PISD & Qualification Issues

transcript

Michael Kotin

Kay-Kay Realty Corp.2007

Placed-in-Service Dates

Two Types of Developments:

New Construction

New Construction Acquisition / Rehab

New Construction

New Construction By December 31st of year which is 2 years from allocation year.

Example: if allocation received in 2006, PISD must occur before December 31, 2008.

Defined statutorily by first certificate of occupancy in each building.

Defined statutorily by first certificate of occupancy in each building. May vary from building to

building.

Defined statutorily by first certificate of occupancy in each building.

Occupancy cannot predate PISD.

Acquisition / Rehab

Acquisition / Rehab Date chosen by Owner.

Acquisition / Rehab Date chosen by Owner. PISD election need not

be made until filing due date of tax return for year units are placed in service.

Acquisition / Rehab Date chosen by Owner. Not dictated by

Certificate of Occupancy.

Certificate of Occupancy

Rehab need not be completed.

Certificate of Occupancy

Rehab need not be completed. At least one unit in each

building must be suitable for occupancy.

Certificate of Occupancy.

Rehab need not be completed

Tenancies may predate PISD.

Acquisition / Rehab

Choice of PISD impacts:

Acquisition / Rehab

Aggregation period for expenses.

Acquisition / Rehab

Aggregation period for expenses. Capitalization period for construction interest.

Acquisition / Rehab

Aggregation period for expenses. Capitalization period for construction interest. Applicable credit percentage.

Acquisition / Rehab

Aggregation period for expenses. Capitalization period for construction interest. Applicable credit percentage. Start period for credits.

Acquisition / Rehab

Aggregation period for expenses:

Acquisition / Rehab

Generally, rehab costs may be aggregated for 24 month period prior to PISD.

Acquisition / Rehab

Costs incurred through the end of the owner’s taxable year.

Acquisition / Rehab

Aggregation period for construction interest:

Acquisition / Rehab

Generally, may capitalize interest until property is placed in service.

Acquisition / Rehab

For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits.

Acquisition / Rehab

Best to delay PISD as long as possible in order to increase total eligible basis.

Acquisition / Rehab

Best to delay PISD as long as possible in order to increase total eligible basis.

Careful to meet 50% test.

Acquisition / Rehab

Applicable credit percentage:

Acquisition / Rehab

PISD may be chosen by taxpayer after end of year.

Acquisition / Rehab

Chosen after all monthly credit percentages for year have been published.

Acquisition / Rehab

Chosen after all monthly credit percentages for year have been published.

May choose the month with the highest published credit percentage.

Acquisition / Rehab

Start period for credits:

Acquisition / Rehab

Start period for credits: “Look back” applies no matter when in year units are placed in service.

Acquisition / Rehab

“Look back” goes back to LATTER of:

Acquisition / Rehab

1st day of taxpayer’s taxable year, or

Acquisition / Rehab

1st day of taxpayer’s taxable year, or

Acquisition date.

Example

Assumptions:

Example

Assumptions: One building project (for

convenience).

Example

convenience). Calendar year taxpayer.

Example

convenience). Calendar year taxpayer. Property acquired July

15, 2006.

Example

Assumptions:

Placed in service October, 2006:

Example

Assumptions:

Aggregation of costs through December 31, 2006.

Capitalization of construction interest through October, 2006 at the latest (generally).

Credit percentage for month of October, 2006 used.

Credits may commence as early as August, 2006.

Example

Assumptions:

Aggregation of costs through December 31, 2007.

Capitalization of construction interest through October, 2007 at the latest (generally)

Credits may commence as early as January, 2007.

Example

Assumptions:

Aggregation of costs through December 31, 2008 except that costs incurred from July, 2006 through October, 2006 may not be included.

Capitalization of construction interest through October, 2008 at the latest (generally).

Credits may commence as early as January, 2008.

Tenant Qualification

Qualification may predate PISD.

Qualification may predate “look back”.

Qualification may NOT predate acquisition date.

Recertification at PISD or “look back” date is NOT required.

Rev. Proc. 2003-82

Is a safe harbor provision.

Assumes tenant occupancy in advance of PISD or “Look back” date.

Is NOT a requirement.

Rev. Proc. 2003-82

Is designed to insure compliance with Next Available Unit Rule.

Relevant on mixed-income properties with buildings which have applicable fractions under 100%.

NOT applicable on 100% tax credit properties where ALL units are always rented to qualified households.

NOT relevant on buildings in mixed-income properties which have 100% applicable fractions.

Rev. Proc. 2003-82

Safe harbor provided if management “tests” eligibility of existing residents.

Test may be retroactive as long as retroactive compliance with NAU can be demonstrated.

Does NOT require that existing residents have incomes below either move-in or recertification limits.

Does NOT require that “test” be a fully documented recertification. Standard may be substantially less.

Other Considerations:

Investor in ownership

Syndicator secondary sale completed

PISD & Qualification Issues

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