panel of speakers
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Panel of Speakers. Dan Foster Housing Tax Credit Program Manager New Mexico Mortgage Finance Authority Aaron Krasnow Vice President-Investment Manager RBC Capital Markets Linda Hill Senior Vice President of Originations Alliant Capital. Jeff Nishita Principal Novogradac & Company LLP - PowerPoint PPT PresentationTRANSCRIPT
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Panel of SpeakersDan Foster
Housing Tax Credit Program Manager New Mexico
Mortgage Finance Authority
Aaron KrasnowVice President-Investment
ManagerRBC Capital Markets
Linda HillSenior Vice President of
OriginationsAlliant Capital
Jeff NishitaPrincipal
Novogradac & Company LLP
Philip A. MeltonSenior Managing Director
Hunt Mortgage Group
Mike JacobsSenior Vice President of
OriginationsNational Equity Fund, Inc.
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Inside the IRS’ Audit Technique Guide
Jeff NishitaNovogradac & Company LLP
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Discussion Topics
• Overview of the ATG – what is it?• Excess basis • Developer fees• Non-profit set aside• Bond issuance costs• Casualty loss
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Regulatory HierarchyInternal
Revenue Code Tres.
Reg.
Supreme Court
Congress
CourtsCircuit Courts
of Appeals District
Courts
IRS Primary Sources Rev.Ruling
TaxCourt
Court of Federal Claims
IRS (Non-authoritative) LIHCNews-letters
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Audit Technique Guide Overview
• Released in Draft Form on Dec. 19, 2013
• Comments on Draft ATG were due March 28th
• Draft ATG was reviewed by IRS Chief Counsel
• 20 Chapters & 10 Appendices
• Adobe file is 312 pages
• Draft ATG cannot be cited as authority for ANY reason
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Excess Basis
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OK
x
x
$10,000,000
100%
$10,000,000
9%
$ 900,000
Eligible basis
Applicable fraction
Qualified basis
Tax credit percentage
Annual tax credits
Actual
$ 9,000,000
$ 810,000
Excess Basis
Audit
x
$
x
$
$10,000,000
100%
9,500,000
9%
855,000
Maximum Allowable Credit
Excess Basis = $1 million
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Developer Fees
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Deferred Developer Fees
Sources
Uses
Defer (IOU)
Tax Credit Equity
Hard Debt
“Soft” Loans, Grants
Deferred Developer Fees
Hard Constr. Costs(Land, bricks and sticks)
Soft Costs(Architectural, interest, utilities, org.
costs, marketing, etc.)
Reserves
Developer Fees
9% Deal
Deferred Developer Fees
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Deferred Developer Fees
Reasonableness of the fee amount
“The IRS is not compelled to accept the developer fee amount allowed by the state agency and may raise issues involving the reasonableness of the fee amount if the facts and circumstances warrant doing so.”
Method of PaymentMust be Bona Fide Debt• Interest required?• GP Contribution at prior to year
15 allowed?• Recordation of note/deed?
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Non-Profit Set Aside
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Non-Profit Developers/Owners
GPLIHTCs
$9mil 10% $900K
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Typical Ownership Structure
P’ship
Owner Entity
Non-Profit Developer/
Owner
GPFund LP
For-Profit
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Bond Issuance Costs
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Placed in service
“Production Period”
IRC § 263A(f)(1)(A)
INDIRECT SOFT COSTSExpe
nsed
Capit
alize
d
Loan FeesBond Issuance
Costs
Eligible Basis
Capitalized to what?
Bond Issuance Costs
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Capitalized to what?
Pick fight with IRS?
Bond Issuance Costs
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Casualty Loss
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Recapture of previously claimed credits?
Loss of current-yearcredits?
Building/Unit Damage
Casualty
In Federally Declared Disaster Area
YES YES
NO YES
NO NO
Unit Out of Service
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The Tank
Aaron KrasnowVice President-Investment
ManagerRBC Capital Markets
Linda HillSenior Vice President of
OriginationsAlliant Capital
Mike JacobsSenior Vice President of
OriginationsNational Equity Fund, Inc.
Philip A. MeltonSenior Managing Director
Hunt Mortgage Group
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Scenario 1The Majestic 12
Apartments
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The Majestic 12 Apartments• New construction - 60 units, 25% for
families with children• 18 units @ 60%, 36 units @ 50% and
6 units @ 30%• 10 - 1 bedroom, 30 – 2 bedrooms, 20
– 3 bedrooms• 2 blocks off of Main Street in Roswell• Land donated• $300,000 grant from the city• HOME loan
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Scenario 2Terrace Hills Apartments
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Terrace Hills Apartments• Acq/rehab – 208 units, 12 buildings,
5% for Households with Special Needs• 206 units @ 50%, HUD HAP contract• 182 - 2 bedrooms, 26 – 3 bedrooms• Tierra Contenta subdivision of Santa
Fe• $10.3 million in TE bonds for
construction • HUD 223(f) insured mortgage • HOME loan
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Questions?