LOUISIANA HOUSING CORPORATION Overview of LHC Resources June

LOUISIANA HOUSING CORPORATION Overview of LHC Resources June 9, 2015 www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Outline of Presentation • • Overview of the Tax Credit Program The Anatomy of a LIHTC Project Post Award Requirements Questions & Answers www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Program Funding Opportunities • 9% Competitive Low Income Housing Tax Credits (LIHTC) • 4% Non-Competitive LIHTC • HOME Initiative Utilizing 4% Tax Credits • CDBG Initiative for Targeted Areas • Risk Share Program www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Tax Reform Act of 1986 • The low-income housing tax credit (LIHTC) program, created in 1986 and made permanent in 1993, is an indirect federal subsidy used to finance the construction and rehabilitation of low-income affordable housing. • The LIHTC program represents the largest federal housing program in existence in terms of the number of units developed each year. • The program acts as an incentive for private developers and investors to provide more low-income housing. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Background Section 42 of Internal Revenue Code of 1986 • The Tax Credit program is contained in Section 42 of the Tax Code. • The program is administered by state housing finance agencies with each state receiving a fixed allocation of credits based on the state’s population. • The state credit agencies decides which projects receive credits each year pursuant to allocation guidelines and the state’s Qualified Allocation Plan (QAP). www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Background The QAP outlines the following: • • • Funding Priorities Amount of available funds Guidelines for applying for funds and the threshold requirements for receiving an award Scoring criteria Funding timeline and deadlines www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION QAP Timeline • • Draft timeline submitted to the Board of Commissioners for review Stakeholders meeting with developers, CHDO/Non-Profits, Local and National Investors, include potential tenants, representatives, etc. Deadline for receipt of additional written comments from stakeholders meeting Draft QAP presented to the Board of Commissioners Release of RFPs for Market Study Analyst Statewide Publication of Draft QAP/Public Hearing Notice Public Hearing on QAP Board adopts Final QAP – Simultaneous submission to Governor and Joint Committee on Budget (JLCB) www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION QAP Timeline Analysis Fee Application Fee 1 to 4 Units $100. 00 5 to 32 Units $1, 000. 00 33 to 60 Units $1, 500. 00 61 to 100 Units $2, 500. 00 Over 100 Units $5, 000. 00 Reprocessing Fee 1 to 4 Units $100. 00 1 to 4 Units $50. 00 5 to 32 Units $1, 000. 00 5 to 32 Units $500. 00 33 to 60 Units $1, 500. 00 33 to 60 Units $750. 00 61 to 100 Units $2, 500. 00 61 to 100 Units $1, 250. 00 Over 100 Units $5, 000. 00 Over 100 Units $2, 500. 00 www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Basics • Market Study Fee • $4500 • Annual Compliance/ Monitoring Fee • $33 per unit • Credit Award Fee • 5% of Credit Reserved • Subsidy Layering Review • ¼ Analysis Fee • Return/Reallocated • 5% of Reallocated Credits • PIS Review Cost • $250. 00 www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Basics • The Louisiana Housing Corporation awards tax credits annually to the highest scoring projects. • Once awarded and following completion, tax credits are taken over the initial 10‐year operating period. • LIHTC are subject to recapture if the project fails to comply during the first 15 years. • Tax credits provide a dollar‐for‐dollar credit against income tax liability of investors. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Basics • Projects are generally owned by a Limited Partnership (LP) or Limited Liability Company (LLC). • The LP or LLC usually consists of the General Partner and the Limited Partner. • Limited partnership passes tax benefits on to the investor and maximizes the investor equity in the project. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Basics Limited Partner generally owns between 99‐ 99. 99% of the tax credits, profits and losses. – Limited Partner pays in capital contributions in multiple installments, based upon negotiated benchmarks. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Basics General Partner generally owns about 0. 01%, guarantees completion of the project, amount of credits and funding of deficits. – Usually controls and operates the project; handles reporting and tax matters. – May receive a share of the cash flow if allowed in the partnership agreement. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Basics • Generally tax credits are taken over the initial 10 -year operating period. • Investors also take any tax losses over the entire investment period. • LIHTC are subject to recapture if the project fails to comply during the first 15 years. • Tax credits provide a dollar-for-dollar credit against income tax liability of investors. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Basics Tax Credits vs. Tax Deductions Tax credits are subtracted directly from one’s tax liability. Credits reduce tax liability dollar‐for‐dollar. Example: Ø A $1, 000 tax credit in a 15% tax bracket reduces tax liability by $1, 000. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Basics Tax Credits vs. Tax Deductions Tax deductions are subtracted from a taxpayer’s total income to compute the tax base. Deductions reduce tax liability by the amount of the deduction times the tax rate. Example: Ø A $1, 000 deduction in 15% tax bracket reduces taxable income by $1, 000, thereby reducing tax liability by $150 ($1000 X 15%). www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Basics • New Construction – Housing units which have not previously been occupied. • Rehabilitation - Any rehabilitation meeting the minimum rehabilitation expenditure requirements. • Substantial Rehabilitation or Conversion - Any rehabilitation in which Hard Costs equal or exceed $20, 000 per unit. