The 10% Test
The 10% Test deadline for developments that received a reservation of 2013 low-income housing tax credits in Pennsylvania is almost here. Developments receiving a reservation of 2013 low-income housing tax credits must have incurred 10% of their reasonably expected basis on or before October 12, 2014, and have until October 28, 2014, to submit the required information to the Pennsylvania Housing Finance Agency (PHFA). 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 2013 credits, a development must incur 10% of its reasonably expected basis by October 12, 2014. 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 2013 credits that will not be placed in service by the end of this year, a Carryover Allocation Agreement must have been executed by October 7, 2013, and have been submitted to PHFA along with other required information by October 10, 2013. Having a valid Carryover Allocation Agreement in place will give developments that received an allocation of 2013 low-income housing tax credits until December 31, 2015 to be placed in service as long as all other requirements, including meeting the 10% Test, are met.
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 Harriger 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.
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