On May 31, 2018, the Internal Revenue Service (IRS) published an updated version of Form 8609, which is the form owners file with the IRS in order to claim low-income housing tax credits. The updated version includes an additional minimum set-aside ...

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IRS Updates Form 8609 to Include "Average Income" Option

IRSOn May 31, 2018, the Internal Revenue Service (IRS) published an updated version of Form 8609, which is the form owners file with the IRS in order to claim low-income housing tax credits.

The updated version includes an additional minimum set-aside option under line 10c on the form – the “average income” option. Owners may benefit from selecting the new set-aside option, bringing with it the opportunity to offer affordable housing to renters earning up to 80% of area median income. Owners should seek the advice of their accountant prior to filing Form 8609.

While the updated form is available on the IRS website, updated instructions have not yet been released.

McKonly & Asbury is a leader in accounting for affordable housing developments in Pennsylvania. IRS and PHFA regulations require specialized knowledge when accounting for LIHTC developments whether it's performing a 10% Test or Development Cost Certification; or performing development stage audits and preparing partnership tax returns. The M&A Team has the audit and tax expertise and experience needed. For more information, please contact us at affordablehousing@macpas.com.


McKonly & Asbury Spring 2018 Affordable Housing Seminar Recap

AH Seminar

McKonly & Asbury’s 2018 Spring Affordable Housing Seminar was held on May 18, 2018. The day began with an update from PHFA’s Holly Glauser. Holly spoke about the preliminary determinations of eligibility for the 2017/2018 low-income housing tax credits as well as the PHARE funding awards. Holly also talked about the 2019 qualified allocation plan and that a revised plan is in the works for review and discussion. The proposed PHFA deadline for the 2019 low-income tax credit applications is now November 16, 2018. Holly also discussed tax exempt volume cap activity and process as well as the Community Revitalization Tax Credit.

Gina Lim, Director of Business Development at KBKG, talked about the 45L Credit. You can read KBKG’s article on our blog about this here. Sumit Sharma, Director of Cost Segregation for KBKG, spoke about cost segregations and how they can be beneficial to affordable housing properties.

Judy Crosby, Of Counsel at Kutak Rock LLP, presented a session on tax reform and its impact on low-income housing tax credit transactions. Judy covered topics such as the business interest deduction, bonus depreciation, the impact of the 21% corporate tax rate on LIHTC deals, and income averaging rules for the minimum set-aside test.  

Judy Crosby presented another session on combining a 9% LIHTC Development with a Tax Exempt Bond/4% Development, also known as “Twinning”. Judy walked us through a case study and offered some pointers on what to watch out for in this type of deal.

McKonly & Asbury’s next seminar is scheduled for October 11, 2018, in Camp Hill, Pennsylvania and will feature A. J. Johnson, President of A.J. Johnson Consulting Services, Inc.

McKonly & Asbury is a leader in accounting for affordable housing developments in Pennsylvania. IRS and PHFA regulations require specialized knowledge when accounting for LIHTC developments whether it's performing a 10% Test or Development Cost Certification; or performing development stage audits and preparing partnership tax returns. The M&A Team has the audit and tax expertise and experience needed. For more information, please contact us at affordablehousing@macpas.com.


Affordable Housing Developers & Investors Can Now Reap an Additional $2,000 Tax Credit for Each Unit Leased in 2017

IStock-905420814We are welcoming CJ Aberin, CCSP to our blog today. CJ is a Principal at KBKG and oversees the Green Building Tax Incentive practice. Read on as CJ talks about 45L credits and explains how it might not be too late for you to take advantage of them.

Affordable housing developers benefit from various tax credits from Low-Income Housing Tax Credits to Rehab Credits, yet they often fail to claim a tax credit that is geared towards their developments: the Section 45L Tax Credit. Section 45L is a commonly overlooked section of the tax code that was recently renewed and rewards energy efficient dwelling units with a $2,000 federal tax credit per eligible unit. Understanding how this specific tax credit works can lead to improved returns for both affordable housing developers and investors, especially since affordable housing typically requires an investment in energy efficiency.

Why is the credit often missed or overlooked?

Part of the reason that 45L tax credits are often missed is that the multifamily industry was originally not considered eligible for this tax credit when it was first introduced into the tax code in 2006. Initial guidance on the tax credit required that homes had to be sold to be eligible, and this tax credit was originally referred to as the “homebuilder tax credit.” However, the IRS clarified its initial guidance in 2008 by also allowing leased homes and units to be eligible for the credits. With the modified guidance, units within low-rise multifamily buildings became eligible for this tax credit.

Additionally, the tax credit has always been a tax extender which has been extended retroactively many times since it was first introduced. Given that the tax credits had constantly expired only to be extended retroactively later made it challenging for developers to monitor and plan for these tax credits.  For example, 45L tax credits were recently extended on February 9, 2018 to be retroactive and applicable to units first leased in 2017.   Essentially, for all of 2017, developers had no way of knowing at the time that the units that they were building and leasing would later be eligible for tax credits.

While developers may have missed out on claiming tax credits when filing their original tax returns, the good news is that the tax credit can still be claimed retroactively, as long as the tax returns are amended within 3 years of the original filing date. Essentially, developers that first leased units in 2014 through the end of 2017 are eligible. However, the window for claiming credits for 2014 is quickly closing as the statute for amending 2014 tax returns will expire sometime this year for most taxpayers. 

