10 TAC §§50.1-50.16
The Texas Department of Housing and Community Affairs adopts
new §§50.1-50.16 concerning the Qualified Allocation Plan and Rules
(the Rules), with changes to the proposed text as published in the December
4, 1998 issue of the
Texas Register
(23 TexReg
12034). The adoption of these rules is contingent upon the Governor's approval,
rejection or modification and approval pursuant to §2306.671(c) of the
Texas Government Code, Title 10.
These rules are being adopted to provide procedures for the allocation,
by the Department, of low income housing tax credits available under federal
income tax laws to owners of qualified low income rental housing projects.
SUMMARY OF COMMENTS RECEIVED UPON PUBLICATION OF THE PROPOSED RULES IN
THE TEXAS REGISTER ON DECEMBER 4, 1998, AND COMMENTS PROVIDED AT PUBLIC HEARINGS
HELD BY THE DEPARTMENT
On December 4, 1998, the proposed Rules were published in the
Texas Register
commencing the required 30-day comment period. The comment
period ended on January 11, 1999.
During the comment period, the Department received 85 requests for copies
of the proposed Rules from the public. A copy of the Rules was also provided
on the Department's web site.
The Department held public hearings in Dallas, Houston, Austin and El Paso.
In addition to the public hearings, the Department received both oral and
written comments from members of the public.
The scope of public comments concerning the Rules pertain to the following
sections:
§50.1 Scope
Public Comment: The Rural Rental Housing Association of Texas suggested
that language be added to the Rules describing the pending Memorandum of Understanding
(MOU) between the Department and TxRD. This language would create an appropriate
reference and authority for improving the way documents are processed and
information is shared (applications, underwriting, environmental reports)
between TxRD and the Department.
Department's Response: The Department concurs with this observation and
suggests the following text be included in §50.1 of the Rules.
"To assure maximum utilization and optimum geographic distribution of tax
credits in rural areas, although not mandated to do so, the Department is
developing Memorandums of Understanding (MOU) with the TxRD-USDA. Such MOUs
will seek to achieve increased sharing of information, reduction of processing
procedures, and fulfillment of project compliance requirements involving existing,
rehabilitated, and new construction housing projects financed by TxRD-USDA."
Board's Recommendation: Department's response accepted.
§50.2 Definitions
(2) Adaptable Dwelling Unit
Public Comment: The Department received a great deal of public comment
on the requirements of §50.6(c)(6)(B) relating to the provision of units
for persons with disabilities.
Department Comment: Because of the comment on §50.6(c)(6)(B) and with
the proposed changes to the section, it is thought that a definition for "Adaptable
Dwelling Unit" should be added to §50.2(2) of the Rules.
"(2) Adaptable Dwelling Unit--As described in the Fair Housing Act, a unit
which meets the minimal accessibility requirements specified in the Act (i.e.
usable doors, an accessible route, accessible environmental controls, and
usable kitchens and bathrooms) and the "adaptable" structural feature of reinforced
bathroom walls for later installation of grab bars."
Board's Recommendation: Department's response accepted.
(45) Ineligible Building Types
Public Comment: One commentator stated: "I do not believe that TDHCA should
consider duplexes and triplexes as ineligible building types. In many communities
across our state duplexes and triplexes work well either because of existing
zoning or neighborhood acceptance. They are also used successfully in many
developments because of site issues and can be mixed with other building types."
The commentator also stated that: "Since ultimately the Department uses per
square foot cost limits to control costs, it would be preferable in rural
areas if we could have the option to include duplex and triplex units. Oftentimes,
a site design can be enhanced through the ability to have some smaller unit
types."
Another commentator suggested that the Department should consider single
family development in metropolitan areas if it was part of a community's redevelopment
plan and was supported by the neighborhood. A case study was provided where
the City of Abilene wished to rehabilitate single family homes that it owned.
The city had been working with the support of the local neighborhood to redevelop
this area. Because the development would be comprised of single family housing
in an urban area, this type of application would not be allowed under the
current Rules.
