| (a) General. Pursuant to §42(h)(6) of the Code,
after the end of the 14th year of the Compliance Period, the Development
Owner of a Development utilizing Housing Tax Credits can request that
the allocating agency find a buyer at the Qualified Contract Price.
If a buyer cannot be located within one year, the Extended Use Period
will expire. This section provides the procedures for the submittal
and review of a Qualified Contract Request.
(b) Eligibility. Development Owners who received an
award of credits on or after January 1, 2002, are not eligible to
request a Qualified Contract prior to the 30 year anniversary of the
date the property was placed in service (§2306.185); if the property's
LURA indicates a commitment to an Extended Use Period beyond 30 years,
the Development Owner is not eligible to request a Qualified Contract
until the expiration of the Extended Use Period. Development Owners
awarded credits prior to 2002 may submit a Qualified Contract Request
at any time after the end of the year preceding the last year of the
Initial Affordability Period, provided it is not precluded by the
terms of the LURA, following the Department's determination that the
Development Owner is eligible. The Initial Affordability Period starts
concurrently with the credit period, which begins at placement-in-service
or is deferred until the beginning of the next tax year, if there
is an election. Unless the Development Owner has elected an Initial
Affordability Period longer than the Compliance Period, as described
in the LURA, this can commence at any time after the end of the 14th
year of the Compliance Period. References in this section to actions
which can occur after the 14th year of the Compliance Period shall
refer, as applicable, to the year preceding the last year of the Initial
Affordability Period, if the Development Owner elected an Initial
Affordability Period longer than the Compliance Period.
(1) If there are multiple buildings placed in service
in different years, the end of the Initial Affordability Period will
be based upon the date the last building placed in service. For example,
if five buildings in the Development began their credit periods in
2005 and one began in 2006, the 15th year would be 2020.
(2) If a Development received an allocation in multiple
years, the end of the Initial Affordability Period will be based upon
the last year of a multiple allocation. For example, if a Development
received its first allocation in 2004 and a subsequent allocation
and began the credit period in 2006, the 15th year would be 2020.
(c) Preliminary Qualified Contract Request. All eligible
Development Owners must file a Preliminary Qualified Contract Request.
(1) In addition to determining the basic eligibility
described in subsection (b) of this section, the pre-request will
be used to determine that:
(A) The Development does not have any uncorrected issues
of noncompliance outside the corrective action period;
(B) There is a Right of First Refusal (ROFR) connected
to the Development that has been satisfied; and
(C) The Compliance Period under the LURA has expired;
and
(2) In order to assess the validity of the pre-request,
the Development Owner must submit:
(A) Preliminary Request Form;
(B) Qualified Contract Pre-Request fee as outlined
in §11.901 of this title (relating to Fee Schedule);
(C) Copy of all regulatory agreements or LURAs associated
with the Property (non-TDHCA); and
(D) Copy of a Physical Needs Assessment (PNA), conducted
by a Third Party, that is no more than 12 months older than the request
date. If the PNA identifies the need for critical repairs that significantly
impact habitability and tenant safety, the identified repairs and
replacements must be resolved to the satisfaction of the Department
before the Development will be considered eligible to submit a Qualified
Contract Request.
(3) The pre-request will not bind the Development Owner
to submit a Qualified Contract Request and does not start the One
Year Period (1YP). A review of the pre-request will be conducted by
the Department within 90 days of receipt of all documents and fees
described in paragraph (2) of this subsection. If the Department determines
that this stage is satisfied, a letter will be sent to the Development
Owner stating that they are eligible to submit a Qualified Contract
(QC) Request.
(d) Qualified Contract Request. A Development Owner
may file a QC Request any time after written approval is received
from the Department verifying that the Development Owner is eligible
to submit the Request.
(1) Documentation that must be submitted with a Request
is outlined in subparagraphs (A) - (P) of this paragraph:
(A) A completed application and certification;
(B) The Qualified Contract price calculation worksheets
completed by a licensed Third-Party certified public accountant (CPA).
The CPA shall certify that they have reviewed annual partnership tax
returns for all years of operation, loan documents for all secured
debt, and partnership agreements. They shall also certify that they
are not being compensated for the assignment based upon a predetermined
outcome;
(C) A thorough description of the Development, including
all amenities;
(D) A description of all income, rental and other restrictions
(non-TDHCA), if any, applicable to the operation of the Development;
(E) A current title report;
(F) A current appraisal with the effective date within
six months of the date of the QC Request and consistent with Chapter
11, Subchapter D of this title (relating to Underwriting and Loan
Policy);
(G) A current Phase I Environmental Site Assessment
(and Phase II, if necessary) with the effective date within six months
of the date of the QC Request and consistent with Chapter 11, Subchapter
D of this title;
(H) A copy of the most recent Physical Needs Assessment
of the property conducted by a Third Party, if different from the
assessment submitted during the preliminary qualified contract request,
consistent with Chapter 11, Subchapter D of this title;
(I) A copy of the monthly operating statements for
the Development for the most recent 12 consecutive months;
(J) The three most recent consecutive annual operating
statements (audited would be preferred) for the Development;
(K) A detailed set of photographs of the Development,
including interior and exterior of representative units and buildings,
and the property's grounds;
(L) A current and complete rent roll for the Development;
(M) A certification that all tenants in the Development
have been notified in writing of the request for a Qualified Contract.
A copy of the letter used for the notification must also be included;
(N) If any portion of the land or improvements is leased,
copies of the leases;
(O) The Qualified Contract Fee as identified in §11.901
of this title (relating to Fee Schedule); and
(P) Additional information deemed necessary by the
Department.
(2) Unless otherwise directed by the Department pursuant
to subsection (g) of this section, the Development Owner shall contract
with a broker to market and sell the Property. The Department may,
at its sole discretion, notify the Owner that the selected Broker
is not approved by the Department. The fee for this service will be
paid by the seller, not to exceed 6% of the QC Price.
(3) Within 90 days of the submission of a complete
Request, the Department will notify the Development Owner in writing
of the acceptance or rejection of the Development Owner's QC Price
calculation. The Department will have one year from the date of the
acceptance letter to find a Qualified Purchaser and present a QC.
The Department's rejection of the Development Owner's QC Price calculation
will be processed in accordance with subsection (e) of this section
and the 1YP will commence as provided therein.
(e) Determination of Qualified Contract Price. The
QC Price calculation is not the same as the Minimum Purchase Price
calculation for the ROFR. The CPA contracted by the Development Owner
will determine the QC Price in accordance with §42(h)(6)(F) of
the Code taking the following into account:
(1) Outstanding indebtedness secured by, or with respect
to, the building;
(2) Distributions to the Development Owner of any and
all cash flow, including incentive management fees, capital contributions
not reflected in outstanding indebtedness or adjusted investor equity,
and reserve balance distributions or future anticipated distributions,
but excluding payments of any eligible deferred developer fee. These
distributions can only be confirmed by a review of all prior year
tax returns for the Development;
Cont'd... |
