Low-Income Housing Tax Credit Financing
The LIHTC program is administered by each state (and some large cities) on behalf of the federal government. There are two types of federal low-income housing tax credits (“LIHTCs”), which depend on the type of financing and/or the type of costs.
These LIHTCs are equal to 9% of “eligible basis” of the residential rental building provided that the owner has received a LIHTC allocation award from a state or local housing agency pursuant to a competitive application process.
These LIHTCs are equal to 4% of (a) “eligible basis” to extent
financed with qualifying tax-exempt bonds (if obtained from a state or local bond authority pursuant to a competitive application process), and/or (b) the acquisition cost of an existing residential building (if certain requirements are satisfied).
Additionally, many states also provide state LIHTCs, which can be applied for state income tax purposes.
- LIHTCs are sold or transferred to investors by using IRS approved structures;
- pricing of LIHTCs varies depending on the project and type of financing;
- there is a 15-year Compliance Period (although the housing agency or bond authority may require an extended period of compliance) for which there are set-asides for low-income tenants at reduced rents;
- each state and bond authority has its own criteria for purposes of scoring applicants for an allocation of LIHTCs and bond financing, respectively; and
- LIHTCs may be used with state LIHTCs, historic tax credit financing, and other community and economic development programs (such as opportunity zone financing, and those provided by the USDA Programs and CDFI Programs).
We work with a significant number of investors who have interest in an array of residential rental projects throughout the country, and we are in an excellent position to obtain the highest pricing for each particular project.
There are many complex rules that must be followed in order to qualify for and maintain a low-income housing tax credit financing.
Our legal and accounting backgrounds as well as significant experience in community and economic development enables us to strategically underwrite, structure and close these complex financings on behalf of our clients.
Generally, all of our fees are contingent upon the funding of the low-income housing tax credit financing. If you believe that you have a project that could qualify for low-income housing tax credits, please complete our Initial Intake Form.
Upon engagement, depending of the role of our client in the LIHTC financing, we will:
- provide our Comprehensive LITHC Intake Form;
- if applicable, organize a new entity for purposes of qualifying as a CDE which will be the applicant (the “Applicant”) submitting any of NMTC allocation application, including (a) drafting and filing articles of organization; (b)drafting partnership agreements or limited liability company agreements, as applicable (including provisions necessary for qualification as a CDE and other CDFI Fund requirements); (c) applying for a federal tax identification number; and (d) other related organizational work;
- determine whether the 9% LIHTCs and/or the 4% LIHTCs apply;
- assist developers in applying for LIHTCs from state housing agencies or bond authorities, as applicable;
- determine amount of “eligible basis” on which the LIHTCs are based;
- underwrite the LIHTC financing;
- identify and secure other sources of financing (including traditional financing, state LIHTCs, and other types of community and economic development programs, such as opportunity zone financing and those provided by the USDA Programs and the CDFI Programs);
- negotiate term sheets;
- structure the overall financing;
- collect due diligence materials and create a drop box;
- manage the closing and funding;
- provide ongoing asset management, compliance and reporting services; and
- provide such other services as set forth in our Consulting Agreement.