Department's Response: Because single family and fourplexes are allowed
in Rural areas under the current Rules, the Department is proposing that the
definition be modified to include duplexes and triplexes as these building
types are of similar scale and character. Because of the Department's past
experiences with mismanagement of developments comprised of smaller building
types in urban areas and the corresponding increase in the level of neighborhood
opposition, the Department believes that fourplexes should remain the smallest
allowable building configuration in non-Rural areas. The following revision
is proposed to §50.2(45) of the Rules:
"(45) Ineligible Building Types--Single family detached housing, duplexes,
and triplexes shall not be included in tax credit developments (except as
provided for in this definition).
Fourplexes are also prohibited unless they are developed in clusters of
four or more on contiguous property under common ownership, management and
Control. The only exceptions to this definition are:
(A) Any project comprised of single family detached homes, duplexes or
triplexes of 35 units or less that is located within a city or county with
a population of not more than 20,000 or 50,000, respectfully, shall not be
considered to include an Ineligible Building Type. The proposed units must
be located on contiguous property under common ownership, management and Control
or dispersed within an existing residential subdivision.
(B) An existing Rural Project that is federally assisted within the meaning
of §42(d)(6)(B) of the Code and is under common ownership, management
and Control shall not be considered to include an Ineligible Building Type.
For qualifying federally assisted Rural Projects, construction activity must
be rehabilitation only, with no expansion of the existing development. Rural
Projects purchased from HUD will also qualify as being federally assisted.
Board's Recommendation: Department's response accepted.
§50.4(l)
Public Comment: One commentator stated that forward commitment and waiting
list awards should not be subjective or arbitrary, and should be based upon
the same selection criteria as the rest of the allocations.
Department's Response: Projects issued a forward commitment of credits
or placed on the waiting list are reviewed, scored, inspected and underwritten
in the same manner as all projects which receive an allocation from the current
Application Round. These decisions are not subjective or arbitrary. While
the draft version of the Rules requires that returned credits be awarded to
projects on the waiting list by level of priority, there seems to be some
confusion over how the priority of the waiting list is determined. At the
time the allocation is made, the origin and type of returned credits are undetermined.
Therefore it is infeasible to generate a fixed order for allocating credits
from the waiting list as the amount, location, and development type of a project
returning the credits is not established. The Department is suggesting that
the following text be added to §50.4(l) of the Rules to describe the
criteria used to establish the priority by which the credits are awarded from
the waiting list:
"(l) If the entire State Housing Credit Ceiling for the applicable calendar
year has been committed or allocated in accordance with this chapter, the
Department shall place all remaining Applications which have satisfied all
Threshold Criteria on a waiting list. All such waiting list Applications will
be weighed one against the other and a priority list shall be developed by
the Department and approved by the Ad Hoc Tax Credit Committee. If at any
time prior to the end of the Application Round, one or more Commitment Notices
expire and a sufficient amount of the State Housing Credit Ceiling becomes
available, the Department shall issue a Commitment Notice to Applications
on the waiting list in order of priority subject to the amount of returned
credits and the 10% Nonprofit Set-Aside allocation required under §42(h)(5)
of the Code. In the event that the Department makes a Commitment Notice or
offers a commitment within the last month of the calendar year, it will require
immediate action by the Applicant to assure that an allocation or Carryover
Allocation can be issued before the end of that same calendar year."
Board's Recommendation: Department's response accepted.
§50.5(b)
Public Comment: It was suggested by the Rural Rental Housing Association
of Texas that because of timing constraints and the relatively small and fixed
amount of TxRD funding, that a more flexible allocation process similar to
that used to award credits to a Tax Exempt Bond Project be utilized. Applications
would be made at any time during the year after the development received funds
from TxRD.
