11-007 Code Vt. R. 11-020-007-X - FEDERAL TAX CREDITS FOR LOW INCOME HOUSING; STATE ALLOCATION SYSTEM; JOINT COMMITTEE ON TAX CREDITS

Section I Purpose

The Federal Tax Reform Act of 1986 created a new federal tax credit to stimulate the production and rehabilitation of housing for low income persons. The legislation ( 26 U.S.C. Section 42) limited the allocation of tax credit authority to each state from 1986-89 to an annual sum equal to $ 1.25 per capita. Under this legislation, the state, acting through the Issuing Authority, the Vermont Housing Finance Agency, has allocated credits totalling approximately $ 1.48 million from 1987 through 1989.

The tax credit is determined as a percentage of certain qualifying project costs, relating to both the entire project and the units within a project that are dedicated for occupancy by low-income households. In the event that the owner fails to maintain the housing as a qualified project, there are provisions for recapture of sums taken as tax credits.

In 1989 Congress adopted an amendment to the legislation that limits the authority for 1990 to $ .9375 per capita. This amendment also requires the state to establish an Allocation Plan for allocating tax credits to qualifying rental properties, which must also meet specific eligibility criteria established by federal law.

On March 8, 1987, Governor Madeleine M. Kunin issued Executive Order # 42, which designates the State Agency of Development and Community Affairs as the State Housing Credit Agency. On July 16, 1987 the Governor signed Executive Order # 42A, which authorizes the Vermont Housing Finance Agency and the Agency of Development and Community Affairs to make low income housing credit allocations. These Rules implement Executive Orders # 42 and 42A.

Section II Definitions

1. "Allocation Plan" means the qualified allocation plan required by Section 42(m)(1)(B), as amended.

2. "Code" means the Federal Internal Revenue Code of 1986, as amended from time-to-time.

3. "Credit Year" means the calendar year. The first credit year for the Low Income Housing Tax Credit Program commenced on January 1, 1987.

4. "Eligible Basis" means "eligible basis" as that term is used in Section 42(d) of the Code, determined in accordance with Federal law.

5. "Issuing Authority" means, for so long as the Memorandum of Understanding is in effect, the Vermont Housing Finance Agency or, after termination of the Memorandum of Understanding, any other entity designated by statute or further order of the Governor.

6. "Joint Committee on Tax Credits" or "Joint Committee" means the committee established by Executive Order # 42, dated March 8, 1987, to develop policies for state allocation of low income housing tax credit authority.

7. "Memorandum of Understanding" means the Memorandum of Understanding between the State Housing Credit Agency and Vermont Housing Finance Agency dated April 17, 1987, in which Vermont Housing Finance Agency consents to serve as the Issuing Authority and pertaining to the division of responsibilities between the State Housing Credit Agency and the Issuing Authority, as the same may be amended from time-to-time not inconsistently with these regulations.

8. "Program" or "Low Income Housing Tax Credit Program" means the public housing program established by Executive Orders # 42 and 42A and these regulations.

9. "Public Housing Program" as that term is used in 3 V.S.A. Section 2472, includes, without limitation, the state system for allocation of low income housing tax credits established by Executive Orders # 42 and 42A and these regulations.

10. "Qualified Basis" means "qualified basis" as that term is used in Section 42(c) of the Code, determined in accordance with Federal law.

11. "Qualified Low Income Housing Project" means projects for residential rental property meeting the requirements of Section 42(g) of the Code.

12. "Qualified Non-Profit Organization" means an organization described in Sections 501(c)(3) or (4) of the Code exempt from tax under Section 501(a) of the Code, which organization has as one of its exempt purposes the fostering of low-income housing.

13. "Recipient" means the person or entity to whom a low income housing tax credit is issued by the Issuing Authority, the beneficial owners of any such entity, and its and their successors and assigns.

14 "State Housing Credit Agency" means the Vermont Agency of Developme.nt and Community Affairs (3 V.S.A. Chapter 47).

15. "State Housing Policy" means such written documents representing the policies of state government with respect to housing needs and allocation of resources as may be promulgated from time-to-time by the Department of Housing and Community Affairs, consistent with 3 V.S.A. Section 2472.

16. "Sunset Date" means that date beyond which low income housing tax credits cease to be authorized under the Code, as the same may be amended from time-to-time.

