| Low-Income Housing Tax Credit Provisions |
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| LIHTC Introduction |
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The Housing and Economic Recovery Act of 2008 (HR3221) was passed into law July 30, 2008 immediately changing several provisions of the federal Low Income Housing Tax Credit (LIHTC) program. OHCS staff is reviewing these changes and is initiating ways to implement these mandates to best serve Oregonians.
Below is a summary of the bill as it affects the LIHTC program. Where possible, the summary includes the department’s initial considerations regarding these changes. These are not to be construed as definitive policies but as a starting point for informal and formal discussions about these issues.
There are certain items in the new bill which OHCS continues to examine and evaluate in the months to come. We appreciate your perspectives in the process and value your input.
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| Additional LIHTC Authority |
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According to the provisions of HR 3221, the State of Oregon received an additional $.20 per capita in LIHTC tax credit authority in 2008 and 2009. As a result, OHCS has received roughly $750,000 in additional credits for 2008 and will receive another $750,000 for 2009.
OHCS’s Response to Equity Markets Price Decreases and Use of Additional 2008 Authority
On or about May 7, 2008, through the public announcement made on the Department’s website, OHCS acknowledged that equity pricing for tax credits in 2008 was significantly less than anticipated. This resulted in funding gaps in several projects that had been reserved credits in the fall 2008 Consolidated Funding Cycle (CFC) or awarded credits in previous cycles. OHCS expressed a desire to assist the owners of those projects by providing a waiver of the following 2007 QAP requirements:
- For projects funded with 2006 and 2007 competitive credits, OHCS waived the requirements that recipients reapply through the consolidated funding cycle if needing additional LIHTC credits.
- The department also temporarily removed the maximum allocation amount of $700,000 per project for projects that have enough eligible basis and can use the excess basis to fill funding gaps on projects already awarded 2007 and 2008 LIHTC credits.
As the 2008 credits were fully allocated, OHCS turned to borrowing credits from the 2009 credit authority. OHCS will accept applications for additional credits to fill equity gaps (as stipulated in the May 7, 2008 announcement) until October 1, 2008. To date, approximately $451,541 additional credits have been allocated. The new credit authority has assisted OHCS by reducing the need to borrow from the 2009 credit authority to fill funding gaps resulting from the decreases in equity gaps for projects currently awarded 2008 credits.
The new 2008 credit authority not needed to fund equity pricing gaps will be allocated competitively through the waiting list and the current consolidated funding cycle until the authority has been exhausted, prior to allocating 2009 credits.
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| Fixed 9% Applicable Percentage |
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For competitively allocated credits, projects placed in service after July 30, 2008, and before December 31, 2013, shall use an applicable percentage of not less than 9 percent, according to the bill. This creates additional eligible basis, however, the department will not necessarily allocate additional credits, at final application or prior, above those initially reserved for the project, given that projects were financially feasible at funding.
OHCS will use the 9 percent credit factor for all 2009 projects until December 31, 2013.
For the 4 percent credits, the rate is still floating.
The National Council of State Housing Agencies, in discussions with its partners, has stated that this supercedes the lock-in rates some sponsors have chosen for building not yet placed in service. The IRS office has informally confirmed this position. OHCS is waiting for additional information from the IRS.
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| Subsidized Properties |
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Below-market federal loans have been eliminated from the definition of federally subsidized properties allowing them to receive competitive 9 percent credits. This does not apply to bond financed properties, and is effective for buildings placed in service after July 30, 2008. The IRS technical explanation provided July 23, 2008, further clarified eligible basis considerations to include loans funded by a federal subsidy such as HOME.
Technical Explanation of Division C of HR 3221
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| Eligible Basis Increases |
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The bill provides OHCS with the latitude in designating certain projects or regions of the state as eligible for a "basis boost" (equal to 130 percent of a project's eligible basis) to calculate tax credits.
OHCS is evaluating ways in which this measure would best serve all of Oregon, however, this research is still in process. Given that all applications received by OHCS to date have indicated financial feasibility in the absence of this boost, OHCS does not foresee use of this boost for any projects in 2008. However, as our research continues, we will engage our stakeholders in determining the best ways to implement the eligible basis increase to the best advantage of all Oregonians.
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| Rehab Threshold Increases |
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For credits and bond allocations, the minimum rehab thresholds have changed to $6,000 per low income unit or 20 percent of the adjusted eligible basis for projects placed in service after July 30, 2008.
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| Changes in Timing |
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The provision extends the time for developers to meet the 10 percent carryover allocation test to one year from allocation, effective for buildings placed in service after July 30, 2008. For 2008, carryover dates are extended to one year from the date of the carryover allocation will occur no later than December 31, 2008. The 10 percent test needs to be met no later than December 31, 2009. Projects with 2008 allocation are to be placed in service no later than 2010.
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| Community Centers |
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Allowable costs for community facilities increased from no more than 20 percent of the eligible basis to no more than 25 percent of the first $15 million in eligible basis, plus 10 percent of additional basis. The buildings must be in a difficult to develop area (DDA) or a qualified census tract (QCT) for this to apply after July 30, 2008.
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| General Public Use Rules |
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The Public Use Rule was clarified to allow LIHTC credits on developments that define occupancy or have a preference for tenants with special needs, or who are members of a specified group under a Federal or State housing program or policy, or who are involved in artistic or literary endeavors. Housing must be consistent with Federal Fair Housing Rules. The provision applies retroactively to projects already placed in service as well as projects to be placed in service after July 30, 2008.
 LIHTC Public Use Clarification
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| Rural Project Income Limits |
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The provision stipulated new income limits for rural projects to the greater of area median income or national non-metro median income. The non-metro median income is adjusted by family size. For example, the non-metro area median income for a family of four is $49,300.
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| Energy Efficiency |
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HR 3221 also requires the addition of energy efficiency to the Qualified Allocation Plan for allocations made after December 31, 2008.
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| Historic Character |
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HR 3221 also requires the addition of historic character to the Qualified Allocation Plan for allocations made after December 31, 2008.
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