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Basics Types of LIHTCs • 9% Credits – New Construction/Rehabilitation credit rate • 4% Credit – New Construction/Rehabilitation when there is federal subsidy (tax‐exempt bonds, below market federal loans, etc. ) • 4% Acquisition Credit – used for the cost of buying an existing building for which rehabilitation expenditures are incurred www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Project Restrictions • There are ALWAYS income and rent limitations. • INCOME: Threshold election – each building must meet one of two minimum thresholds: 1) 40/60 – 40% of the units affordable to households at 60% AMI or below. 2) 20/50 – 20% of the units affordable to households at 50% AMI or below. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Project Restrictions • RENT ‐ Rents are set at 30% or less of household’s eligible income. • AMI ‐ Area Median Income is published annually by HUD, calculated based on the size of the family. • Compliance Period ‐ Buildings must remain rent and income restricted for at least 15 years; and may be subject to extended use periods. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Terms/Calculations • Total Development Cost – Includes all project costs. • Eligible Basis – Depreciable basis of residential rental housing (exclude costs not related to residential rental housing or that are not depreciable). • Qualified Basis – includes eligible basis costs of only the units occupied by qualified tenants. • Applicable Percentage Rate – Rate set monthly for the 9% and 4% credits. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Terms/Calculations • Applicable Fraction – the lesser of the percent of units or square feet qualifying for credits. • Basis Boost – Increase in tax credit basis by 30% if the building is in a Qualified Census Tract (QCT) or Difficult to Develop Area (DDA). • Tax Credit Regulatory Agreement – Document containing the terms and restrictions for maintaining a tax credit property. • IRS Form 8609 – Document issued once the project is complete to allocate tax credits. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Terms/Calculations Example Ø 100 unit project with 70 low income units Ø TDC (including land) = $5. 5 M Ø Land value $500 K –subtracted from TDC because land is nondepreciable. Ø Eligible basis - $5. 0 M Ø Qualified basis would be less because only 70% will be LIHTC units – $5. 0 M X 70% = $3. 5 M www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Terms/Calculations Example Continued Ø Applicable percentage = 9. 0% Ø Annual credit = $315, 000 ($3. 5 M x 9. 0%) Ø 10 year credits = $3, 150, 000 Assuming that an investor is willing to pay 80 cents per tax credit dollar, the equity would yield $2, 517, 480 ($3, 150, 000 X 99. 9% x 80%). www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Terms/Calculations Assuming that this is a bond financed or 4% deal: Ø Applicable percentage = 3. 40% Ø Annual credit = $119, 000 ($3. 5 M x 3. 40%) Ø 10 year credits = $1, 190, 000 Ø Assuming that an investor is willing to pay 80 cents per tax credit dollar, the equity would yield $951, 048 ($1, 190, 000 X 99. 9% x 80%). www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Application Process Pre‐award – – – – – Application deadline Market Study commissioned by Corporation Feasibility and Viability Analysis Completed Application reviewed Application competitively scored Challenge period Application scored and ranked Board Approval of Awards List Reservation of Credits www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Application Process Post Award • • Carryover Allocation Monthly Construction Reports Construction Monitoring Placed in Service Analysis SLR/Field Report Issuance of IRS Form 8609 Placed in Service Audit www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Application Process Selection Criteria Targeted Project Types – 2015 QAP • • • De‐concentration Project Redevelopment Project High Vacancy Projects Rehab Project (Abandoned) Scattered Site/Rehab New Const/Scattered Site 4‐ 12 Points 6 Points 2‐ 6 Points 6‐ 8 Points 10 Points 2‐ 4 Points www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Application Process Selection Criteria Targeted Project Types – 2015 QAP Preservation Priority Project – PBRA/100% or Subsidy/60% – PBRA/60% or Subsidy/40% 10 Points 9 Points – PBRA/30% or Subsidy/20% 8 Points www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Application Process Selection Criteria Targeted Population Type – 2015 QAP • Special Needs • Veterans Households • Elderly Households 3‐ 5 Points 7 Points 6 Points www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Application Process Selection Criteria Priority Development Areas and Other Preferences • Extended Affordability Agreement 2‐ 4 Points • Increased Unit Affordability 4‐ 6 Points • Difficult Development Area (QCT/DDA) 2‐ 4 Points • Rural Area Project 10 Points • Other Governmental Priority 2‐ 3 Points • Governmental Support 2‐ 4 Points www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA Application Process Continued… HOUSING CORPORATION Location Characteristics Project Characteristics • Green Buildings • Community Facilities • Optional Amenities • Additional Accessible Units • On Site Security 0 -10 Points 5 Points 2 Points 1 -7 Points 1 -3 Points Leverage, Efficiency and Viability • Leverage for Disability Funding • TDC/Unit 10% below Maximum • Viability Penalty Points Project & Submission Penalty Points 3 Points Loss of 5 - 10 Points Loss of 4 - 39 Points www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Development Team • • Developer General Contractor Architect Attorney Property Manager Accountant Consultant www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Development Team • Lenders Construction lender and attorneys Permanent lender and attorneys • Syndicator Equity underwriter and attorney • State Allocating Corporation Allocate credits Provide soft loans Monitor timelines and compliance • Other Professionals Engineers, Historic, Environmental, etc. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION General Tax Credit Timeline • • • Apply for tax credits Get a tax credit reservation Incur more than 10% of costs in year 1 Receive carryover allocation Complete project and place it in service Submit PIS Docs for review Record TCRA & extended use agreement Receive Form 8609 Rent tax credit units to qualified tenants Elect when to start tax credits Keep tax credit units in compliance www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Application Process Upon Submission General Timeline (Approx. 