TAX CREDITS 101. with Brad Elphick Novogradac & Company LLP 2014 Housing Works! October 15 16, x 10 years. Low Income Housing Tax Credit DEBT

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1 TAX CREDITS 101 with Brad Elphick Novogradac & Company LLP 2014 Housing Works! October 15-16, years Ta Liability Investor Low Income Housing Ta Credit DEBT DEBT Partnership LLC S-Corp Equity Bonds Ta Liability Developer/ Owner Total Project Costs Total Project Costs Equity Participation in the LIHTC program enables developers to access capital from investors in echange for delivery of ta credits. Income limits Rent limits Suitability for occupancy

2 North Carolina pop: 2013 Appro Appro 9.75 mil $ =

3 QAP 10% of credits set aside for non-profits Take into account energy efficiency and historic nature of projects Priority to projects targeting lowest income tenants and longest period of low-income use Consider financial feasibility/viability Limit credits to amount necessary North Carolina LIHTC QAP for 2015 QAP

4 North Carolina LIHTC QAP for 2015 QAP A. SITE EVALUATION AND MARKET ANALYSIS (i) Neighborhood Characteristics (ii) Amenities (iii) Site Suitability B. RENT AFFORDABILITY C. PROJECT DEVELOPMENT COSTS AND RPP LIMITATIONS D. CAPABILITY OF THE PROJECT TEAM E. UNIT MIX AND PROJECT SIZE ETC... North Carolina LIHTC QAP for 2015

5 North Carolina LIHTC QAP for 2015 Central 10% Rehab East Metro West (for buildings placed in service after 12/31/07) Offset AMT Ta Return 10 = Ta Liability Investor Fund $43.5mil Form Form Certificate of Occupancy Certificate of Occupancy Placed In Service Package Regulatory Agreement Developer/ Owner Property Manager Loan documents Architectural agreements Permits Final Cost Certification Low-Income Households

6 Ta Return Ta Liability Investor(s) Developer/ Owner Property Manager Total Project costs Eligible Basis Sewer

7 Eligible basis DDA/QCT EB adj for DDA/QCT Applicable fraction Qualified basis Ta credit percentage Annual Ten years Total Limited partner % Total limited partner credits Price per credit Equity contributions 1,000, % 1,300,000 95% 1,235,000 9% 111, ,111, % 1,111, ,680 New Constr. Financing Method Non-volumecap-bond debt Bonds Federally Subsidized 9% 3.23% Oct 2014

8 Eligible basis DDA/QCT EB adj for DDA/QCT Applicable fraction Qualified basis Ta credit percentage Annual Ten years Total Limited partner % Total limited partner credits Price per credit Equity contributions 1,000, % 1,300,000 95% 1,235,000 9% 111, ,111, % 1,111, ,680 Financed in part w/ ta-eempt bonds 3.23% 40, , % 400, ,085 Eligible basis DDA/QCT EB adj for DDA/QCT Applicable fraction Qualified basis Ta credit percentage Annual Ten years Total Limited partner % Total limited partner credits Price per credit Equity contributions 1,000, % 1,300,000 95% 1,235,000 9% 111, ,111, % 1,111, ,680 Financed in part w/ ta-eempt bonds 3.24% 40, , % 400, ,085

9 Construction Method New Constr. Acq/Rehab Financing Method Non-volumecap-bond debt Bonds Federally Subsidized 9% 9% 3.24% 3.16% Acquisition PIS (January 2012) Construction Method New Constr. Acq/Rehab Financing Method Non-volumecap-bond debt Bonds Federally Subsidized 9% 9% 3.24% 3.16% Rehab PIS (November 2012)

10 Construction Method New Constr. Acq/Rehab Financing Method Non-volumecap-bond debt Bonds Federally Subsidized 9% 9% 3.24% 3.16% Eligible basis DDA/QCT EB adj for DDA/QCT Applicable fraction Qualified basis Ta credit percentage Annual Ten years Total Limited partner % Total limited partner credits Price per credit Equity contributions Acquisition Rehab 500, % 500, % 500,000 95% 650,000 95% 475, ,500 9% 15, , % 151,510 55, , % 555, , $ 601,123

11 Construction Method New Constr. Acq/Rehab Financing Method Non-volumecap-bond debt Bonds Federally Subsidized 9% 9% 3.24% 3.16% Eligible basis DDA/QCT EB adj for DDA/QCT Applicable fraction Qualified basis Ta credit percentage Annual Ten years Total Limited partner % Total limited partner credits Price per credit Equity contributions Acquisition Rehab 500, , % % 500,000 95% 650,000 95% 475, , % 15, , % 151,510 19, , % 195, , $ 294, ,160

12 Ta Return Noncompliance! Ta Liability Investor(s) Developer/ Owner Property Manager Ta Return Form 8823 Noncompliance! Ta Liability Investor(s) Developer/ Owner Property Manager

13 Important Time Frames Etended Use Period Compliance Period Ta Credit Period PIS Credit Recapture Compliance Period Ta Credit Period Year

14 Credit Recapture Accelerated Credits Year Credit Recapture Year

15 Credit Recapture Year novogradac itunes Brad Elphick, CPA brad.elphick@novoco.com