Pisd qualification issues
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PISD & Qualification Issues. Michael Kotin Kay-Kay Realty Corp. 2007. Placed-in-Service Dates. Placed-in-Service Dates. Two Types of Developments:. Placed-in-Service Dates. Two Types of Developments: New Construction. Placed-in-Service Dates. Two Types of Developments: New Construction

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PISD & Qualification Issues

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Pisd qualification issues

PISD & Qualification Issues

Michael Kotin

Kay-Kay Realty Corp.2007


Placed in service dates

Placed-in-Service Dates


Placed in service dates1

Placed-in-Service Dates

Two Types of Developments:


Placed in service dates2

Placed-in-Service Dates

Two Types of Developments:

  • New Construction


Placed in service dates3

Placed-in-Service Dates

Two Types of Developments:

  • New Construction

  • Acquisition / Rehab


Placed in service dates4

New Construction

Placed-in-Service Dates


Placed in service dates5

New Construction

By December 31st of year which is 2 years from allocation year.

Placed-in-Service Dates


Placed in service dates6

New Construction

By December 31st of year which is 2 years from allocation year.

Example: if allocation received in 2006, PISD must occur before December 31, 2008.

Placed-in-Service Dates


Placed in service dates7

New Construction

By December 31st of year which is 2 years from allocation year.

Defined statutorily by first certificate of occupancy in each building.

Placed-in-Service Dates


Placed in service dates8

New Construction

By December 31st of year which is 2 years from allocation year.

Defined statutorily by first certificate of occupancy in each building.

May vary from building to building.

Placed-in-Service Dates


Placed in service dates9

New Construction

By December 31st of year which is 2 years from allocation year.

Defined statutorily by first certificate of occupancy in each building.

Occupancy cannot predate PISD.

Placed-in-Service Dates


Placed in service dates10

Acquisition / Rehab

Placed-in-Service Dates


Placed in service dates11

Acquisition / Rehab

Date chosen by Owner.

Placed-in-Service Dates


Placed in service dates12

Acquisition / Rehab

Date chosen by Owner.

PISD election need not be made until filing due date of tax return for year units are placed in service.

Placed-in-Service Dates


Placed in service dates13

Acquisition / Rehab

Date chosen by Owner.

Not dictated by Certificate of Occupancy.

Placed-in-Service Dates


Placed in service dates14

Acquisition / Rehab

Date chosen by Owner.

Not dictated by Certificate of Occupancy

Rehab need not be completed.

Placed-in-Service Dates


Placed in service dates15

Acquisition / Rehab

Date chosen by Owner.

Not dictated by Certificate of Occupancy

Rehab need not be completed.

At least one unit in each building must be suitable for occupancy.

Placed-in-Service Dates


Placed in service dates16

Acquisition / Rehab

Date chosen by Owner.

Not dictated by Certificate of Occupancy.

Rehab need not be completed

Tenancies may predate PISD.

Placed-in-Service Dates


Acquisition rehab

Acquisition / Rehab


Acquisition rehab1

Acquisition / Rehab

Choice of PISD impacts:


Acquisition rehab2

Acquisition / Rehab

Choice of PISD impacts:

  • Aggregation period for expenses.


Acquisition rehab3

Acquisition / Rehab

Choice of PISD impacts:

  • Aggregation period for expenses.

  • Capitalization period for construction interest.


Acquisition rehab4

Acquisition / Rehab

Choice of PISD impacts:

  • Aggregation period for expenses.

  • Capitalization period for construction interest.

  • Applicable credit percentage.


Acquisition rehab5

Acquisition / Rehab

Choice of PISD impacts:

  • Aggregation period for expenses.

  • Capitalization period for construction interest.

  • Applicable credit percentage.

  • Start period for credits.


Acquisition rehab6

Aggregation period for expenses:

Acquisition / Rehab


Acquisition rehab7

Aggregation period for expenses:

Generally, rehab costs may be aggregated for 24 month period prior to PISD.

Acquisition / Rehab


Acquisition rehab8

Aggregation period for expenses:

Generally, rehab costs may be aggregated for 24 month period prior to PISD.

PLUS

Acquisition / Rehab


Acquisition rehab9

Aggregation period for expenses:

Generally, rehab costs may be aggregated for 24 month period prior to PISD.

PLUS

Costs incurred through the end of the owner’s taxable year.

Acquisition / Rehab


Acquisition rehab10

Aggregation period for construction interest:

Acquisition / Rehab


Acquisition rehab11

Aggregation period for construction interest:

Generally, may capitalize interest until property is placed in service.

Acquisition / Rehab


Acquisition rehab12

Aggregation period for construction interest:

Generally, may capitalize interest until property is placed in service.

For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits.

Acquisition / Rehab


Acquisition rehab13

Aggregation period for construction interest:

Generally, may capitalize interest until property is placed in service.