4‐ 5 month process) www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Requirements Acquisition – Rehabilitation • Rehabilitation costs must be the greater of (IRC § 42(e)(3)) – $3, 000 per unit; or 10% of the adjusted basis of the building • Rehabilitation costs included in basis must be incurred during any 24‐month period (IRC § 42(e)(4)(A)) • Can’t claim acquisition credits prior to rehab credits (IRC § 42(f)(5)(A)) www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Project Pre-Submission 1. Process Needs Assessment and Cost Analysis Developer Conducts a Needs Assessment � Market Study, Housing Analysis, Own Data • Must evidence a need for the proposed units and targeted population • With the development there is still an unmet demand • Get estimated TDC (Total Development Cost) • Can the expected revenue meet the expected expenses? www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Project Pre-Submission 2. Site(s) Selection • Proper Zoning – Must be zoned for proposed use • Possible Environmental Clearances Needed • Location Characteristics �Proximity to goods and services � Infrastructure – Streets, Roads, Sewer, Drainage, utilities www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Project Pre-Submission 3. Getting Project Support • Local Community Support • Local Government’s Financial Support � Loans, Grants, Infrastructure assistance, etc. • Local Concerted Revitalization Plans � Fills local objectives and needs � Blight mitigation/remediation www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Project Pre-Submission 4. Secure Financial Commitment • Banks, Lenders, Local/State/Federal Governmental Funds, Non‐profit funding � HOME, CDBG, Grants, (Soft Funds) � Used to provide leverage � Minimize the amount of LIHTCs needed • Investor/Syndicators – Provide Equity, Purchase Tax Credit and Enters the Partnership �Typical Arrangement: Developer to Investor? • Generally 99‐ 99. 99% of the Partnership • 0‐ 0. 01% to the Developer www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Project Post Award The application has been submitted and awarded What’s next? • Closing • Construction • Place In Service www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Project Post Award Project’s Financial Closing • Documents signed & Commitments Locked‐In • Funding Commitments made by Developer, Lenders and Investors are finalized � Tax Credit Guarantees � Construction Completion & Deficit � Lease‐Up � Permanent Loan Funding � Tax Credits (Adjusters) � Compliance Monitoring • Syndicator enters into the partnership � Commits to the funding the project � Sets timetable and benchmarks for equity pay‐in www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Project Post Award What Does The Developer Retain? • • Developer Fees Property Management Fees Operating Cash Flow Sale or Refinancing Proceeds www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION LIHTC Project Post Award Project’s Construction • Begins After Financial Closing • Developer issues NTP (Notice to Proceed) • 9% LIHTC Projects have up to 24 months to complete and PIS project • 4% LIHTC Bond Projects Longer to PIS • Staff monitors the project’s progress • 90 days off schedule requires reprocessing www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Follow the Money Feasibility and Viability Study • Rigorous financial evaluations to make sure project receives only enough Housing Credits to make it viable as long-term, low income housing. • State evaluates every source and use of funds, including government subsidy, reasonableness of costs, and developer and builder profit. • The Corporation’s Underwriting team reviews each project’s financial pro forma for short-term feasibility and long-term viability • Awarded only the amount necessary for feasibility. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Calculating the Housing Credit • Eligible basis • High cost area adjustment (30% Boost) • Applicable fraction • Applicable percentage www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Eligible basis • Portion of total project costs • Acquisition basis (building) • Rehab/new construction basis • Excludes: � Costs attributable to land www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION High Cost Area Adjustment • Also called “boost” • Increases eligible basis by 30% • High cost areas �Difficult Development Areas • Qualified Census Tracts • State-designated high cost areas www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Applicable Percentage • Also called “tax credit rate” • Rate eligible basis is multiplied by to determine tax credits • Set monthly by U. S. Treasury • Currently 9% is flat 9% (Rehab/New Construction) • The 4% is a floating percentage (varies monthly) www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Calculating the Credit (Example) 9, 000 +1, 300, 000 10, 300, 000 (1, 000, 000) 8, 300, 000 EB x AF x CP x 10 = Credits (9% LIHTC Project) Project Costs Developer Fee Total Project Costs Non‐eligible Project Costs Land Eligible Basis www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Calculating the Credit Equity 8, 300, 000 * 100% 8, 300, 000 * 9. 00% 747, 000 * 10 7, 470, 000 * 99. 99% *. 80 $5, 916, 240 Eligible Basis Low Income Occupancy % (Applicable Fraction) Qualified Basis Credit Percentage Credits Per Years Total Credits Investor Limited Partner Ownership Credit Price Equity www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Calculating the Debt 100 Rental Units *600 Rent Per Unit 60, 000 Per Month Rental Income (30, 000) Operating Expense (50%) 30, 000 Net Operating Income Per Month *12 Months 360, 000 Net Operating Income Annually /1. 20 Debt Coverage Ratio 300, 000 Cash Available $3, 708, 000 Loan (approx. 7. 5% Amt. @ 30 yr) www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Calculating the Credit 10, 000 (5, 916, 240) (3, 708, 000) 375, 760 (375, 760) Project Costs Equity Permanent Loan Unfunded Project Costs (Gap) Deferred Developer Fee (or other sources; CDBG, HOME, etc) $0 www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Calculating the Credit (Acq/Rehab) (Difference is Acquisition Credits) • Single Bldg‐ 100 unit project = 100% Low Income • Applicable percentage = 3. 25% (4% rate) www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Calculating the Credit (Acq/Rehab) 1, 600, 000 * 100% * 3. 25% 52, 000 *10 520, 000 *99. 99% *. 80 $411, 840. 00 Eligible Acq. Basis ($2 M acq. ‐$400 k land) Applicable Fraction Credit Percentage (monthly) Credits per years Total Credits Investor Ownership Credit Price Equity www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

