Acquisition/ Rehabilitation

Acquisition / Rehabilitation

There are two types of acquisition/rehabilitation properties: Vacant

Vacant acq/rehabs are similar to new construction and follow those rules when leasing up

Occupied Occupied Acq/Rehabs are more challenging

and will be discussed further in this presentation

First Year of the Credit Period

Determining the First Credit Year Most important issue to be eligible to start credits is

the date resident eligibility is certified

Once the rehabilitation threshold is met, the second placed in service date is chosen, and the project is able to earn rehab credits

Credits may be claimed for both acq/rehab back to the date of acquisition or the first day of their fiscal year, dependent on the rehab placed in service date

First Year of the Credit Period, con’t

Determining the First Credit Year Claiming credits back to the date of acquisition, all

units that credit is being claimed for must be certified as eligible households as of the purchase date

For acq/rehab properties, both the acquisition and rehabilitation credit must be claimed in the same time period. Credit cannot be claimed in years prior to the rehab placed in service year

Credit can be claimed back to the date of acquisition only if the rehab was completed in the same fiscal year. If the rehab was completed in a later fiscal year, credit can only be claimed as of the first day of the fiscal year

Acquisition/Rehabilitations

Requirements: Must be completed in a two year time

frame Required Rehab threshold must be met

All residents must be certified

All residents should be income-eligible and rent restricted plus meet all other LIHTC requirements

LIHTC Properties involvingAcquisition and Rehabilitation

Two Important considerations in determining when credit can begin claimed:

The earliest possible date from which credit can be claimed

The date on which existing residents must be certified as income-eligible

Existing Residents

Certifying existing residents

Acquisition Date

Rehabilitation Completion Year

New move in resident

Acquisition Date

Certifying residents on the Acquisition Date: Residents can be certified 120 days before and/or 120

days after the acquisition date Tenant Income Certification’s effective date is the

acquisition date Income and rent limits to be used are the limits that

are in effect as of the acquisition date or the first building’s PIS date that will be on the 8609’s determines the limits to use

Rehab must be completed within the same year as the acquisition date to claim credits from the acquisition date

Rehabilitation Year

Certifying residents in the second year of the acq/rehab: Existing residents must be certified on January 1st of

the second year to start claiming credits Residents must be certified 120 days before January

1st

Tenant Income Certification’s effective date is January 1st of the rehab completion year

Income and rent limits that are in effect as of January 1st should be used or if you know the PIS date of the first building that was placed in service on the property drives the limits to use

New Move in Resident

Certifying residents after the Acq/Rehab dates: Residents certified after the Acq/Rehab dates are

considered a new move in resident Tenant Income Certification’s effective date will be the

actual move in date Income and rent limits that are in effect at the time of

the move in should be used

Examples when to Certify Residents

Acq Date and Rehab Date are in the same year: Assume the fiscal year is January 1 to

December 31 calendar year All of the examples will assume that there

is only one unit in each building

Example #1

Existing Resident was certified within 120 days of the AcquistionDate: Acquisition Date: 2/10/2015 Rehab PIS date: 11/30/2015 Earliest Date resident can be certified: 2/10/2015

Resident is certified as LIHTC-eligible within 120 days before or after 2/10/2015

Both the acquisition credits and the rehabilitation credits can be claimed from this date

Example #2

Existing Resident not certified within 120 days after the Acq Date: Acquisition Date: 2/10/2015 120 days after Acquisition Date: 6/10/2015 Resident Certified as LIHTC-eligible:6/24/2015 Rehab PIS Date: 11/30/2015 Earliest Date resident can be certified: 6/24/2015

Example # 3

Existing resident not certified until after the rehab PIS date: Acquisition Date: 2/10/2015 Rehab PIS Date: 11/30/2015 Date Resident Certified as LIHTC-eligible:12/15/2015 Earliest Date resident can be certified: 12/15/2015

Example #4

Acq Date and Rehab PIS date are in DIFFERENT fiscal years: Acquisition Date: 2/10/2015 Rehab PIS Date: 4/14/2016 Latest Date resident can be certified: 1/1/2016

Provided the resident is certified as LIHTC-eligible within 120 days before 1/1/2016 date

If resident were certified prior to 1/1/2016 income must be retested as of 1/1/2016. Per 2003-82, safe harbor test.

Conclusion

Important dates that are essential for you to know when certifying the existing residents:

Acquisition Date

Rehabilitation Date

Over Income Residents

Options Relocation of resident Moving Incentives

Free rent at new apartment complex that they are moving too.

Pay for moving expenses New Color TV Cold Hard Cash

Over Income Residents con’t

Options Mixed Use property

Move resident to a market unit Change the unit set aside to an acceptable

level

Accept the two-thirds credits on the unit. As an investor this is something we need to

avoid.