109.00.9. ARKANSAS DEVELOPMENT FINANCE AUTHORITY'S HOUSING CREDIT PROGRAM 2009 QUALIFIED AL...
AR ADC 109.00.9Arkansas Administrative Code
Ark. Admin. Code 109.00.9
109.00.9. ARKANSAS DEVELOPMENT FINANCE AUTHORITY'S HOUSING CREDIT PROGRAM 2009 QUALIFIED ALLOCATION PLAN GUIDANCE TO IMPLEMENT THE TAX CREDIT ASSISTANCE PROGRAM (“TCAP”) AND THE SECTION 1602 EXCHANGE/SUBWARD PROGRAM OF THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009
Pursuant to Section 42 of the Internal Revenue Code, 26 USC § 42, the Arkansas Development Finance Authority (the “Authority”) must annually adopt a Qualified Allocation Plan (“QAP”) that establishes selection and program criteria for the allocation of federal low-income housing tax credits from the State's annual ceiling. On July 17, 2008, and August 21, 2008, the Board of Directors for the Authority adopted its QAP for 2009. Due to the reduction or complete loss of federal low-income housing tax credit investor equity, President Obama signed into law the American Recovery and Reinvestment Act (“ARRA”), Public Law 111-5 on February 17, 2009. ARRA established two subsidy provisions to assist those developments that have been or will be awarded tax credits in 2007, 2008 and 2009. The first is the Tax Credit Assistance Program (“TCAP”) which provides $20,463,053 in federal funding to Arkansas from HUD for the express purpose of providing financing to those taxpayers “awarded” low-income housing tax credits under Section 42(h) of the Internal Revenue Code (IRC) in fiscal years 2007, 2008 and 2009. The second is a grant program whereby Arkansas can elect to receive a grant of funds in an amount up to $.85 per tax credit for tax credits consisting of all unused and returned credits held by the Authority plus 40% of our 2009 state ceiling (not including disaster credits). This is referred to as the “exchange program”. In addition to the stimulus funding provided by the ARRA, the Board of Directors has implemented two additional initiatives to assist existing developments in need of additional financing: 1) Pursuant to 26 USC § 42(d)(5), the Board of Directors has designated certain existing developments as difficult to develop entitling them to a 30% basis boost; and 2) provide additional tax credits to those developments in need of additional financing.
Distribution of the $20,463,053 in TCAP funding must be done on a competitive basis. The Board of Directors has determined to award TCAP funding in association with the other funding sources available as indicated by the financial needs of the applicant. The following “Arkansas's Three Tier Selection Process” and 2009 Guidance and Procedures have been approved by the Board of Directors on May 15, 2009, and June 18, 2009, respectively, for the distribution of TCAP funds and Exchange Program fund.
Arkansas' Three Tier Selection Process
2006, 2007 and 2008 Allocation recipients:
ii. After building's 1st tax credit year and only if the LIHTC qualified basis has increased by virtue of increase in number of LIHTC units or LIHTC square footage. In this instance, the 2/3 rule of Section 42(f)(3) of the Internal Revenue Code. Will require Board approval to increase LIHTC units from original application.
a. Application will be by submission of a 2009 Special Application, to provide information required for the TCAP and Exchange/Subaward Programs, to include updated financial commitment letters, an updated Pro Forma, Attachment C, and, if applicable, updated attachment G. Applicants must meet the minimum debt coverage ratio of 1.10.
i. Certification to a development timeline that verifies the development will expend 100% of the TCAP funds awarded no later than November 15, 2010 and will place in service no later than December 31, 2011. Failure to make the certifications eliminate the applicant's eligibility for funding separate from that in the applicant's Original Application. Failure to adhere to the timelines required will result in a recapture of tax credits, TCAP or Exchange/Subaward funds, as applicable.
ii. The Final Score received with 2008 scores adjusted to match 2007 scoring criteria. (The Final Score for 2008 will be reduced by any bonus points received under Item #11 “Market Feasibility Study” as the bonus points were not available for 2007. With this reduction, the scoring criteria for 2007 and 2008 are identical); and
iii. 5 priority points to those applicants requesting additional tax credits. Additional tax credits must be purchased at no less than $.50 per additional tax credit requested. Recipients of additional tax credits will not be eligible to return any tax credits allocated or reserved by ADFA for the purpose of receiving TCAP funds or an Exchange/Subaward.
