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PHFA Issues Draft 2019 Allocation Plan
The Pennsylvania Housing Finance Agency (PHFA) has issued a draft of their 2019 Allocation Plan for low-income housing tax credits.
According to the draft Allocation Plan, applicants will be required to submit an Intent to Submit Fact Sheet and Development Synopsis to PHFA on or before July 13, 2018. The final applications will be due to PHFA by 3 pm on September 28, 2018.
There are a few proposed changes in the scoring criteria.
- Up to 20 points are available for experienced development team members.
- Bonus points for a complete application package are back! Up to five bonus points may be awarded in this category.
- Noncompliance deductions now include negative points for an applicant or management company who is late in payments to PHFA, who has materially defaulted on obligations to PHFA, or who has not met required PHFA submissions and program guidelines.
You can read the draft Allocation Plan here.
A public hearing about the Allocation Plan will be held at PHFA's Harrisburg office on April 5, 2018, at 9:30 am. More information about that hearing is available here.
Holly Glauser, Director of Development at PHFA, will be speaking at our May 18, 2018, Affordable Housing Seminar in Camp Hill. This is a great opportunity to interact with Holly and ask questions regarding the Allocation Plan. Registration for the seminar will be announced in the near future.
McKonly & Asbury is a leader in preparing and consulting on low-income housing tax credit applications in Pennsylvania. Our team is passionate about making your application a success. We have a comprehensive understanding of the challenges and nuances of structuring a low-income housing tax credit deal. We are able to assist you in putting the entire application package together for submission, or we can review your application and provide suggestions for optimizing points for PHFA scoring. For more information, please contact us at email@example.com.
Save These Dates!
The dates for McKonly & Asbury's 2018 Affordable Housing seminars have been set!
Our Spring Seminar is planned for Friday, May 18, 2018. Holly Glauser, Director of Development at PHFA; Judy Crosby, Esq. of Kutak Rock, LLP; and KBKG are scheduled to speak.
Our Fall Seminar is planned for Thursday, October 11, 2018. A.J. Johnson will be the speaker.
Both seminars will be held at the Giant Community Center – inside the Giant Food Store at 3301 East Trindle Road, Camp Hill, PA 17011.
Stay tuned for additional details!
Year End Audit and Tax Planning Tips for Affordable Housing Partnerships
It’s that time of the year again to prepare for your partnership’s calendar year end audits and tax returns. Below are some tips to help owners and managers of affordable housing partnerships help ensure reporting deadlines are met and to minimize the disruption by auditors and tax preparers to your day to day operations.
- Be sure that all of the adjusting journal entries from the prior year audit have been made.
- Pay special attention to updating balance sheet accounts that might not have monthly activity during the year. For example: prepaid rent, related party advances, interest payable, developer fee payable, fixed assets, and accumulated depreciation accounts.
- Reconcile all bank accounts.
- Scrutinize any repairs made to property or equipment during the year to ensure the amount was properly capitalized or expensed. One item that is important is a written policy related to expensing of repairs. It is critical to have the policy in place to take advantage of favorable tax treatment.
- Create a list of fixed assets that were disposed of during the year including the date of disposal and any proceeds received.
- If there is any unpaid developer’s fee outstanding, review the agreements for any requirements that may need to be met for final payment to be made.
- If there are related party payables, create and maintain a list of what makes up these amounts.
- Be sure that your audit firm has the most up to date copies of any agreements and any amendments to agreements.
Partnerships with a Property Under Construction or Placed in Service During the Year
- Record all equity payments received. Review all requirements for future equity payments and develop a plan that will help in meeting those requirements as quickly as possible.
- If there is a tax credit adjuster written into your partnership agreement, talk to your accountant about analyzing the effect of the adjuster.
- If there was a cost certification performed during the current year, be sure to reconcile the cost certification amount to your books.
- If your state housing finance agency requires an “Operating” and “Non-Operating” cash flow, be sure to account for development cash activity separately from operating cash activity.
- If development and operating transactions are being accounted for in separate general ledgers, be sure to combine the ledgers into one trial balance for year end.
- The Federal partnership filing deadline is March 15, 2018 for partnerships with a December 31, 2017 year-end.
- Report any change in ownership to your tax preparer. Check into step-up considerations for partner death or transfers.
- For a partnership receiving any IRS Forms 8609 during the year, properly complete Part II and provide to your tax preparer for their review prior to filing with the IRS clearinghouse and state housing finance agency.
- For partnerships with low or negative capital accounts, work with your tax preparer to ensure that there will not be any credits reallocated away from the investor. Complete minimum gain worksheet if applicable.
- At the end of the tax year, did any entity or individual have, directly or indirectly, an ownership interest of 50% or more in the partnership? If so, details will need to be provided to your tax preparer.
- At the end of the tax year, did the partnership own 20% or more directly of the stock of a corporation or interest in another partnership; or did the partnership own 50% or more, directly or indirectly, of the stock of a corporation or interest in another partnership? If so, details will need to be provided to your tax preparer.