Coordinating 45L Tax Credits with Low-Income Housing Tax Credits (“LIHTC”)

45L tax credits complement the goals of the affordable housing industry, as one of the requirements for these dwellings is for each to be energy efficient, resulting in lower utility bills for low-income tenants. When housing agencies are determining which developments are awarded LIHTC credits, part of the criteria often relies on gauging how energy efficient the housing will be. Affordable housing developers who plan to make their units more energy efficient than others put themselves in a better position to be awarded LIHTC credits. As a result, LIHTC projects are often built to be significantly more energy efficient than market rate projects, making them great candidates for meeting the energy efficiency criteria required for 45L tax credits.

Given that a LIHTC deal is more complex than a market rate deal, there are many issues that affordable housing developers must consider. Basis issues, investor appetite for additional tax credits, and the possibility of special allocations are just some of the things to consider when pursuing 45L tax credits. With proper planning and guidance, both developers and investors can navigate through the complexities that exist within affordable housing to reap additional rewards through 45L tax credits. 

Claiming 45L Tax Credits

The basis for claiming and supporting the 45L tax credit is a detailed energy analysis that must be certified by a qualified third-party. KBKG’s multi-disciplinary team of engineers and tax experts have the necessary qualifications for properly quantifying and certifying 45L tax credits. In addition to assisting 8 of the country’s top 10 builders to claim millions in 45L tax credits, KBKG has helped numerous other developers and their tax advisors in securing and maximizing the tax credit.

Do you develop affordable or market-rate housing? If so, you may qualify for this often-overlooked credit. Contact KBKG today for an energy analysis and claim up to 4 years of missed credits. For additional discussion on this topic, plan to attend McKonly & Asbury's May 18 Affordable Housing Seminar. 

Contact CJ at cj@kbkg.com or 1-877-525-4462 x148. To register for McKonly & Asbury's May 18 Affordable Housing Seminar, click here.

 

 


REGISTER NOW FOR McKONLY & ASBURY'S HISTORIC BUILDING REHABILIATION WEBINAR

MAY wEBINARMcKonly & Asbury’s May webinar entitled “Tax Credit Opportunities for Historic Building Rehabilitations” will take place on Thursday, May 17, 2018.

The webinar will be hosted by McKonly & Asbury Senior Tax Manager, Mike Eby and Senior Audit Manager, Dan Kern, along with special guest, Bonnie Mark, Principal at Delta Development Group, Inc.

The presentation will provide an overview of the Federal and Pennsylvania historic preservation tax credit programs for income-producing properties. Specific discussions will include: 1) requirements that need to be met for a project to be eligible for the programs, 2) the application process, 3) accounting and cost certifications, 4) tax benefits of participating in the programs, 5) and recent changes to the Federal program due to Tax Reform.

Throughout the presentation, the hosts will draw from case study examples of local and national projects that they have participated in over the years. Developers, contractors, investors, and even businesses outside the real estate industry will find that there may be opportunities for them to participate in the incentives of these programs.

During this webinar, attendees will learn:

  • A general understanding of the qualifications for a project’s eligibility for the Federal and/or Pennsylvania historic rehabilitation credit programs.
  • An understanding of the steps required to participate in the program, including key dates and financial thresholds.
  • An understanding of the tax benefits of the program, as well as important tax matters to consider before moving forward with a project.
  • Direction on where to go from here if an attendee has a potentially qualifying project.

ADDITIONAL DETAILS

THURSDAY, MAY 17 AT 2 PM EST

This free, one hour-long webinar will take place on Thursday, May 17th at 2:00 p.m. EST. One “Tax” CPE credit is available for this one hour-long webinar. The level for this CPE is intermediate and there are no prerequisites for this CPE. This program is a live webinar which offers you the opportunity to ask questions and interact with the presenters.


Faces of Affordable Housing 2018

IStock-638559506Members of McKonly & Asbury’s affordable housing team attended Housing Development Corporation MidAtlantic (HDC)’s Faces of Affordable Housing Reception on April 19, 2018.

One of the highlights of the evening was watching video testimonials by residents who live in properties managed by HDC. One testimonial came from a woman who described how her accessible apartment has dramatically improved her life and independence. Another testimonial came from a single mom who described how her affordable apartment has allowed her to pursue her dream of attending college where she is working toward becoming a professional dancer. Both stories were extremely moving!

HDC highlighted their “Hope and Opportunity Fund.” Contributions to this fund assist HDC residents with emergencies or one-time needs to avoid eviction. This fund provides flexible funds for resident needs such as food assistance, rental assistance, health or sanitation products, transportation, or other necessities. Since the inception of this fund, dozens of households have been saved from eviction. During the past year, the average amount of support needed to help a resident keep their home was only $660. During the evening, it was announced that this fund had been renamed the “Michael R. Carper Hope & Opportunity Fund” after HDC’s president who has been instrumental in the creation and success of this fund.

Our team left the event inspired to continue to do our best to help affordable housing developers and managers do all the right things so they can continue to create affordable housing!

McKonly & Asbury is a leader in accounting and consulting for affordable housing developments in Pennsylvania. For more information, please visit our web-site or contact affordablehousing@macpas.com.




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