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January 2010

PHFA Releases Preapplication Workshop Q&A

PHFA_logo_300 The Pennsylvania Housing Finance Agency (PHFA) this week released a document containing the questions posed by participants at the Preapplication Workshop held on December 16, 2009 and PHFA’s responses. The Q &A contains good information relating to the new scoring criteria of having an equity investor secured, site control, and submitting an application with a funding gap.

For additional information regarding low-income housing tax credit application preparation, contact Elizabeth Brooks at or (717)761-7910.

Report on Lancaster County Regulatory Barriers to Affordable Housing

Rules and regs The Lancaster County Planning Commission and the Lancaster Housing Opportunity Partnership released a study this week titled “An Analysis of Regulatory Barriers to Housing Affordability”. The goal of the study is to identify ways in which land use regulations in Lancaster County may contribute to the lack of affordable housing in the county. The study states that a change in local land use regulations alone will not result in the production of additional affordable housing. The study recognizes that there are numerous factors that contribute to housing price and availability. The study concludes that it is crucial to work towards providing additional housing choice and affordability in Lancaster County and by raising public awareness, understanding, and support for affordable housing, potential regulatory barriers to affordable housing can be addressed.

Affordable Housing Success Story - Mifflin Mills, Lebanon, Pennsylvania

MifflinMillsRendering In our November 2, 2009 blog post, we began a series of affordable housing success stories with Westminster Place at Parkesburg. Through this series, we hope to highlight the great work being done in Pennsylvania to provide affordable housing.

The second success story to be highlighted in our series is Mifflin Mills Townhomes (Mifflin Mills). Mifflin Mills is Lebanon, Pennsylvania’s first affordable rent-to-own townhouse community. The development is comprised 20 three-bedroom townhomes located just blocks from downtown Lebanon. Mifflin Mills was developed by the Lebanon County Housing Authority and construction was completed in November 2009. Mifflin Mills offers a unique opportunity for tenants in that the units will be leased during the first 15 years and then they will be sold to their tenants. During each year of occupancy, funds will be escrowed for tenants to use toward the down payment on the townhome. The 1,380 square foot 2 and 3 story units have open floor plans, front porches, off-street parking, energy star appliances, and high efficiency natural gas heat.  Mifflin Mills was developed on a vacant blighted city block and the construction of Mifflin Mills has greatly improved the appearance of the neighborhood. In addition, the property was designed to blend in with streetscape of the neighborhood further adding to the aesthetics of the community in which it is located.

Projects such as this highlight the excellent quality of housing that is being developed through the Low-Income Housing Tax Credit program administered by the Pennsylvania Housing Finance Agency.

If you know of a project for consideration in our success stories series, e-mail us at

Partnership Taxation: Who Owns Me? Who Do I Own?

The IRS Form 1065, U.S. Return of Partnership Income, is the tax return that partnerships must file annually. Beginning with the 2009 tax year, partnerships are required to answer two new questions when filing Form 1065.

1. 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?
2. 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?

These two questions essentially ask for a “chain of ownership” involving the partnership. On the surface, these questions would appear straight-forward. However, in addition to looking at the direct ownership, you need to look at the constructive ownership rules. These rules are defined in Internal Revenue Code Section 267(c); we’re not going to recite them here, but basically, you must look “up and down the chain” of ownership in entities and you must also look at family relationships. These concepts are best illustrated through some examples:

Example 1

Corporation A owns, directly, an interest of 50% of Partnership B. Corporation A also owns, directly, an interest of 15% in Partnership C. Partnership B owns, directly an interest of 70% in Partnership C. So, we’ve got the following ownerships:


As a result, Corporation A owns, directly or indirectly, 50% of Partnership C (15% directly and 35% indirectly through its ownership of Partnership B). You should report on the 2009 1065 for Partnership C, that it is owned 50% by Corporation A and 70% by Partnership B. Note: You can have ownership percentages of direct and indirect ownership reported that will exceed 100%.

Example 2

Individual A owns 50% of Partnership X. Individual B, the daughter of A, does not own any part of Partnership X, but she does own 80% of Partnership Y. Partnership Y owns 30% of Partnership X. So, we’ve got the following ownerships:


As a result, Individual A owns, directly or indirectly, 74% of Partnership X (50% directly and 24% indirectly through his relationship to his daughter and her ownership in Partnership Y, which owns part of Partnership X). You should report on the 2009 1065 for Partnership X it is owned 74% by Individual A. Another “anomaly” of these constructive ownership rules is that the ownership shown on Schedule B might not always agree to the ownership shown on the Schedule K-1 for that partner.

Example 3

Partnership A owns a 45% interest in Partnership B. Partnership A owns 15% of Partnership C and Partnership B owns 85% of Partnership C. So, we’ve got the following ownership structures:


This results in Partnership A owning directly, a 45% interest in Partnership B and directly and indirectly a 53% interest in Partnership C (15% directly and 38% indirectly through its ownership of Partnership B). What is shown on Partnership A’s Form 1065 is 45% interest in Partnership B (since that is a more than 20% direct ownership) and a 53% interest in Partnership C (since that is a more than 50% direct or indirect ownership). This example illustrates the “look-through” principle that must be used in answering these questions. At first glance, one might think that Partnership C does not need disclosed since Partnership A only owns less than 20%, but further inspection of the “chain of ownership” reveals the need to include Partnership C on the Form 1065.

What all this means for partnerships looking to complete their 2009 tax returns in the coming months is that they will need to look at not only their direct owners but also ask questions about who owns their partners or who is related to their partners as well as what do they own. Feel free to contact Jane McCurdy at for additional information.