The Internal Revenue Service (IRS) has clarified tax-exemption rules for prospective nonprofit general partners in affordable housing projects that use low-income housing tax credits (LIHTC). A published analysis by the law firm of Nixon Peabody said an IRS internal memorandum, dated April 25, begins to resolve 10 years of interpretation difficulties over the “safe harbor” regulations in Rev. Proc. 96-32, particularly a “catch-22” that has forced organizations to enter definite partnership agreements before knowing how the IRS will view their applications for tax-exempt status. See www.irs.gov/pub/irs-tege/urbanmemo42406.pdf and www.nixonpeabody.com.
In other IRS news:
- Private Letter Ruling (PLR) 200617003 allowed an unnamed large company that invests in LIHTCs to obtain surety bonding from an “affiliate” to avoid recapture under Sec. 42(j). PLRs may not be cited as precedent.
- PLR 200614019, which is similar to February’s PLR 200607013, found a multifamily project satisfied the 10-year holding period for an LIHTC acquisition/rehab. The project was not recently renovated but had been through a variety of ownership changes.
Lockhart nominated to OFHEO
James B. Lockhart III, an old friend of President Bush and deputy commissioner at Social Security, has been nominated to direct the Office of Federal Housing Enterprise Oversight. Official profiles say he was previously managing director at a company called NetRisk, worked in the insurance and oil industries, holds Yale undergraduate and Harvard business degrees, and has served on a U.S. Navy submarine.
The SuperNOFA flub file
The inevitable “technical corrections” file for the Department of Housing and Urban Development’s Super Notice of Funding Availability (SuperNOFA) is in the April 28 Federal Register. Highlights include new format requirements for online application materials and a warning that the Sec. 811 grant process will reserve funds for two programs in Mississippi and Pennsylvania that were mistakenly denied money in fiscal 2005.
A separate announcement describes the HOPE VI funding availability for fiscal 2006. It appeared first on April 11, but was fully replaced by a new version issued on May 5 to correct errors.
Several grants for homeless veterans were announced in the April 20 Federal Register by the Department of Veterans’ Affairs and the Department of Labor. They also posted a NOFA April 12 on a pilot program offering “to guarantee up to 15 loans with an aggregate value of $100 million to develop or implement housing and supportive services for homeless veterans,” with applications to be accepted on a rolling basis.
Regulatory plans for the year
Semi-annual regulatory agendas appeared in the April 24 Federal Register for all federal agencies. New housing regulatory subjects include HUD’s part in an Office of Management and Budget project to standardize all requirements for federal grants, a plan to set mortgage insurance premiums according to the risk in each individual loan, and a simplified review process for mixed-finance applications. The Treasury Department planned to issue changed rules in December for the New Markets Tax Credit and for “general public use requirements” affecting LIHTC projects.
In this list, and in several other recent regulatory announcements, it appears HUD is being newly careful to back up informally issued previous decisions with more formal Federal Register rulemaking publications. Details are among the April items on Affordable Housing Finance’s weblog at www.housingfinance.com/blog.
In other announcements:
- HUD posted the new inflation-adjusted limits for major multifamily mortgage programs, including Secs. 221(d)(3) and (4) and Sec. 234, in the May 2 Federal Register.
- Many new logic model spreadsheets are available for Community Planning and Development programs. At www.hudclips.org, see “What’s New” for April 27 or search for Form HUD-96010 in the online forms library.
- Developers have until June 30 to seek previous participation clearance using the paper HUD-2530 Previous Participation Certificate instead of the electronic Active Partner Performance System. The Nixon Peabody site is following this matter closely.
- The Office of Thrift Supervision has adopted the same definitions of "community development" already used by the other three federal regulators what enforce the Community Reinvestment Act. See the April 12 Federal Register for this announcement plus another requesting comments on related interpretive guidance.