e. Applicants requesting the maximum amount ($500,000) of TCAP funding will be eligible for additional HOME funds not to exceed $900,000, including any previous allocation. Recipients may use the additional HOME funds to reduce permanent debt, deferred developer fee, or other funding source in the Original Application.
i. Written statement from most recent investor/syndicator submitted to ADFA which indicates that the investor/syndicator has rescinded its previous equity commitment to the applicant. The written statement must reference the date and terms of the previous equity commitment rescinded and the amount rescinded. If the rescission is limited to a portion of the previous credit amount accepted and equity commitment, the investor/syndicator statement must specifically identify the amount of credits and amount of equity that remain accepted and committed;
ii. Written statement from nationally recognized investor/syndicator indicating that the investor/syndicator has been contacted by the applicant and rejected an offer to purchase any/all of the tax credits offered. The rejection must specifically identify the amount of credits offered and rejected. If the rejection is limited to a portion of the tax credits offered, the investor/syndicator statement must specifically identify the number of credits accepted for purchase and amount of equity to be paid for such purchase; and
c. 2009 applicants will be awarded remaining tax credits based upon the highest score. Following a reservation of the tax credit award, if any TCAP, Exchange/Subaward, or HOME funds remain available, applicants will be given an opportunity to request such funding with the highest scoring development receiving priority. In the event of a tie, the Board of Directors for the Authority will award priority based upon factors in the application such as: market need, number of affordable units; income/rent limitations; energy efficiency; and unit amenities.
i. Certification to a development timeline that verifies the development will expend 100% of the TCAP funds awarded no later than December 31, 2010 and will place in service no later than December 31, 2011. Failure to make the certifications eliminate the applicant's eligibility for funding separate from that in the applicant's Original Application. Failure to adhere to the timelines required will result in a recapture of tax credits, TCAP or Exchange/Subaward funds, as applicable; and
f. Applicants requesting the maximum amount ($500,000) of TCAP funding will be eligible for additional HOME funds not to exceed $900,000, including any previous allocation. Recipients may use the additional HOME funds to reduce permanent debt, deferred developer fee, or other funding source in the Original Application.
i. Written statement from most recent investor/syndicator submitted to ADFA which indicates that the investor/syndicator has rescinded its previous equity commitment to the applicant. The written statement must reference the date and terms of the previous equity commitment rescinded and the amount rescinded. If the rescission is limited to a portion of the previous credit amount accepted and equity commitment, the investor/syndicator statement must specifically identify the amount of credits and amount of equity that remain accepted and committed;
ii. Written statement from nationally recognized investor/syndicator indicating that the investor/syndicator has been contacted by the applicant and rejected an offer to purchase any/all of the tax credits offered. The rejection must specifically identify the amount of credits offered and rejected. If the rejection is limited to a portion of the tax credits offered, the investor/syndicator statement must specifically identify the number of credits accepted for purchase and amount of equity to be paid for such purchase; and
Board Approval
Any award made pursuant to Arkansas' Three-Tier selection process is subject to the approval of the Board of Directors for the Arkansas Development Finance Authority. The Board of Directors has the authority to determine the amount of any additional tax credits, TCAP, Exchange/Subaward or additional HOME funds requests based upon the financial feasibility analysis of any applicant.
2009 Guidance and Procedures
Tax Credit Assistance Program (“TCAP”)
• ADFA's TCAP Application has been accepted by HUD.
• $20,463,053 available for 2007, 2008 and 2009 LIHTC “awardees.”
• “Awardee” defined to include those development owners publicly announced by Board of Directors as receiving a reservation of tax credits.
Does not include those development owners who returned their tax credits prior to enactment of ARRA.
• Apply by application as provided by ADFA.