Department's Response: Because the "TxRD" credits originate from the State
Housing Credit Ceiling, they are subject to a number of administrative and
legislative constraints (including the cycle deadline requirements established
by the Legislature), which makes it infeasible to accept applications at any
time in the year as is done with a Tax Exempt Bond Project. The Department
intends to work closely with TxRD to meet the timing requirements of their
developments. The current Rules would allow for issuing the credits at different
times during the Application Round and the TxRD portion could be issued separately
from the General and Nonprofit Set-Asides if required. No changes to the Rules
are suggested.
Board's Recommendation: Department's response accepted.
§50.5(c)
Public Comment: A commentator stated that the current text appears to prohibit
awarding credits to developments which exceed the Program's cost guidelines.
It was the commentator's opinion that developments with total development
costs exceeding the cost limitations had received credit awards in the past.
Department's Response: The Department is suggesting that the Board be given
the opportunity to provide a waiver or approve a credit award based on a reduction
of costs to meet the Program's cost guidelines. The Department is suggesting
that the following revision be made to §50.5(c) of the Rules
"(c) Unless the Department makes a recommendation to the Board based on
the need to fulfill the goals of the Program as expressed in this QAP and
Rules and the Board grants a waiver, a Commitment Notice shall not be issued
with respect to any Project where the cost for the total development, acquisition,
construction or rehabilitation exceeds the limitations established from time
to time by the Department and the Board as more specifically provided in the
Reference Manual. The Department's recommendation to the Board shall be clearly
documented."
Board's Recommendation: Department's response accepted.
§50.6(a)(1)(A)
Public Comment: One commentator stated, "As an architect, I cannot certify
fees which are owner determined. An architect can certify as to which amenities
are included in his design, but not fees collected by the proposed amenities."
Department's Response: The Department has reevaluated the relevance of
having an architect provide this information in the Application. Having the
architect describe the amenity package does not provide a higher level of
certainty that the items will be provided upon completion. This requirement
only produces another third party piece of documentation for the Project Owner
to obtain and the Program staff to review. Also, rehabilitation developments
typically do not utilize an architect. To streamline the application process,
the Department is suggesting that the Project Owners should provide this exhibit.
As is current practice, the Project Owner will be responsible for ensuring
that these items are included in the finished development. IRS Form 8609s
will not be issued until all required items have been provided. It is proposed
that the text of §50.6(a)(1)(A) be modified to read:
"(A) A letter from the Project Owner specifying the type of amenities proposed
for the development. If fees in addition to rent are charged for amenities
reserved for an individual tenant's use (i.e. covered parking, storage, etc),
then the amenity may not be included among those provided to satisfy this
exhibit. Therefore, the letter must clearly indicate those amenities for which
fees may be collected. Projects larger than 35 units must provide at least
four of the amenities provided in clauses (i)-(x) of this subparagraph. Small
Developments (35 Units or less) and Special Housing Projects must provide
at least two of the amenities provided in clauses (i)-(x) of this subparagraph."
Board's Recommendation: Department's response accepted.
§50.6(a)(1)(B)
Public Comment: One commentator suggested that a survey be required at
the time of Application and the site plan should conform to the survey. Unit
size, mix and location within the site should be shown on the survey and this
information should conform to the rest of the application.
Department's Response: A basic site plan should be sufficient for the Program's
review requirements. The title policy usually contains a description of the
site and the acreage. The site description is verified with a legal description
at Carryover and a final survey is required at the time of cost certification.
A survey would represent an unnecessary additional expense for the Applicant.
While no policy related changes are recommended to the Rules, the Department
is suggesting a minor grammatical change to §50.6(a)(1)(B) for clarity.
“(ii) typical floor plans for each residential and common area building
configuration and typical unit floor plans for each type of unit. The net
rentable area as calculated in Exhibit 2A of the Reference Manual should be
clearly stated on each unit floor plan; and"
Board's Recommendation: Department's response accepted.
