What does a LIHTC syndicator do?
Typically, a syndicator will provide equity financing for a portfolio of real estate developments. It will pool them, repackage them, and offer private investors (top right of the diagram) the chance to invest in the pooled fund. Private investors receive equity in the development, and a proportion of the tax credits.
How does a tax credit fund work?
How the credit works. … Once awarded credits, a developer sells them to an individual investor or, more commonly, to a tax-credit syndication fund made up of equity from one or from many investors. In return, the investors receive a credit against their federal income tax based on the size of their investments.
How do I qualify for a tax credit apartment?
Qualifying for the Credit
- At least 20 percent of the project’s units are occupied by tenants with an income of 50 percent or less of area median income adjusted for family size (AMI).
- At least 40 percent of the units are occupied by tenants with an income of 60 percent or less of AMI.
What is a recapture of tax credits?
If you’re in the situation where you have to file IRS Form 4255, you might have to pay back a tax credit you’ve earned in prior years. This process, known as recapture, occurs if you claim a credit—in this case, a credit for a specific type of business investment—and then no longer qualify for that credit.
How do LIHTC developers make money?
In practice, real estate developers who are awarded the LIHTC typically sell the credits to real estate investors in order to obtain funding for their project. The investors can then claim the credit over a 10-year period, starting when the property’s housing units are made available to tenants.
What is tax credit equity financing?
What is tax equity? Tax equity offers a form of project financing, using a combination of project-generated cash flow and federal tax benefits. These benefits include both tax deductions and tax credits.
Why was LIHTC created?
It was created under the Tax Reform Act of 1986 (TRA86) and gives incentives for the utilization of private equity in the development of affordable housing aimed at low-income Americans. LIHTC accounts for the majority (approximately 90%) of all affordable rental housing created in the United States today.
What is an affordable housing syndicator?
Tax-credit syndicators help bridge the gap between the various parties to affordable housing transactions. Syndicators raise money from investors and identify low-income housing projects in which to invest that capital.
Who bought Boston Capital?
USA acquired Boston Financial, a longtime LIHTC syndicator that manages a $7.7 billion portfolio comprising over 1,125 properties and 98,110 units. The purchase of Boston Capital’s housing credit assets will nearly double the portfolio to $15 billion.
How is tax credit rent calculated?
LIHTC rents are set at 30% of the income of the AMI tied to the unit. This is calculated with an assumed family size of 1.5 persons per bedroom. … The tax credit program assumes a 1.5 person bedroom size.
What is a low income tax credit apartment?
Low-Income Housing Tax Credits are a dollar-for-dollar tax offset issued by the federal government and distributed by the states to affordable housing developers.
How long does a tax credit application take?
Applying for a Tax Credit community can be a time-consuming process. Due to all the requirements and requests, it can sometimes be overwhelming. However, if you are dedicated to the process and are both responsive and accessible during this time, typically it takes about two weeks to be approved if you are qualified.