
• there are 2 -- 20%/50% and 40%/60%

Front 15

20% @50% Set Aside

Back 15

• 20% of the units must be set aside at 50% of the median area income limit
• Rent on these units will need to be at or below the 50% rent limit less the applicable utility allowance

Front 16

40% @60% Set Aside

Back 16

• 40% of the units must be set aside at the 60% of the median area income limit
• Rent on these units will need to be at or below the 60% rent limit less the applicable utility allowance

Front 17

BIN Number (Building Identification Number)

Back 17

Each building has its on BIN number.

Up to the owner to determine whether each building is its own project or if all buildings are considered in one project.

Front 18

Project Rule

Back 18

All monitoring and compliance is a building issue and not a property issue.

Depending on what the owner chooses on the 8609 - each building can either be its own project or all buildings are considered part of the same project

This election is line 8a of the 8609

Front 19

When does compliance monitoring begin?

Back 19

After the last building has been placed in service but no later than the end of the 2nd calendar year that the building is placed in service.

Front 20

How is the Placed in Service (PIS) date determined?

Back 20

By the type of property it is --

New Construction - when first unit receives its certificate of occupancy

Acquisition/Rehab - the date of purchase

Substantial Rehab - when the building is ready and accessible for its designed function; over any 24 month period when expenditures are $6000 per unit or 20% of adjusted basis

Front 21

Facts about Placed in Service Date

Back 21

• Only one PIS date per building but there can be different PIC dates for each buildings in a project
• Credits can not be claimed until the unit has been occupied for 30 days
• Minimum set aside must be met by the end of the 1st credit year and must be met every year thereafter