Today marks two important deadlines in the world of low-income housing tax credits in Pennsylvania. For developments that received a 2010 allocation of credits, 10% of the reasonably expected basis must be incurred as of today. For developments that received a 2011 reservation of low-income housing tax credits, today is the deadline for executing the Carryover Allocation Agreement.

The 10% Test deadline for developments that received 2010 low-income housing tax credits in Pennsylvania is here. These developments must have incurred 10% of their reasonably expected basis as of today and have until noon on August 25, 2011, to submit the required information  to the Pennsylvania Housing Finance Agency. This is an important test because failure to satisfy it can cause a development to lose its tax credits.

In order to meet the 10% Test for 2010 credits, a development must have incurred 10% of the reasonably expected basis by today. Reasonably expected basis is the estimated land and all depreciable property (not just basis eligible property) expected to be part of the development.

Generally, a development must be placed in service in the year that the low-income housing tax credits are awarded by the state housing finance agency (in Pennsylvania, this is PHFA). A carryover allocation can extend the placed in service date to the end of the second calendar year after the year that a carryover allocation is made.  For any development receiving an allocation of 2011 credits that will not be placed in service by the end of this year, a Carryover Allocation Agreement must be executed today and submitted to PHFA along with other required information  by August 22, 2011. Having a valid Carryover Allocation Agreement in place will give developments that received an allocation of 2011 low-income housing tax credits until December 31, 2013 to be placed in service.

McKonly & Asbury is a leader in accounting for affordable housing developments in Pennsylvania. IRS and PHFA regulations require specialized knowledge when preparing a 10% Test. This test is critical in the tax credit process and it is important to work with someone who has the experience and expertise to ensure that your Test is accurate and your credits are not lost. The M&A Team has the audit and tax expertise and experience needed to complete an accurate 10% Test. For more information, please contact Elizabeth Brooks at [email protected].

The information presented in this post is intended solely for informational purposes and should not be construed as accounting advice from McKonly & Asbury, LLP.