For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits.

Best to delay PISD as long as possible in order to increase total eligible basis.

Acquisition / Rehab


Acquisition rehab14

Aggregation period for construction interest:

Generally, may capitalize interest until property is placed in service.

For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits.

Best to delay PISD as long as possible in order to increase total eligible basis.

Careful to meet 50% test.

Acquisition / Rehab


Acquisition rehab15

Applicable credit percentage:

Acquisition / Rehab


Acquisition rehab16

Applicable credit percentage:

PISD may be chosen by taxpayer after end of year.

Acquisition / Rehab


Acquisition rehab17

Applicable credit percentage:

PISD may be chosen by taxpayer after end of year.

Chosen after all monthly credit percentages for year have been published.

Acquisition / Rehab


Acquisition rehab18

Applicable credit percentage:

PISD may be chosen by taxpayer after end of year.

Chosen after all monthly credit percentages for year have been published.

May choose the month with the highest published credit percentage.

Acquisition / Rehab


Acquisition rehab19

Start period for credits:

Acquisition / Rehab


Acquisition rehab20

Start period for credits:

“Look back” applies no matter when in year units are placed in service.

Acquisition / Rehab


Acquisition rehab21

Start period for credits:

“Look back” applies no matter when in year units are placed in service.

“Look back” goes back to LATTER of:

Acquisition / Rehab


Acquisition rehab22

Start period for credits:

“Look back” applies no matter when in year units are placed in service.

“Look back” goes back to LATTER of:

1st day of taxpayer’s taxable year, or

Acquisition / Rehab


Acquisition rehab23

Start period for credits:

“Look back” applies no matter when in year units are placed in service.

“Look back” goes back to LATTER of:

1st day of taxpayer’s taxable year, or

Acquisition date.

Acquisition / Rehab


Example

Example


Example1

Assumptions:

Example


Example2

Assumptions:

One building project (for convenience).

Example


Example3

Assumptions:

One building project (for convenience).

Calendar year taxpayer.

Example


Example4

Assumptions:

One building project (for convenience).

Calendar year taxpayer.

Property acquired July 15, 2006.

Example


Example5

Assumptions:

Placed in service October, 2006:

Example


Example6

Assumptions:

Placed in service October, 2006:

Aggregation of costs through December 31, 2006.

Capitalization of construction interest through October, 2006 at the latest (generally).

Credit percentage for month of October, 2006 used.

Credits may commence as early as August, 2006.

Example


Example7

Assumptions:

Placed in service October, 2007:

Aggregation of costs through December 31, 2007.

Capitalization of construction interest through October, 2007 at the latest (generally)

Credit percentage for month of October, 2007 used.

Credits may commence as early as January, 2007.

Example


Example8

Assumptions:

Placed in service October, 2008:

Aggregation of costs through December 31, 2008 except that costs incurred from July, 2006 through October, 2006 may not be included.

Capitalization of construction interest through October, 2008 at the latest (generally).

Credit percentage for month of October, 2008 used.

Credits may commence as early as January, 2008.

Example


Tenant qualification

Tenant Qualification


Tenant qualification1

Qualification may predate PISD.

Tenant Qualification


Tenant qualification2

Qualification may predate PISD.

Qualification may predate “look back”.

Tenant Qualification


Tenant qualification3

Qualification may predate PISD.

Qualification may predate “look back”.

Qualification may NOT predate acquisition date.

Tenant Qualification


Tenant qualification4

Qualification may predate PISD.

Qualification may predate “look back”.

Qualification may NOT predate acquisition date.

Recertification at PISD or “look back” date is NOT required.

Tenant Qualification


Rev proc 2003 82

Is a safe harbor provision.

Assumes tenant occupancy in advance of PISD or “Look back” date.

Is NOT a requirement.

Rev. Proc. 2003-82


Rev proc 2003 821

Is designed to insure compliance with Next Available Unit Rule.

Relevant on mixed-income properties with buildings which have applicable fractions under 100%.

NOT applicable on 100% tax credit properties where ALL units are always rented to qualified households.

NOT relevant on buildings in mixed-income properties which have 100% applicable fractions.

Rev. Proc. 2003-82


Rev proc 2003 822

Safe harbor provided if management “tests” eligibility of existing residents.

Test may be retroactive as long as retroactive compliance with NAU can be demonstrated.

Does NOT require that existing residents have incomes below either move-in or recertification limits.

Does NOT require that “test” be a fully documented recertification. Standard may be substantially less.

Rev. Proc. 2003-82


Placed in service dates17

Placed-in-Service Dates

Other Considerations:


Placed in service dates18

Placed-in-Service Dates

Two Types of Developments:

  • Investor in ownership


Placed in service dates19

Placed-in-Service Dates

Two Types of Developments:

  • Investor in ownership

  • Syndicator secondary sale completed


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