§50.6(c)(1)(A)
Public Comment: The Texas Affiliation of Affordable Housing Providers questioned
the use of QCTs because this data has not been updated since 1989. In addition
to concerns over the relevance of the data, it was thought that reliance on
QCTs may encourage concentration of developments in specific areas. It also
was thought that a potential for abuse of market rate points exists in those
QCTs.
Department's Response: The Department reviews the geographical distribution
of credits very carefully. The current language in the Rules governing the
award of points for mixed income developments should eliminate potential abuses.
No changes to the Rules are suggested.
Board's Recommendation: Department's response accepted.
§50.6(c)(3)(C)
Public Comment: One commentator stated that if the intent of this item
is to provide units for large families, then for safety and convenience sake,
the three and four bedroom units should not be over two stories tall.
Department's Response: The Department concurs with this assessment and
suggests the following revision to §50.6(c)(3)(C):
"(C) The proposed development's composition offers a Unit mix which is
conducive to housing large families. To qualify for these points, these Units
must have at least 1000 square feet of net rentable area for three bedrooms
or 1200 square feet of net rentable area for four bedrooms. Unless the building
is served by an elevator, the 3 or 4 bedroom Units should not be located above
the building's second floor. If the Project is a mixed-income development,
only tax credit Units should be used in computing the percentage of qualified
Units for this selection item:"
Board's Recommendation: Department's response accepted.
§50.6(c)(3)(D)
Public Comment: A commentator stated that the reference to Energy Star
appliances is too vague and that specific appliances should be required.
Department's Response: The Program staff concurs with this observation
and believes that unless the requirement is clearly defined, it will be difficult
at cost certification to determine what level of appliance provision is acceptable.
The following revision to §50.6(c)(3)(D) of the Rules is proposed:
“(viii) utilization of appliances and residential light fixtures
that qualify for the US EPA and the US Department of Energy's Energy Star
Label. At a minimum, this shall include the installation of programmable thermostats,
water heaters, refrigerators and dishwashers in each unit."
Board's Recommendation: Department's response accepted.
§50.6(c)(3)(E)
Public Comment: Several commentators proposed changes to the density criteria
point system to allow applicants in areas where land cost is high or those
proposing multistory elderly developments to have an opportunity to claim
points for providing a density which is less than that typically found in
typical market rate developments.
Department's Response: The Department believes the current density criteria
is consistent with the desire to provide low density, low-rise, family oriented
developments. It is thought that the 10 point bonus for elderly developments
offsets the points lost for the density (as well as the family unit criteria).
The Department evaluates each Application on its relative merits and would
take into account scoring variances between worthy developments. No changes
to the Rules are suggested.
Board's Recommendation: Department's response accepted.
§50.6(c)(3)(G)
Public Comment: One commentator stated that while they supported the market
requirements that have been added to the mixed-income developments, they had
a number of concerns. They provided the following comment regarding the difficulty
to utilize the criteria in non-metropolitan areas: "The definition and determination
of 'submarkets' and the determination of 'market rents' in such submarkets.
While this information should be readily available in urban areas, I believe
that this will be more difficult to obtain and qualify in rural areas. My
experience in the smaller towns is that they do not have new apartment units,
and that most of the 'market rate' housing stock is ten to fifteen years old.
Thus, it is going to be necessary to allow adjustments to the local 'market
rents' to compensate for the age of existing stock. This is a common adjustment
by market firms, and it is possible that the Department has already made a
provision for this adjustment." They also expressed this question as to what
area standards will be utilized: "Will the 10% and 5% tests be based on rent
per "gross" square foot or "net" square foot? Will they utilize the "gross
rent" (including a utility allowance) or the "net rent" (what the resident
actually pays)?" Their other concern was that making the concept work in submarkets
of SMSAs that don't share the same characteristics of the SMSA will be difficult
because the rent is tied to allowable program rents rather than the rent which
will be charged by the applicant. In areas such as Austin, where the rents
are very high and the program rents are correspondingly high for that MSA,
surrounding cities with lower actual market rents would be adversely affected.
