Low-Income Housing Tax Credits

Creation of Pennsylvania Low-Income Housing Tax Credit

Governor Tom Wolf recently signed legislation that established a Pennsylvania low-income housing tax credit (LIHTC)! S.B. 30 creates this state tax credit, which is designed to encourage the development of quality affordable housing in Pennsylvania.

The Pennsylvania LIHTC will be administered by the Pennsylvania Housing Finance Agency and the Pennsylvania Department of Revenue. The requirements for the credits will follow the federal LIHTC.

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PHFA Announces 2020 LIHTC and PennHOMES Awards

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Governor Tom Wolf this week announced awards totaling $42 million in Low-Income Housing Tax Credits, $6.08 million in PennHOMES funding, and $12.6 million in National Housing Trust Funds for the construction of 36 affordable multifamily housing developments in Pennsylvania. The federal tax credits are administered by the Pennsylvania Housing Finance Agency and were approved by its board.


“These investments in housing benefit everyone because communities need housing for people at all income levels if they are to stay vibrant and growing,” said Gov. Wolf. “Demand is high for these tax credits because they make possible the construction of affordable rental housing that otherwise wouldn’t be financially feasible.”


When completed, the developments receiving funding today will preserve and create an additional 1,785 rental units for Pennsylvania residents, including 70 for people at or below 30 percent of the area median income supported by the National Housing Trust Funds.


“Low Income Housing Tax Credits are essential because they draw on public-private partnerships to achieve the construction of affordable rental housing that might otherwise never be built,” said PHFA Executive Director and CEO Robin Wiessmann. “The allocation of this funding reflects our commitment to address the affordable housing crisis, and the public-private investments that are being made will provide a stimulus to Pennsylvania’s economy.”

The 36 multifamily housing proposals that have been awarded tax credits can be viewed here.


PHFA Issues Extension Guidance for 10% Tests and Placed In Service Dates

PHFA_logo_300The Pennsylvania Housing Finance Agency (PHFA) has issued guidance on extensions of 10% Tests and Placed in Service Dates as a result of COVID-19. 

2019 Developments that entered into a Carryover Agreement prior to March 30, 2020, will receive a six month extension to meet the 10% Test. The new deadline for those owners to incur more than 10% of the Development's reasonably expected basis is April 25, 2021. Developments that were awarded a Forward Commitment of 2020 Low-Income Housing Tax Credits (LIHTC) and entered into a Carryover Agreement in April 2020 will also have until April 25, 2021, to incur more than 10% of the Development's reasonably expected basis.

 

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IRS Guidance Enables Partnerships to Amend Tax Returns Which Creates Positive Impact for Some LIHTC Partnerships

On April 8, 2020, the IRS released Revenue Procedure 2020-23 which enables eligible partnerships to file amended returns for 2018 and 2019 rather than having to file an administrative adjustment request (AAR).

The reason for this guidance is to allow eligible partnerships to take advantage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) tax relief for the year being adjusted (2018 or 2019), rather than delay the relief until the year the AAR is filed. Prior to this Revenue Procedure, if a BBA partnership had an adjustment to a previously filed return beginning in tax year 2018 or later, it was required to file an AAR. In most cases, the partners of the partnership would then reflect those adjustments in the year the AAR is filed, rather than in the year being adjusted. Without this latest guidance, partners would not have been able to take advantage of the tax benefits of the CARES Act until, most likely, 2021 when the 2020 partnership return is filed.

BBA Partnerships that have filed form 1065 and furnished all required Schedules K-1 for the taxable years beginning in 2018 or 2019, prior to April 8, 2020, may file amended partnership returns for those years prior to September 30, 2020.

This is significant to the Low-Income Housing Tax Credit Industry because the legislation states that “The amended returns may take into account tax changes brought about by the CARES Act as well as any other tax attributes to which the partnership is entitled by law.” This means that any eligible partnership receiving IRS Form(s) 8609 prior to September 30, 2020 would be able to amend a previously filed partnership return to claim credits in the 2018 tax year. The partners will then be able to receive the benefits immediately  rather than in 2021 if an AAR had to be filed.

If you have any questions regarding this information, please feel free to contact Elizabeth Harriger, CPA, Partner & Director of Affordable Housing Services at McKonly & Asbury at eharriger@macpas.com or by calling (717) 972-5727.

As further changes develop, we’ll continue to keep you informed. Be sure to check back to our COVID-19 Resource Center for additional information and updates.


PHFA Announces 2019 Low-Income Housing Tax Credits and PennHOMES Awards

PHFA_logo_300Governor Tom Wolf yesterday announced awards totaling $41.6 million in low-income housing tax credits and $7.7 million in PennHOMES funding for the construction of 39 affordable multifamily housing developments in Pennsylvania. The tax credits are administered by the Pennsylvania Housing Finance Agency and were approved by its board.

