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PREPARING FOR YEAR 15

PREPARING FOR YEAR 15. By: Thomas A. Giblin. Nixon Peabody LLP. 10513695. Part I: Preparing for Year 15/Introduction to Year 15 Issues. Panel Overview. Understanding the tax credit rules applicable to Year 15 Overview of qualified contracts and state response

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PREPARING FOR YEAR 15

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  1. PREPARING FOR YEAR 15 By: Thomas A. Giblin Nixon Peabody LLP 10513695

  2. Part I: Preparing for Year 15/Introduction to Year 15 Issues Panel Overview • Understanding the tax credit rules applicable to Year 15 • Overview of qualified contracts and state response • Resyndication and anti-churning issues • Overview of today’s disposition transactions

  3. UNDERSTANDING THE TAX CREDIT RULES APPLICABLE TO YEAR 15 • Pre-1990 allocations • Post-1990 allocations

  4. Tax Credit Rules Applicable To Year 15: Pre-1990 Allocations • 15-year tax credit compliance period • Federal tax credit recapture if non-compliance/disposition during the tax credit compliance period • No ongoing restrictions under Section 42 after the tax credit compliance period • No requirement to phase out restricted tenancies after expiration of the tax credit compliance period

  5. Tax Credit Rules Applicable To Year 15: Post-1990 Allocations • 30-year affordability commitment • 15-year tax credit compliance period • 15-year extended use period • Early termination of 30-year affordability commitment • Foreclosure (or instrument in lieu of foreclosure) • Qualified contract process • Extended use agreements • Right of first refusal pursuant to Code Section 42(i)(7)

  6. General Observations About Year 15 Asset Transactions

  7. Approaching Exit Strategies: General Considerations • There is no global approach to Year 15 transactions • Investor/syndicator perspective • Developer/general partner perspective • Tax credit agency/lender perspective • Structuring a Year 15 transaction requires flexibility • Sale of property (resyndication/conversion to market rate) • Sale/transfer of interests in ownership entity • Refinancing/debt restructuring

  8. Factors to Consider When Selecting and Executing a Year 15 Strategy • Physical condition of property • Financial condition of property owner • Capacity of development team • Local real estate market • Tax credit agency resources • Investor tax liability • Existing restrictions contained in project documents • Duties and obligations under partnership agreement

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