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1. Are able to be allocated to one or more low income units or substantially benefit low income units; and <br />2. Equal the greater of: <br />a. An average of $6,100 in qualified basis per low income unit for a building [as increased by cost of <br />living adjustment per Section 42(e)(3)(D)]; or <br />b. An amount that is not less than 20 percent of the adjusted basis of the building, as determined <br />pursuant to Section 42(e)(3). <br />In addition to the Section 42(e) requirements, Minnesota Statutes Section 462A.221, Subdivision 5, requires <br />rehabilitation expenditures for the project of an average of $5,000 per unit. <br />It is necessary to acquire an existing building in order to incur qualifying rehabilitation expenditures with respect <br />to that building. In such a case, the costs of acquiring the existing building may be eligible for the 30 percent <br />present value credit and the rehabilitation expenditures may be eligible for the 70 percent present value credit. <br />D. Existing Buildings <br />In order for an existing building to qualify for the 30 percent acquisition credit in connection with rehabilitation, <br />there must have been a period of at least 10 years between the date the building was acquired and the date it <br />was last placed in service. <br />Please note that the 10-year rule also applies to existing tax credit projects applying for a new allocation of <br />acquisition credits at the end of the original 15-year compliance period. <br />E. Exception to the Ten -Year Rule <br />Exceptions to the ten-year rule are provided in Section 42(d)(6) for federally or State assisted buildings, certain <br />low-income buildings subject to mortgage prepayment, and buildings acquired from insured financial institutions <br />in default. Certain other situations are exempt from the ten-year rule, such as: <br />1. A person who inherits a property; <br />2. A government unit or qualified nonprofit group if income from the property is exempt from federal <br />income taxation; <br />3. A person who gains a property through foreclosure (or instrument in lieu of foreclosure) of any <br />purchase money security interest, provided the person resells the building within 12 months after <br />placing the building in service following foreclosure; or <br />4. Single family residences that had no use during the prior ten-year period except, as an owner -occupied <br />principal residence will not be treated as being placed in service for purposes of the ten-year holding <br />period. Note that although the 10-year rule does not apply, the property must still be rehabilitated to <br />claim the acquisition costs of such a property. <br />F. Federal Subsidies <br />The determination of whether a building is federally subsidized is addressed in Section 42(i)(2). In general, a <br />building is treated as federally subsidized if there is financing which is tax exempt under Section 103 the <br />proceeds of which were used (directly or indirectly) in the building or its operation. <br />Federal grants are not to be taken into account in determining eligible basis. The eligible basis of a building shall <br />not include any costs financed with the proceeds of a federally funded grant. <br />17 12012 Housing Tax Credit Procedural Manual Rev. 04/2011 <br />