If using conventional financing (9% LIHTC) If using tax-exempt bonds (4% LIHTC) Total development costs $21, 000, 000 Less: Ineligible costs, including land <1, 000, 000> 20, 000, 000 100% 20, 000, 000 9. 00%* 3. 34%* 1, 800, 000 668, 000 540, 000 -- 2, 340, 000 668, 000 23, 400, 000 6, 680, 000 Eligible basis (Total LIHTC eligible costs) Applicable fraction Qualified basis (Eligible basi 1 s x Applicable fraction) Applicable percentage Annual credit before basis boost Basis boost (130%) Annual credit after basis boost Total credit (Annual credit x 10) www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Definitions • Reservation ▫ Commitment of funds from Corporation to Taxpayer after Board Approval if certain conditions are met ▫ Can not be carried forward into the next year • Allocation ▫ Formal commitment that can be carried forward into the next year • Binding Agreement ▫ Agreement between the Corporation & Taxpayer to committing of actions • Placed‐In‐Service ▫ when the building meets the minimum occupancy requirements www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Post Award Timeline Awards approved in July 2015… • 07/2015 – • 8/5/2015 – • • • Reservation Letters/ Commitment Agreements mailed Credit Award Fee & Recorded Commitment Agreement due 11/15/2015 – Carryover Allocations granted 03/15/2016 – Carryover Allocations granted for applicable projects 12/31/2017 – All projects granted carryover in 2015 must be placed in service 04/1/2018 – PIS Documents due to Corporation 6/30/2018 – Project receives 8609 s www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Reservation Letter • Commits credits • Stipulates instructions for attached Housing Credit Percentage Commitment Agreement • Documents due dates for Allocation Documentation www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Reservation Letter • For 4% projects, the following documents are issued. – Commitment Letter • Commits credits approved by the Corporation’s Board of Commissioners – 42(M) Letter • Declares that the tax exempt bonds finances at least 50% of the Total Development Cost of the project www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

