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Focus on Real Estate: American Recovery and Reinvestment Act of 2009

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On February 13, 2009, Congress passed the American Recovery and Reinvestment Act of 2009 ("Act"). President Obama signed the Act into law on February 17, 2009. The Act provides a series of Housing Credit provisions designed to stimulate the stalled affordable housing industry.
February 17, 2009

What the American Recovery and Reinvestment Act Will Mean to the Low Income Housing Tax Credit Program and the Affordable Housing and Community Development Industry

On February 13, 2009, Congress passed the American Recovery and Reinvestment Act of 2009 ("Act"). President Obama signed the Act into law on February 17, 2009. The Act provides a series of Housing Credit provisions designed to stimulate the stalled affordable housing industry. Significant provisions include:

Gap Financing Provisions:

$2.25 billion to be available to state housing credit agencies until September 30, 2011 to be used for either 9% or tax-exempt bond deals. The Funds will be apportioned amongst state credit agencies based on percentage of HOME funds apportioned to each state and participating jurisdictions for fiscal year 2008.

  • These funds must be distributed competitively and pursuant to the QAP.
  • Funds are available to owners who either have received or receive simultaneously an award of tax credit under Section 42(h).
  • The funds do NOT result in reduced eligible basis.
  • 75% of the funds must be committed by housing credit agencies within 1 year of the date of enactment, and 75% of funds must be expended by owners within 2 years of the date of enactment, and 100% of funds must be expended within 3 years of the date of enactment.
  • Projects awarded tax credits under Section 42(h) during fiscal years 2007, 2008, or 2009 are eligible to receive this gap financing.

Credit Exchange Provisions:

  • The Treasury Secretary is authorized to make a grant to each state housing credit agency, at the agency's election, in the maximum amount of 85% of the following amounts:
  • 40% of the sum of the states' annual per capita credit amount (the greater of $2.20 per state resident for 2009 or $2,557,500), and any amount it received from the national pool times 10; plus,
  • 100% of 2009 credit ceiling attributable to a state's unused credit ceiling for 2008 and 100% of a state's credit ceiling returned in 2009 times 10. However, any amounts exchanged will reduce the amount of credit available to the state agency to allocate.
  • The Exchanged Credit awards may be made for construction or acquisition/rehab of qualified low-income buildings, with or without an allocation of tax credits. These awards may only be made to qualified low-income buildings with tax credit allocations if the credit agency determines that such use will increase the total funds available to the state to build and rehabilitate affordable housing. State credit agencies must establish a process by which those allocated credits are required to demonstrate good faith efforts to obtain investment commitments for credit before the agency can make an award of funds.
  • Awards are subject to the same LIHTC requirements.
  • Exchanged funds will NOT reduce eligible basis, nor, per the conference agreement, would the funds be considered taxable income.
  • Funds are subject to recapture if the buildings are not in compliance during the compliance period.

Other Significant Housing Provisions:

  • $2 billion to fully fund project-based Section 8 contracts.
  • $4 billion in capital funds for PHAs.
  • $250 million of public housing and HUD assisted multifamily "green" or sustainable investments.

Please call us if you have questions or concerns regarding the new legislation. We are currently compiling a list of implementation questions and concerns. We look forward to your feedback!

 

Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.

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