06/07/2010 Council Packet - Laserfiche WebLink

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INTRODUCTION The purpose of the Minnesota Housing Finance Agency (MHFA) is to ensure the availability of decent, safe, energy efficient, and affordable housing to low and moderate - income households. In order to achieve its purpose, MHFA is active in: lending and financing, allocating housing grants and subsidies, advocating for affordable housing, establishing state housing policies and providing technical assistance to housing sponsors. Minnesota has allocated tax credits since shortly after the Low Income Housing Tax Credit Program was created in 1986. The Minnesota Housing Finance Agency has been designated by the Minnesota Legislature as the primary apportionment Agency of Housing Tax Credits in Minnesota. Qualified local cities and counties have also been designated by the Legislature as suballocators of the tax credit: the cities of Duluth, Rochester, St. Cloud, St. Paul and Minneapolis, and Washington County and Dakota County. The initial compliance period for a development receiving an allocation of Housing Tax Credits (HTC) is fifteen years. For HTC allocations made in 1990 and later, an extended use agreement required by Internal Revenue Code Section 42(h)(6) extends the compliance period up to a minimum of fifteen additional years. Section 42(h)(6)(E)(i)(II) of the Internal Revenue Code provides that the extended use period shall terminate if a housing credit agency is unable to present a qualified contract to a taxpayer who has requested such a contract. The Internal Revenue Code (Code) contains some of the basic provisions for handling qualified contract requests. However, there are a number of important questions that have not been answered through federal regulation or other guidance. The purpose of this guide is to set forth the procedures to be followed by MHFA and the owners of Minnesota tax credit developments who are considering making a request for a qualified contract. The provisions provided in the Code are subject to modification and clarification by the Internal Revenue Service (IRS). MHFA reserves the right to revise this Qualified Contract Procedure Guide from time to time. Compliance with the requirements of Section 42 is the responsibility of the owner of the building for which the credit is allowable. The Request for a QC is a difficult process, involving substantial time and energy on the part of the owner, management company and MHFA. As such, it may not be the best alternative in each situation and owners are encouraged to consider all options. An important aspect in making this decision is that after the Compliance Period, MHFA has adopted policies that reduce compliance and redefine some of the eligibility criteria Housing Tax Credit Program 1 Qualified Contract Process Guide (rev.12 /05)