Housing Association of Nonprofit Developers handhousing Operating in a Tighter Resource Environment #1: Getting the Most

1. Housing Association of Nonprofit Developers • www.handhousing.org • Operating in a Tighter Resource Environment #1:Getting the Most out of Tax Credits • Sponsored by VHDA • Legislative Overview • Erik T. Hoffman • Partner, Klein Hornig LLP • Washington DC www.kleinhornig.com

2. Presentation Overview • Format: Review, then Discussion & Questions • Outline • Proposals from Housing Associations and Advocates • U.S. Congress • House Appropriations Draft Stimulus Bill • House Ways & Means Draft Bill • Barney Frank Proposal (Financial Services Committee) • What is Missing? What is Next? www.kleinhornig.com

3. Legislative Proposals for LIHTCs • Housing Associations and Advocacy Groups • Wide Ranging and Many • Affordable Housing Tax Credit Coalition • National Preservation Working Group • Mortgage Bankers Association • The Others www.kleinhornig.com

4. Proposals of Housing Associations and Advocacy Groups • Affordable Housing Tax Credit Coalition (rev’d 12/18/2008) • Direct Subsidy through State Allocating Agencies • $5 Billion FY09 ($4B FY10; $3 B FY11) • HOME or other Funds as Soft Loans or Grants • 5-year Carryback of Credits (count against AMT) • Accelerate 1st Year Credit • If achieve Minimum Set Aside, then full year’s credit • Fix the 30% Credit at 4% • Refundable Credit • Public/widely-held C Corps only • Cash refund from Treasury for unused (no losses) More Info http://www.taxcreditcoalition.org/features/164 www.kleinhornig.com

5. Proposals of Housing Associations and Advocacy Groups • National Preservation Working Group (11/7/2008) • Subsidy Funding • $8 Billion: [$5 B, by formula] for Public Housing Capital Funds • [$3 B, by competition] for HUD-assisted (202, 811, Sec 8. 221d, 236) • Carryback of Credits • 5 Years • Temporary (credits awarded through 12/31/2010) • Additional Tenant Relocation Assistance • $200 MM • Allow Enhanced Vouchers to be Project-based Support www.kleinhornig.com

6. Proposals of Housing Associations and Advocacy Groups • Mortgage Bankers Association (1/12/09 Letter and Proposal) • Treasury Purchases Mortgage-backed Securities with Fannie, Freddie, Ginnie Mae Guaranty • Limited to Properties financed with LIHTCs • Terms • 4.5% note rate • 15-year Maturity (then refinance or sell) • Appropriate $625 MM for FY 2009 www.kleinhornig.com

7. Proposals of Housing Associations and Advocacy Groups • The Others • Monetizing the Tax Credits • Joel Rubenzahl • Up to 50% can be exchanged by State Allocating Agency for cash based on $.85 pricing • Recapture Provision (proportional to noncompliance) • LISC Proposals • Refundability for Investors of unused credits • 5-year Carryback • Extend GO Zone sunset • $5 B in HOME for LIHTC transactions • Housing Partnership Network, Center for American Progress, NH&RA, Other Green Housing Organizations www.kleinhornig.com

8. Current Bills in Congress • House Appropriations Committee Stimulus Bill • House Ways & Means Committee • House Financial Services Committee www.kleinhornig.com

9. House Appropriations Committee Stimulus Bill • Recovery Bill Draft 1/15/2009 • $16 B for Housing Programs • Public Housing [$4 B, by formula, $1 B by competition] • HOME Funds [$1.5 B, by formula, no green req’t.] • CDBG [$1 B, by formula] • Energy Retrofit [$2.5 N, by competition; 202, 811, Sec. 8; should include 236 and 221(d)(4), but does not currently] • Neighborhood Stabilization [$4.2 B] (single family) • McKinney Homeless Assistance Grants [$1.5 B] • Lead Paint [$100 MM] • Emergency Food/Shelter [$200 MM] • MOST IMPORTANT: Shovel Ready (120 days from award) • Waiver Stated or Permitted for Certain Requirements www.kleinhornig.com

10. House Ways & Means Committee Draft Bill • Recovery Draft Bill Provisions 1/17/2008 (yes, Saturday) • State Credit Agency exchange of Credits for Grant Funds • Maximum of 40% of 2009 Ceiling and 100% of National Pool Credits • Price at $.85 with a Reduction in Credit Ceiling • Use or Lose Grant Funds by 1/1/2011 • Subaward for Low-income Buildings • With or without tax credit allocation (if have allocation, good faith efforts to get investment commitment before get subaward) • No impact on Basis (as a grant); not clear if exception for grant being taken into income if structured as a grant • Same Section 42 Restrictions Apply • Recapture—no detailed provisions, but must include recapture to Treasury www.kleinhornig.com

11. More to Come? • Financial Services Committee Proposals? • Rep. Barney Frank proposed Treasury purchase $5 B in credits and adding $5 B of subsidy funds (12/31/2008). • Ways & Means cover letter indicated tax credit provisions were “designed by Financial Services Committee” • Improving the Credits’ Appeal? • Carryback & AMT; Acceleration or Reduce Credit Period • Investor Exchange Provisions • Increase CRA Footprint • State Allocating Agencies NCSHA Underwriting Guidelines & Recap Advisors Recommendations • New Resident in Washington, D.C. • http://change.gov/page/s/economy www.kleinhornig.com

12. Questions, Comments, Discussion? • Circular 230 Disclosure:Internal Revenue Service regulations provide that, for the purpose of avoiding certain penalties under the Internal Revenue Code, taxpayers may rely only on opinions of counsel that meet specific requirements set forth in the regulations, including a requirement that such opinions contain extensive factual and legal discussion and analysis. Any tax advice that may be contained herein does not constitute an opinion that meets the requirements of the regulations. Any such tax advice therefore cannot be used, and was not intended or written to be used, for the purpose of avoiding any federal tax penalties that the Internal Revenue Service may attempt to impose. www.kleinhornig.com