Housing Credit Percentage Commitment Agreement • Binding Agreement • Serves as basis for compliance with the provisions of the Code and IRS Guidelines. • Includes 3 exhibits www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

Exhibit I (HCPCA) • Legal Description of Project Location ▫ Provided by Taxpayer ▫ Shall include detailed location ▫ Map must be included ▫ Must be consistent with application and all subsequent documents www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

Exhibit II (HCPCA) • Excel Spreadsheet completed by Corporation ▫ Specifies Housing Credit Dollar and Qualified Basis ▫ Specifies types of building to which the credit dollar applies ▫ Specifies location and Taxpayer ▫ Specifies Applicable Credit Percentage www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

Exhibit III (HCPCA) • Credit Percentage Election Form ▫ Locks in the credit percentage �Percentage to be applied to Qualified Basis to determine amount of tax credit per building �Issued by the IRS monthly in Revenue Rulings • Optional Ø Applicable percentage can also be locked in when the project places in service. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Exhibit III • Percentage can be locked in – 9% Rehabilitation or New Construction • Month when binding agreement is issued • Month project places in service – 4% Bonds Projects • month in which bonds are issued • Month project places in service – 4% Acquisition • Month building is acquired = places in service www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Deadlines required by Reservation Letter & Commitment Agreement • Agreement must be recorded by the end of the month in which it was issued. • Award Fee – equal to 5% of Credit Award must be paid to LHC by no later than the 5 th day of the following month www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

Carryover • Formal commitment of credit dollar • Given to projects that do not place in service by the end of the year of reservation • To qualify, projects must incur 10% of reasonably expected costs by end of the year ▫ Certificate of Allocation is granted. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

Carryover • Section 42 allows an allocation to be made to a project that does not incur the 10% if more than 10 percent is incurred no later than 6 months following close of year • Housing and Economic Recovery Act of 2008 allowed an additional 6 months to incur 10% ▫ Carryover Allocation Agreement is granted. �Binding Agreement www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Carryover • Revenue Procedure Extensions – IRS Rev. Proc. 95 -28 • Grants carryover relief or PIS relief for projects in disaster areas by allowing an additional year following any additional time granted to incur the 10 percent www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Monitoring • Staff Monitoring • Monthly Construction Reports • Field Inspection Reports • Project Schedule Updates www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Staff Monitoring • Staff is in constant contact with Taxpayers through email and telephone ensuring the progress of the project. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