"Tax credits are the best tool we have for funding the construction of affordable rental housing," said Governor Wolf. "Tax credits provide the incentive for investment, which in turn funds the construction. The end result is more affordable housing options for Pennsylvanians."

When completed, the developments receiving funding yesterday will preserve and create an additional 1,708 rental housing units for Pennsylvania residents.

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Legislation Introduced to Create Pennsylvania State Housing Tax Credit

Rules and regsLegislation was recently introduced by Sen. Tom Killion (R-Delaware) to create a Pennsylvania Housing Tax Credit (“PHTC”). The legislation allows for $10 million in credits per fiscal year.

The guidelines for the PHTC will be created by the Pennsylvania Housing Finance Agency and are expected to be similar to those of the federal Low-Income Housing Tax Credit (“LIHTC”). The eligible applicants and eligible uses will reflect those allowed by the LIHTC. One exception to those similarities is that the credit period for the PHTC will be 5 years as opposed to the 10 year LIHTC credit period.

The legislation calls for the credits to be allocated in a way that results in at least 10% of the credits providing housing that targets households with incomes at or below 30% of area median income.

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Registration is Open! McKonly & Asbury Fall Affordable Housing Seminar

2018 Fall Save the Date

Registration is now open for McKonly & Asbury’s next Affordable Housing Seminar to be held on Thursday, October 11, 2018.

You won’t want to miss this seminar! It is full of hot topics in the Low-Income Housing Tax Credit industry.

We are excited to once again welcome A.J. Johnson as our speaker. A.J. will be covering two sets of topics and you may choose to attend just the morning or afternoon session or both!

Morning Session:

  • Income Averaging
  • Opportunity Zones
  • IRS Form 8823
  • IRS Form 8609
  • Occupied Rehab Issues

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PHFA Issues Second Draft Allocation Plan for Program Years 2019-2020

PHFA_logo_300The Pennsylvania Housing Finance Agency (PHFA) has issued a second draft of their 2019-2020 Allocation Plan for low-income housing tax credits.

According to the draft Allocation Plan, applicants will be required to submit an Intent to Submit Fact Sheet and Development Synopsis to PHFA on or before August 31, 2018. The final applications will be due to PHFA by 3 pm on November 16, 2018.

A number of changes have been made since the first draft of the 2019 Allocation Plan was released. A few of those changes include:

  • The addition of Income Averaging language and several related changes
  • A change in the time period the allocation plan covers (the new draft covers the 2019 and 2020 years)
  • An increased required length of the Restrictive Covenant Agreement to 35 years.

You can read the revised draft allocation plan here.

Written comments on the draft allocation plan are due to PHFA by July 10, 2018.

A Pre-Application meeting will be held by PHFA on August 7, 2018 at the Red Lion Hotel Harrisburg/Hershey.

McKonly & Asbury is a leader in preparing and consulting on low-income housing tax credit applications in Pennsylvania. Our team is passionate about making your application a success. We have a comprehensive understanding of the challenges and nuances of structuring a low-income housing tax credit deal. We are able to assist you in putting the entire application package together for submission, or we can review your application and provide suggestions for optimizing points for PHFA scoring. For more information, please contact us at affordablehousing@macpas.com.


IRS Updates Form 8609 to Include "Average Income" Option

IRSOn May 31, 2018, the Internal Revenue Service (IRS) published an updated version of Form 8609, which is the form owners file with the IRS in order to claim low-income housing tax credits.

The updated version includes an additional minimum set-aside option under line 10c on the form – the “average income” option. Owners may benefit from selecting the new set-aside option, bringing with it the opportunity to offer affordable housing to renters earning up to 80% of area median income. Owners should seek the advice of their accountant prior to filing Form 8609.

While the updated form is available on the IRS website, updated instructions have not yet been released.

McKonly & Asbury is a leader in accounting for affordable housing developments in Pennsylvania. IRS and PHFA regulations require specialized knowledge when accounting for LIHTC developments whether it's performing a 10% Test or Development Cost Certification; or performing development stage audits and preparing partnership tax returns. The M&A Team has the audit and tax expertise and experience needed. For more information, please contact us at affordablehousing@macpas.com.


Affordable Housing Developers & Investors Can Now Reap an Additional $2,000 Tax Credit for Each Unit Leased in 2017

IStock-905420814We are welcoming CJ Aberin, CCSP to our blog today. CJ is a Principal at KBKG and oversees the Green Building Tax Incentive practice. Read on as CJ talks about 45L credits and explains how it might not be too late for you to take advantage of them.

Affordable housing developers benefit from various tax credits from Low-Income Housing Tax Credits to Rehab Credits, yet they often fail to claim a tax credit that is geared towards their developments: the Section 45L Tax Credit. Section 45L is a commonly overlooked section of the tax code that was recently renewed and rewards energy efficient dwelling units with a $2,000 federal tax credit per eligible unit. Understanding how this specific tax credit works can lead to improved returns for both affordable housing developers and investors, especially since affordable housing typically requires an investment in energy efficiency.

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