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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

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

  • Acquisition / Rehab


New Construction

Placed-in-Service Dates


New Construction

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

Placed-in-Service Dates


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


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


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


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


Acquisition / Rehab

Placed-in-Service Dates


Acquisition / Rehab

Date chosen by Owner.

Placed-in-Service Dates


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


Acquisition / Rehab

Date chosen by Owner.

Not dictated by Certificate of Occupancy.

Placed-in-Service Dates


Acquisition / Rehab

Date chosen by Owner.

Not dictated by Certificate of Occupancy

Rehab need not be completed.

Placed-in-Service Dates


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


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

Choice of PISD impacts:


Acquisition / Rehab

Choice of PISD impacts:

  • Aggregation period for expenses.


Acquisition / Rehab

Choice of PISD impacts:

  • Aggregation period for expenses.

  • Capitalization period for construction interest.


Acquisition / Rehab

Choice of PISD impacts:

  • Aggregation period for expenses.

  • Capitalization period for construction interest.

  • Applicable credit percentage.


Acquisition / Rehab

Choice of PISD impacts:

  • Aggregation period for expenses.

  • Capitalization period for construction interest.

  • Applicable credit percentage.

  • Start period for credits.


Aggregation period for expenses:

Acquisition / Rehab


Aggregation period for expenses:

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

Acquisition / Rehab


Aggregation period for expenses:

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

PLUS

Acquisition / Rehab


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


Aggregation period for construction interest:

Acquisition / Rehab


Aggregation period for construction interest:

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

Acquisition / Rehab


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


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


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


Applicable credit percentage:

Acquisition / Rehab


Applicable credit percentage:

PISD may be chosen by taxpayer after end of year.

Acquisition / Rehab


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


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


Start period for credits:

Acquisition / Rehab


Start period for credits:

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

Acquisition / Rehab


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


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


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


Assumptions:

Example


Assumptions:

One building project (for convenience).

Example


Assumptions:

One building project (for convenience).

Calendar year taxpayer.

Example


Assumptions:

One building project (for convenience).

Calendar year taxpayer.

Property acquired July 15, 2006.

Example


Assumptions:

Placed in service October, 2006:

Example


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


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


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


Qualification may predate PISD.

Tenant Qualification


Qualification may predate PISD.

Qualification may predate “look back”.

Tenant Qualification


Qualification may predate PISD.

Qualification may predate “look back”.

Qualification may NOT predate acquisition date.

Tenant Qualification


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


Is a safe harbor provision.

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

Is NOT a requirement.

Rev. Proc. 2003-82


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


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 Dates

Other Considerations:


Placed-in-Service Dates

Two Types of Developments:

  • Investor in ownership


Placed-in-Service Dates

Two Types of Developments:

  • Investor in ownership

  • Syndicator secondary sale completed


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