Monthly Construction Reports • An electronic report is sent to all Taxpayers of projects that have not evidenced being Placed-In-Service ▫ Updates Current Status of Project �Closed, Not Closed, Under Construction, Placed-In. Service ▫ Closing Dates ▫ Percentage of Construction Completed ▫ Impediments? www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

Field Inspection Reports • Construction Department inspects each projects at the following intervals: ▫ 30% ▫ 60% ▫ 90% ▫ Completion www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

Project Schedule Updates • The QAP allows projects to alter their previously specified dates by up to 90 days. • Anything above 90 days requires approval by the Corporation. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Reprocessing • Reprocessing Change • Material Change www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Reprocessing Change • Can be approved by Staff • Adjustments of sources or uses greater than 5% but less than 10% • Increases or decreases in # of buildings, # of units, unit mix, square footage greater than 5% but less than 10% • Changes in project schedule by more than 90 days • Any increase in the interest rate of long term debt required for completion of project www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Material Change • Requires Board Approval • Any change above 10% • Any reprocessing change resulting in project no longer being feasible and viable • Any reprocessing change resulting in a reduction of points • Site Change – NIMBY (Not In My Back Yard) www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Reprocessing Example Original # of Units Reprocessing # of Units Action 50 48 None Necessary 50 47 New Application & Analysis/ Staff Approval 50 44 New Application & Analysis/ Board Approval www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Recapture Credits can only be returned to the Corporation’s Credit Ceiling for 2. 5 years following allocation. • Voluntary Credit Return Agreement • Act of Correction • Act of Cancellation www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Placed-In-Service • A building is deemed placed‐in‐service when the building meets the minimum occupancy requirements and receives a Certificate of Occupancy from the parish in which the project is located. • Multi‐building projects are deemed PIS when the last building receives a CO. • All 9% projects must PIS 24 months after receiving the Carryover Allocation. • 4% projects are not under the same time constraint. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Placed-In-Service • By April 1 of the year following PIS, the following must be submitted ▫ Financing Certification �Specifies sources of funds for the projects, Syndication Information, subsidies provided, and amounts allocated to various developer costs at Application, Reservation, and PIS ▫ Syndication Certification �Certification between Taxpayer & Syndicator specifying other information costs or items incurred for the packaging of the investment www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Placed-In-Service ▫ Cost Certifications/Certificate of Actual Cost �Specifies all of the sources & uses throughout the Placed in Service Date ▫ GAAP Audit �Must audit the certificate of actual costs, the sources & uses through the PIS Date �Identify all identities of interest and related persons to the Taxpayer receiving payment ▫ Baseline Operating Budget �Budget established during the first year of the Credit Period www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Placed-In-Service • The carryover allocation of credits is subject to recapture if these documents are not received by the specified date. • An one‐year extension may be requested from the Corporation if the Taxpayer has elected to begin the first year of the credit period following the year in which the project is placed‐in‐service. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Placed-In-Service – Annual Audit • Must identify all transactions involving related persons • Must distinguish operating expenditures from capital expenditures • Specify surplus cash • Must be submitted by April 1 of each year following the year the project Placed‐In‐Service • Failure to submit timely can preclude Taxpayers from participating in funding rounds www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Placed-In-Service • These documents are sent to the Corporation’s underwriters for final analysis. • This analysis called the Final Subsidy Layering Review determines the final credit allocation for the project. • The credit dollar can be decreased from the carryover allocation, but not increased. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

Placed-In-Service • Tax Credit Regulatory Agreement ▫ Ensures that the project will be constructed, used, and operated in accordance with the Tax Code, Louisiana Housing Finance Act, and the Application. ▫ Includes an Extended Use Agreement to promote the long term use of low income housing tax credit property. ▫ Agreement has the legal status of restrictive covenants against the property ▫ Must be filed in the Mortgage and Conveyance Records of appropriate parish www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

Placed-In-Service • Tax Credit Regulatory Agreement ▫ Address & Location of Project ▫ Final Allocation ▫ PIS Date ▫ Credit Period ▫ Compliance Period ▫ Extended Use Period ▫ Awarded Selection Criteria www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