• Award of TCAP funding based on:
• Eligibility for TCAP:
Applicants requesting maximum amount of TCAP - $500,000 - will be eligible to request additional HOME funds not to exceed $900,000.
• Commitment and Expenditure deadlines:
i. Recipient's agreement that TCAP funds will be awarded in the form of a loan, secured by mortgage, amortized over the term of the development's affordability period as selected in the recipient's tax credit application, to be payable monthly based on one-half surplus cash (to be defined), with a balloon payment of the balance at the end of the affordability period;
ii. Recipient's agreement that a covenant binding ownership and its successors will be recorded restricting the development property by those TCAP program requirements and crosscutting federal grant requirements required by Notice CPD-09-03. Those requirements will be separately identified in the covenant;
iii. Recipient's agreement that TCAP funds may only be used for capital investment. Capital investment will be defined to mean costs included in “eligible basis” (not including 30% basis boost), except costs associated with the construction, acquisition or rehabilitation of a swimming pool(s), under Section 42 of the Internal Revenue Code;
vii. Recipient's agreement that failure to meet the deadline requirement of subsections b(vi)(A), b(vi)(B), or b(vi)(C), above, will require the recipient to set-aside an equivalent percentage, i.e., 25%, 50%, or 75%, of its developer's fee into escrow. Said amount will be payable to the developer in equal annual payments over 15 years following placement in service of the development;
Distribution of recaptured TCAP funds.
c. The commitment and expenditure timelines of Section b(vi) above will apply. Dependent upon the date of recapture, the Authority will have the discretion to set timelines different from those set forth in Section b(vi) above. However, any timelines determined by the Authority will be set to ensure compliance with commitment and expenditure timelines imposed by the American Recovery and Reinvestment Act of 2009 and Section IV.C of Notice CPD-09-03.
• All commitment and expenditure timelines will be tracked and reported to HUD in IDIS
Section 1602 Grants in Lieu of Tax Credits (“Exchange Program”)
• Available to developments placed in service after December 31, 2008.
• Acquisition costs for existing building(s) not eligible for Exchange Subaward if placed in service before January 1, 2009.
Acquisition basis cannot include value of cash reserves
• Apply by application as provided by ADFA. ADFA will have application form ready no later than June 26, 2009.
• Must have requested at least $100,000 in TCAP funding
• Cannot receive Exchange Subaward if allocated “additional tax credits.”
• Can only be used to replace equity lost from ORIGINAL APPLICATION
• Cannot exceed eligible basis costs not including 30% basis boost.
TCAP plus Exchange funds cannot exceed eligible basis costs not including 30% basis boost.
• Must place in service in accordance with year of allocation of “retained” tax credits.
• Required to adhere to 2009 QAP including Minimum Design Standards - Universal Design requirements
• Applicant must provide the following:
• Must execute agreement with ADFA prior to disbursement that sets forth:
f) Recipient's agreement that failure to meet the deadline requirement of subsections e(i); e(ii); e(iii), above, will require the recipient to set-aside an equivalent percentage, i.e., 25%, 50%, or 75%, of its developer's fee into escrow. Said amount will be payable to the developer in equal annual payments over 15 years following placement in service of the development;
• Must incur or expend 100% of Exchange Subaward by November 15, 2010.
2009 Applications
• Will be based upon 2009 application
• Made before September 30, 2009
• 2009 applicants will be awarded tax credit remaining after the 2007 and 2008 outstanding developments have been awarded additional tax credits and Exchange/Subaward
Based upon the highest score
• Following a reservation of the tax credit award, if any TCAP, Exchange/Subaward, or HOME funds remain available, applicants will be given an opportunity to request such funding with the highest scoring development receiving priority
• Criteria for eligibility of TCAP and Exchange funds will be same as set forth above for the 2007 and 2008 awardees
Amendments
The above guidance is subject to change as necessary to administer the TCAP and Section 1602 Grants in Lieu of Tax Credit Programs in accordance with state and federal requirements.
Credits
Adopted Aug. 14, 2009.
Current with amendments received through February 15, 2024. Some sections may be more current, see credit for details.
Ark. Admin. Code 109.00.9, AR ADC 109.00.9
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