McKonly & Asbury is a leader in auditing and tax preparation for affordable housing partnerships. State housing finance agency and IRS regulations require specialized knowledge when performing audits and preparing tax returns for affordable housing partnerships. The Affordable Housing Team at McKonly & Asbury has the audit and tax expertise and experience needed to complete accurate and efficient audits and tax returns. For more information, please contact our Affordable Housing Team at firstname.lastname@example.org.
$1.5 Trillion Tax Cut's Impact on Affordable Housing
The president signed a $1.5 trillion tax cut bill into law on December 22, 2017. The law retained the Low Income Housing Tax Credit (LIHTC) and preserved the tax exemption for private activity bonds. However, there are a number of changes that will have an indirect impact on how affordable housing properties are financed and operated. Let’s start with five.
1) Corporate Tax Rate Drops to 21%. Affordable housing properties need equity to operate, and investors provide equity in return for tax benefits; primarily tax credits and tax losses. The value of tax losses generated are directly correlated to the tax rate of the taxpayer receiving the loss. With a reduction in corporate tax rates, tax benefits of investing are reduced, reducing the amount of equity corporate investors are willing to provide.
2) Depreciation. For property placed in service after December 31, 2017, there will be a temporary 100% cost recovery of qualifying business assets, and the ADS recovery period of residential rental property is reduced to 30 years. Reduced depreciable lives will increase the time value of money on tax losses created by depreciation expense, but will also decrease tax basis necessary to take losses more rapidly.
3) Repeal of Partnership Technical Termination Rule. Under previous law, a partnership was terminated if within any 12-month period, there was a sale or exchange of 50% or more of the total interest in partnership capital and profits (a technical termination). As a result, some of the tax attributes of the old partnership terminated, the partnership's taxable year closed, potentially resulting in short tax years, partnership-level elections generally ceased to apply, and the partnership depreciation recovery periods restarted. The new law eliminates the technical termination rule. A partnership is terminated only if no part of any business, financial operation, or venture of the partnership continues to be carried on by any of its partners in a partnership. The transfer of limited partner interests in affordable housing partnerships will no longer require a technical termination.
4) Credit For Qualified Rehabilitation Expenditures (QRE) Now Over 5 Years. The new law repeals the 10% credit for pre-1936 buildings but retains the 20% credit for QREs with respect to certified historic structures. However, now the 20% credit is allowable ratably over a five-year period starting with the year the qualified rehabilitated building is placed in service. What had been a 20% credit available to taxpayers in the year the building was placed in service has effectively been converted into a 4% credit taken in each of five years starting with the year the building is placed in service. The loss of the 10% credit and loss in value of the 20% credit due to the time value of money may impact the feasibility of an affordable housing development.
5) Requires the Use of the C-CPI-U. A number of affordable housing tax parameters are adjusted for inflation to protect from the effects of rising prices. Under previous law, inflation adjustment computation was based on annual changes in the level of the Consumer Price Index for all Urban Consumers (CPI-U). Effective for tax years beginning after 2017, the new law modifies the inflation adjustment computation rules to require use of chained CPI-U (C-CPI-U). The C-CPI-U, like the CPI-U, is a measure of the average change over time in prices paid by urban consumers. However, the C-CPI-U differs from the CPI-U in that it accounts for the ability of individuals to alter their consumption patterns in response to relative price changes. This change will decrease inflation adjustments in LIHTC and private activity bond allocations in future years.
The full impact of the $1.5 Trillion Tax Cut on Affordable Housing won’t be determined for some time. What has been determined is that the tax law changes went into effect on January 1, 2018.
If you have any questions about these changes, please contact Brad Bowers at email@example.com.
Register Now for McKonly & Asbury's November 2 Affordable Housing Seminar!
We are excited to once again welcome back A.J. Johnson as our speaker. A.J. will cover topics including acquisition/rehab deals and complexities related to those deals such as placed in service issues and transferring tenants between units. He will also spend time discussing the calculation of LIHTCs, critical time frames for LIHTC developments, IRS Forms 8609 and 8823, and combining tax-exempt bond financing with LIHTCs.
This seminar will also include a light breakfast, lunch, and networking.
Attendees are eligible for 5.5 “Other” Continuing Professional Education Hours and this training is appropriate for senior management staff, developers, and others involved in structuring low-income housing tax credit and tax-exempt bond deals. The level of the content is Intermediate to Advanced and a basic understanding of the LIHTC program is the only prerequisite.
Date: Thursday, November 2, 2017
Time: 9:00AM – 3:30PM (registration and a light breakfast begin at 8:30 AM)
Location: Giant Community Center – inside the Giant Food Store at 3301 East Trindle Road, Camp Hill, PA 17011
Fee: $195 (includes lunch)
Click here for more information and to register.