Placed-In-Service • IRS Form 8609 ▫ Final allocation document completed by the Corporation and provided to the Taxpayer ▫ Document is submitted to the IRS by both the Corporation and Taxpayer to reduce the income tax liability on behalf of the investor. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Placed-In-Service • Compliance Monitoring Agreement – Included with TCRA • Once 8609 s are issued, the Corporation’s Compliance Department monitors the project with visits every 3 years and annual submission of certification of tenant income and rent for each unit. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION HOME Program Overview • Block‐grant, formula‐funded program administered by the U. S. Department of Housing and Urban Development (HUD) • Purpose ◦ Expand the supply of decent, safe, affordable housing for low‐income households www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION HOME Program Overview Eligible Applicants: Units of General Local Government 2. Nonprofit organizations 3. Public housing agencies 4. For‐profit Entities 1. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION HOME Program Overview Eligible Activities: 1. 2. 3. 4. Homeowner Rehab Homebuyer Rental Rehab and New Construction Tenant‐based Rental Assistance www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION HOME Program Overview Community Housing Development Organization (CHDO) ◦ LHC designates the CHDO. ◦ CHDOs can maintain program income as CHDO proceeds. ◦ LHC is required to invest at least 15% to CHDO eligible activities. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION HOME Initiatives Utilizing 4% Credits • LHC has made available HOME funds to be used in conjunction with 4% LIHTC under Section 42 of the IRS code. • Participating projects must apply for and receive approval of Tax Exempt Bonds and an allocation of 4% LIHTC. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION HOME Initiatives Utilizing 4% Credits 2015 SPRING NOFA 1. Focus on development of rental units for Low and Very Low income households. 2. All funds will be in the form of a loan. 3. Repayment of loan will be from a minimum of 50% of Cash Flow. All other terms will be based on LHC underwriting. 4. Maximum award of $1, 500, 000 but no more than necessary to make the project and viable. feasible www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION HOME Initiatives Utilizing 4% Credits 2015 SPRING NOFA 5. Any deferred developer fees will be paid from the developer’s portion of Surplus Cash. 6. All HOME assisted rental units must be leased to eligible tenants within 18 months from date of construction completion or all HOME Funds which were a part of the project must be repaid to the LHC. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION HOME Initiatives Utilizing 4% Credits 2015 SPRING NOFA 7. HOME awards may be terminated due to lack of program or project productivity. 8. Applications fees are due at time of submittal. 9. Market study and analysis fees due 7 days from the receipt of preliminary award letter. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION HOME Initiatives Utilizing 4% Credits TIMELINE April 2, 2015 Question Submittals June 17, 2015 Application Deadline 4: 00 PM July 2015 Application Awards 7 Days from PA Market Study Fees Due Executed PA www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Additional Financial Resources Community Development Block Grant Funds • LHC will make available CDBG funds in conjunction with 4% Credits and Bond Allocation. • Available to targeted areas www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Additional Financial Resources Risk Share Pilot Program • To provide FHA Risk-Sharing Loans to qualified projects that are applying for Non-Competitive Low Income Housing Tax Credits. • Under the Risk Sharing Program, LHC and HUD share full insurance risk for the project’s permanent financing. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Risk Share Pilot Program • Insured projects must meet minimum project set-asides by assisting households with incomes at or below 60% of the AMI. • Compliance with LHC’s underwriting requirements and the FHA Risk-Sharing Underwriting and Development Policies contained in HUD Handbook No. 4590. 01 Rev-1 is required. www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION Risk Share Pilot Program Eligible Projects: • The Risk Share Program is available to the following projects: o Certain Existing Residential Rental Developments o Substantial Rehabilitation o Single Room Occupancy Projects o Elderly Projects o Board and Care/Assisted Living Facilities www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation

LOUISIANA HOUSING CORPORATION CONTACT Brenda Evans bevans@lhc. la. gov Marjorianna Willman mwillman@lhc. la. gov Urshala Hamilton uhamilton@lhc. la. gov www. lhc. la. gov Louisiana. Housing. Corp @lahousingcorp Louisiana-housing-corporation