California and Michigan are among the states that have released proposed regulation changes to incorporate the new American Recovery and Reinvestment Act resources into their low-income housing tax credit (LIHTC) programs.
The proposed regulations are likely to evolve, according to William Pavao, executive director of the California Tax Credit Allocation Committee (CTCAC), noting that the committee will take public comments on the plan. States are also waiting for more program guidance from the Department of Housing and Urban Development and the Treasury Department.
In preparation of short federal timelines, CTCAC has gone ahead and prepared a draft of its regulations. The proposal can be found at www.treasurer.ca.gov/ctcac/.
The key features of the recent legislation are the Tax Credit Assistance Program (TCAP) funds and the federal grants that can be made in lieu of housing credit allocations, also known as the exchange program. In general, credits can be exchanged for $0.85 per dollar of returned credit.
Developers who received a 2007 or 2008 reservation may apply to CTCAC for an exchange of reserved credits for TCAP or exchange funds. To be eligible, project applicants must demonstrate that they have made good faith efforts to obtain investment commitments for the LIHTCs and that the project remains the same as originally proposed, says the early proposal.
The Michigan State Housing Development Authority has also drafted its proposed rules. The authority says that sponsors with unsyndicated 9 percent LIHTC reservations from prior funding rounds will be given an opportunity to request an award of TCAP and/or awards of monetized credit in lieu of syndicating those awards. In order to apply for an award of such funding, sponsors will be required to return their reservation to the authority, according to the draft plan.
There will be no penalty attached to an award that is voluntarily returned. Although it is unknown how much Michigan will have under the exchange program, the authority estimates that at least $150 million of funding will be used. Michigan’s proposal notes that applicants for the 9 percent credit exchange will be required to submit refreshed underwriting materials, including pro forma projections. For more, visit www.michigan.gov/mshda.