Arkansas Administrative Code › Agency 109 - Arkansas Development Finance Authority › Rule 109.00.09-002 - Tax Credit Assistance Program (TCAP) and Section 1602 Exchange Program

Current through Register Vol. 49, No. 6, June, 2024
Pursuant to Section 42 of the Internal Revenue Code,
			 26 USC §
								42, the Arkansas Development Finance
			 Authority (the "Authority") must annually adopt a Qualified Allocation Plan
			 ("QAP" ) that establishes selection and program criteria for the allocation of
			 federal low-income housing tax credits from the State's annual ceiling. On July
			 17, 2008, and August 21, 2008, the Board of Directors for the Authority adopted
			 its QAP for 2009. Due to the reduction or complete loss of federal low-income
			 housing tax credit investor equity, President Obama signed into law the
			 American Recovery and Reinvestment Act ("ARRA),
			 Public
			 Law 111-5 on February 17, 2009. ARRA established
			 two subsidy provisions to assist those developments that have been or will be
			 awarded tax credits in 2007, 2008 and 2009.
The first
is the Tax Credit Assistance Program ("TCAP") which provides
$20,463,053 in federal funding to Arkansas from HUD for the
			 express purpose of providing financing to those taxpayers "awarded" low-income
			 housing tax credits under Section 42(h) of the Internal Revenue Code (IRC) in
			 fiscal years 2007, 2008 and 2009.
The second
is a
			 grant program whereby Arkansas can elect to receive a grant of funds in an
			 amount up to $.85 per tax credit for tax credits consisting of all unused and
			 returned credits held by the Authority plus 40% of our 2009 state ceiling (not
			 including disaster credits). This is referred to as the "exchange program". In
			 addition to the stimulus funding provided by the ARRA, the Board of Directors
			 has implemented two additional initiatives to assist existing developments in
			 need of additional financing:
1)
		  Pursuant to 26 USC §
								42(d)(5), the Board of
		  Directors has designated certain existing developments as difficult to develop
		  entitling them to a 30% basis boost; and
2)provide additional tax credits to those
		  developments in need of additional financing.
Distribution of the $20,463,053 in TCAP funding must be done on a
			 competitive basis. The Board of Directors has determined to award TCAP funding
			 in association with the other funding sources available as indicated by the
			 financial needs of the applicant. The following "Arkansas's Three Tier
			 Selection Process" and 2009 Guidance and Procedures have been approved by the
			 Board of Directors on May 15, 2009, and June 18, 2009, respectively, for the
			 distribution of TCAP funds and Exchange Program fund.
Arkansas' Three Tier Selection Process 2006,
			 2007 and 2008 Allocation recipients:
1.
Tier One
- Initially consider
		  to allocate Unused, Returned and as Needed 2009 Tax Credits
a. Additional Tax Credits Only. Per the
		  Board's directive of December, 2008, staff will allocate/reserve additional tax
		  credits to those 2006, 2007 and 2008 owners that have not been issued IRS Forms
		  8609.
b. Application will be by
		  submission of a 2009 Special Application to include updated financial
		  commitment letters and an updated Pro Forma, Attachment C. Applicants must meet
		  the minimum debt coverage ratio of 1.10.
c. Application must be submitted by the
		  deadline date determined by ADFA.
d. Additional tax credits must be purchased
		  at no less than $.50 per additional tax credit requested. Recipients of
		  additional tax credits will not be eligible to return
any
tax credits allocated or reserved by ADFA for the
		  purpose of receiving TCAP funds or an Exchange/Subaward.
e. Pursuant to Section 42, eligibility for
		  additional tax credits is determined as follows:
i. If development buildings placed in service
		  in 2009, or will place in service in 2010, and credit eligibility has increased
		  due to 9% credit percentage requirement of
		  Section
		  3002 of
		  P.L.
		  110-289 and 30% basis boost per Board directive of
		  January, 15, 2009 (available for new buildings only).
ii.After building's
		  1st tax credit year and only if the LIHTC qualified
		  basis has increased by virtue of increase in number of LIHTC units or LIHTC
		  square footage. In this instance, the 
		  2/3 rule of Section
		  42(f)(3) of the Internal Revenue Code. Will require Board approval to increase
		  LIHTC units from original application.
iii.The amount of additional tax credits plus
		  any previous allocation cannot exceed the maximum amount allowed pursuant to
Section IIIA.
of the
2009 Qualified Allocation Plan.
f. These developments will not be entitled to TCAP, an
		  Exchange/Subaward, or additional HOME funds because they have not competed for
		  these types of financing as required below.