Section III State System for Allocation of Low Income Housing Tax Credits

Executive Order # 42, dated March 8, 1987, and Executive Order # 42A, dated July 16, 1987, establish a system for allocation of federal tax credit authority for qualified low income housing projects. Pursuant to Executive Orders # 42 and 42A:

--The Vermont Agency of Development and Community Affairs is designated the State Housing Credit Agency for the purpose of carrying out and administering the low Income Housing Tax Credit Program.

--A Joint Committee on Tax Credits is established to develop recommended policies for allocation of state credit authority, and to review performance of the Issuing Authority in implementing Program objectives.

--The State Housing Credit Agency is authorized to contract with Vermont Housing Finance Agency as the Issuing Authority for the purpose of administering the program.

Section IV State Housing Credit Agency; Authority; Responsibilities

The State Housing Credit Agency is authorized to adopt policies for allocation of the state's tax credit authority, to assure that low income housing tax credits are allocated consistently with the Code, any regulations adopted pursuant to Section 42 of the Code, and state housing policy. The State Housing Credit Agency is responsible for submission of annual reports to the Secretary of Treasury concerning the state's credit allocation system, as required by federal law.

Section V Joint Committee on Tax Credits; Authority; Responsibilities

1. A Joint Committee on Tax Credits is established to advise the Secretary of the Agency of Development and Community Affairs with respect to policies for allocation of state tax credit authority. The Joint Committee shall consist of the Commissioner of Housing and Community Affairs or his/her designee; the Executive Director of the Vermont Housing Finance Agency or his/her designee; the Director of the Vermont State Housing Authority or his/her designee; the Director of Planning, Office of Policy Research and Coordination; and one additional member representing housing interests appointed by the Secretary. The Commissioner of Housing and Community Affairs shall serve as Chair of the Committee.

2. The Committee shall meet periodically at the call of the Chair, to consider the state's progress in implementing the system of allocation of low income housing tax credits, to review the Issuing Authority's progress in implementing the general policies established by the State Housing Credit Agency, and to recommend for consideration of the Secretary any amendments to the Allocation Plan that may be advisable to assure the Program objectives are met.

Section VI Issuing Authority; Responsibilities; Procedures for Issuance of Credits for Specific Qualifying Projects

The Issuing Authority has sole responsibility for review and approval of tax credit authority relating to specific qualifying low income housing projects, and for execution of the Allocation Plan. In addition to authority to issue tax credits for specific projects, the Issuing Authority shall have the following authority and responsibility:

1. To establish procedures governing application and eligibility for issuance of tax credit authority to specific qualifying low income housing projects, consistent with the Allocation Plan, the requirements of Section 42 of the Code, regulations adopted thereunder from time-to-time, and State Housing Policy.

2. To prepare and distribute materials explaining the state policies for allocation of low income tax credits, the Issuing Authority's application procedures, and application documents.

3. To prepare quarterly a status report for review by the Joint Committee, for purposes of assessment of the performance of the Issuing Authority with respect to state tax credit allocation policies.

4. To prepare annually any reports required by Section 42 of the Code to be submitted by the State Housing Credit Agency.

5. The Issuing Authority shall be entitled to charge and retain fees under the Program in amounts reasonably calculated to compensate the Issuing Authority for services and related overhead costs.

Section VII Allocation of State Low Income Housing Tax Credit Authority

1. Allocation Plan

The Issuing Authority will draft an Allocation Plan for the State Housing Credit Agency that conforms to the requirements of Section 42(m)(1)(B) of the Code. The State Housing Credit Agency will solicit comments from the Joint Committee before distributing the Allocation Plan for public comment. From time to time, the Issuing Authority or the Joint Committee may propose such modifications in the Plan as are required by the Code or are indicated by conditions in the housing situation of the State.

2. Process for Adoption of the Allocation Plan

The State Housing Credit Agency shall hold at least the minimum number of public hearings required by the Code on the Plan. The draft Allocation Plan and the required Housing Needs Analysis will be distributed upon request prior to the public hearings. The State Housing Credit Agency may revise the Allocation Plan in response to public comment and may request advice from the Joint Committee about such revisions. After finalization of the Allocation Plan, the State Housing Credit Agency shall submit it to the Governor for approval. Any amendments to the Allocation Plan shall follow this process.

