Fall 2016 issue of Horizons

Through this proposed reform, the number of new or rehabilitated homes is expected to reach 400,000 over the next ten years and would increase the financial predictability of the program. Along with the changes in the annual LIHTC allocation and credit rate, the legislation also calls for modifications to the definition of the term “qualified low-income housing project.” It achieves this by adding an average income test option, while maintaining the 20-50 and 40-60 minimum set-aside tests, to determine if a project will qualify as a LIHTC property. Further, it includes reforms to the rules mandating tenant credit eligibility and Native American housing assistance. On July 29, 2016, President Obama signed into law the Housing Opportunity Through Modernization Act of 2016 . Having passed with unanimous support in both the House and the Senate, this bipartisan legislation amended the United States Housing Act of 1937 and other housing laws. The act brings about a number of changes, including modification of HUD’s rental assistance and public housing programs and provides Public Housing Agencies (PHAs) guidance on housing unit inspections to ensure they comply with quality standards. Additionally, the act outlines new tenant income review and verification processes to be followed by PHAs while making modifications to project-based voucher programs. Under this new law, no more than 20.0% of a PHA’s units can be utilized for the project- based voucher program. However, a PHA is allowed to set aside an additional 10.0% of its units for project-based vouchers if the units are reserved for the homeless, veterans, the elderly and the disabled. Housing Opportunity Through Modernization Act of 2016

Additional highlights of the act include:

∙ Granting permission to the Department of Agriculture to delegate its loan approval authority to preferred lenders for the Single Family Housing Guaranteed Loan Program of the Rural Housing Service ∙ Amending the Federal Housing Administration’s condominium mortgage insurance certification requirements ∙ Requiring that HUD report to Congress on strategies to link housing assistance programs with support services for tenants (e.g. job counseling, childcare, youth programs) ∙ Providing affordable housing opportunities for people diagnosed with AIDS IRS – 50(d) Regulations On July 22, 2016, the IRS released its guidance on Section 50(d) of the Internal Revenue Code (IRC). These temporary regulations give further direction on the pass-through of qualified rehabilitation expenditures to a lessee in a master lease arrangement and have been an important issue for the Historic Tax Credit and Renewable Energy Tax Credit industries since the Historic Boardwalk Hall court decision released in 2012. Under the master lease structure, the lessee has been required to include in its gross income 100.0% of the tax credit amount received (or 50.0% in the case of renewable energy leases) ratably over the recovery period of the property (e.g. the 50(d) income). Per industry practice, lessees (and ultimately, investors) have included this annual 50(d) income amount in their outside basis of the taxable entities.

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