Agenda - Council Work Session - 03/13/2012

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Chapter 8 — Tax Exempt Projects Seeking Tax Credits A. General Section 42 of the Internal Revenue Code establishes a separate set of procedures to obtain housing tax credits through the issuance of tax-exempt bonds. Although the tax credits are not counted in the tax credit volume cap for the State of Minnesota, developers of projects should be aware of the information contained in Article 9 of the State of Minnesota Housing Tax Credit Qualified Allocation Plan. The project must comply with the QAP that is in effect for the calendar year in which the tax-exempt bonds were first allocated by the Minnesota Department of Finance to the issuer. If the tax-exempt bonds are initially issued on a short-term basis, the year the tax-exempt bonds are reissued on a long-term basis may occur anytime after the year the tax-exempt bonds were allocated and the effective QAP will always be the QAP for the year in which the tax-exempt bonds were allocated. The application and all required submissions must be complete and legible or the application will be returned. Applications should be submitted to the: Minnesota Housing Finance Agency Housing Tax Credit Administrator 400 Sibley Street, Suite 300 St. Paul, MN 55101-1998 Developers should also be aware of the requirements of Minn. Stat. § 474A.047 including subdivision 1, which requires the extension of existing U.S. Department of Housing and Urban Development (HUD) Housing Assistance Payment (HAP) contracts to the full extent available. B. Application for Issuance of Preliminary Determination Letter Prior to Bond issuance, the developer must submit to Minnesota Housing a full and complete application for issuance of a Preliminary Determination by Minnesota Housing pursuant to Section 42(m)(1)(D) [also see the Qualified Allocation Plan for additional detail]. The developer must submit to Minnesota Housing all documents required for an application for tax credits under Chapter 7 of the Housing Tax Credit Program Procedural Manual and any additional information requested by Minnesota Housing. For projects in which Minnesota Housing is the allocating agency, the developer must submit an application fee (review fee). (See Chapter 9) In addition, if the issuer of the bonds is not Minnesota Housing, the initial submission must include a preliminary determination issued by the issuer of the bonds addressing the tax credit dollar amount and project costs pursuant to Section 42(m)(2)(D) of the Internal Revenue Code [also see the Qualified Allocation Plan for additional detail]. Based upon the submission of documents, Minnesota Housing will prepare a letter with its preliminary determination pursuant to Section 42(m)(1)(D) as to whether the project satisfies the requirements for allocation of a housing credit dollar amount under the Qualified Allocation Plan. A Preliminary Determination fee must be submitted to Minnesota Housing prior to release of the letter (See Chapter 9). This process may take six weeks or more from the time the full application package is submitted. All applicants should develop their timelines and schedules accordingly. C. Election of Applicable Percentage Section 42 of the Internal Revenue Code requires that the Owner elect the applicable percentage for the project. The election is made at the time the tax-exempt obligations are issued to fix the percentage for the month in which the building is placed in service or the month in which the tax-exempt obligations are issued. If the election is not made at the time the tax exempt obligations are issued, the percentage will be fixed for the month in which the building is placed in service. The Owner must be sure to consider the best options for this election and make sure the election is made at the correct time. Once made, the election is irrevocable. 47 12012 Housing Tax Credit Procedural Manual Rev. 04/2011