3. Priorities for the Allocation Plan

The Allocation Plan will provide that the highest priority in allocating credits is given to properties with the lowest percentage of costs attributable to intermediaries and that priority is also given to projects serving the lowest income tenants and projects obligated to serve qualified tenants for the longest period and any other priorities established by the Code.

4. Criteria for Consideration in the Allocation Plan

Additional criteria that will be considered in the state's Allocation Plan include:

(1) project location;

(2) housing needs characteristics;

(3) project needs characteristics;

(4) sponsor characteristics;

(5) consideration of local tax-exempt organizations;

(6) housing for special needs individuals;

(7) the preferential treatment of persons on a public housing waiting list; and

(8) any other matters as may be required by the Code.

5. Reservation for Projects Involving Qualified Nonprofit Organizations.

Not less than 10% of the state housing credit ceiling for any calendar year shall be reserved exclusively for allocation, whether or not actually allocated, the projects involving Qualified Nonprofit Organizations. For purposes of this paragraph, a project "involves" a Qualified Nonprofit Organization if the Qualified Nonprofit Organization materially participates in the development and operation of the project throughout the compliance period, all within the meaning of Section 42(h)(5)(B) of the Code.

6. Selection Policies for Competing Projects; Discretion of Issuing Authority; Conditional Commitments.

In the event that the lawful supply of state credit authority for a given credit year is inadequate to meet the demand, the Issuing Authority may allocate the available supply first in accordance with the priorities established by the Allocation Plan and then, as between projects of equal general priority, in its discretion taking into account, without limitation, such factors as:

--The number of units to be set aside for occupancy by low-income families in the respective competing projects;

--The length of time, beyond the qualifying minimum, for which the competing applicants propose to commit their respective projects to rental housing in general and low-income housing in particular;

--The experience, fiscal responsibility, and past management record of the competing applicants.

7. Commitments to Issue Credit Authority.

With respect to projects not placed in service by the proposed Recipient at the time of application for credit authority, the Issuing Authority is authorized to make tentative assignments of credit authority to particular projects for a current credit year or for any credit year prior to the Sunset Date. Such tentative assignments may be made in the form of commitments, conditioned by their terms on compliance, as of the date the project is placed in service by the Recipient, with Federal law, these regulations, and such other terms and conditions as the Issuing Authority in its discretion shall deem necessary or desireable in furtherance of these regulations and State Housing Policy.

a. Current Year Commitments. In issuing commitments for a current credit year, the Issuing Authority may establish a performance schedule and termination dates consistent with he ability of the Issuing Authority to reallocate the amount of the credit to a different qualifying project within the current credit year.

b. Future Year Commitments. In issuing commitments for a future credit year, the Issuing Authority shall assure that the expiration date for allocation of the credit occurs prior to the Sunset Date. The Issuing Authority may establish performance schedules and termination dates in its discretion.

Section VIII Recipient Responsibility for Accurate Information

As between the Recipient and the Issuing Authority, the Recipient shall be fully responsible for the accuracy of all project information bearing upon the legality and amount of the credit authority allocated to the Recipient's project including, without limitation, information pertaining to the determination of Eligible Basis and Qualified Basis. At the time of application, or such later time prior to allocation of the credit as the Issuing Authority in this discretion may permit, the proposed Recipient shall deliver to the Issuing Authority, in such form as the Issuing Authority may provide, its certificate as to the amount of Eligible Basis and the amount of Qualified Basis for which the project is eligible under the Code and the regulations adopted pursuant thereto. The Issuing Authority and the State Housing Credit Agency shall be entitled to rely upon such certificate, and the Recipient shall indemnify and hold harmless the Issuing Authority and the State Housing Credit Agency for any loss, cost, or expense resulting from any false statement contained in such certificate, whether or not such statement is negligent or willful. This Section VIII shall constitute an implied term of each and every commitment for, and allocation of, tax credit authority.

Notes

11-007 Code Vt. R. 11-020-007-X

STATUTORY AUTHORITY: Statutory authority not provided.
EFFECTIVE DATE: June 1, 1990 Secretary of State Rule Log #90-26)
AMENDED: July 2009 [The Department of Housing and Community Affairs and the Department of Economic Development were merged into the new Department of Economic, Housing and Community Development]