It was suggested that the market rate rents should be compared to the actual
rents that the applicant will be charging rather than the allowable program
rents?
Department's Response: The Department relies on the expertise of the market
analyst to provide an estimate of market rate rents in an area. If the professional
experience and standard practice of the analyst advocates the use of an adjustment
factor for new versus older units, then an adjustment should be made. However,
the Department reserves the right to question the accuracy of the figure and
will review this criteria item accordingly. The per square foot comparison
should be based on net rentable area because this information is likely to
be more accessible to the market analyst. The Department realizes that it
may be difficult for some areas to claim these points based on the community's
demographics. However, the goal of this change is to reduce the number of
applicants who may claim points for sites in areas whose demographics do not
represent a significant mix of incomes. By denying the points to nonqualified
sites the scoring is improved for developments that do not make this election.
The following revisions to §50.6(c)(3)(G) of the Rules are proposed:
"(G) The subject Project is a mixed-income development comprised of both
market rate Units and qualified tax credit Units. To qualify for these points,
the project must be located in a submarket where the average rents for comparable
market rate units are at least 10% higher on a per net rentable square foot
basis than the maximum allowable rents under the Program. Additionally, the
proposed rents for the market rate units in the project must be at least 5%
higher on a per net rentable square foot basis than the maximum allowable
rents under the Program."
Board's Recommendation: Department's response accepted.
§50.6(c)(3)(I)
Public Comment: One commentator expressed concern over the recertification
requirements for Tenants at 50% AMGI. As currently written, the income qualification
is more restrictive than the 140% Test set forth in §42(g)(2) of the
code. As currently presented, the 50% tenant would cease to be considered
as a qualified tenant for the purposes of meeting the 50% set aside points
as soon as their income level rose above the 50% income limit. The impact
of this would require the next available unit to be set aside at 50% and the
rent for the previous 50% tenant would have to be increased to the 60% level
to make up for the lost income. "This is an extreme penalty to those individuals
who are generally at the lowest income category capable of leasing units in
a tax credit development. Within the Dallas MSA there is approximately a $120
per month difference in the rental rate between the two bedroom unit rent
at 50% and 60%." According to the commentator, this would translate into $1,440
in additional rent payments for an individual who exceeded the income level
by as little as $1.00.
Department's Response: The Department concurs with this observation and
believes that the current requirement may be too restrictive. The following
revision, which is consistent with the next available Unit requirements for
60% of median income Units as discussed in §42(g) of the Code, is proposed
to §50.6(c)(3)(I):
"(I) Property Owner will set-aside Units for households with incomes at
50% or less of Area Median Gross Income (AMGI). The rents for these Units
must not be higher than the allowable tax credit rents at the 50% AMGI level.
The property owner will set aside Units at 50% AMGI and will maintain the
percentage of such Units continuously over the compliance and extended use
period as specified in the LURA. For the purposes of this subparagraph (maintaining
the promised percentage of set aside 50% AMGI Units), if at re-certification
the tenant's household income exceeds 140% of the 50% AMGI level, then the
Unit remains a 50% AMGI Unit until the next available Unit of comparable or
smaller size is designated to replace this Unit. Once the over 50% AMGI Unit
is replaced, then the rent for the previously qualified 50% AMGI Unit may
be increased under the LIHTC requirements. Rent increases, if any, should
comply with lease provisions and local tenant-landlord laws. If the Project
is a mixed-income development, only tax credit Units should be used in computing
the percentage of qualified Units for this selection item. Utilize the percentages
in clause (i) through (ii) of this subparagraph to assess the appropriate
score."
Board's Recommendation: Department's response accepted.
§50.6(c)(3)(J)
Public Comment: The Texas Affiliation of Affordable Housing Providers suggested
that points be awarded for eight-plexes as this configuration is more cost
effective than fourplexes and provides for more green space.
Department's Response: The fourplex and Town Home criteria is an attempt
to create a lower density, more family oriented development with individual
entrances, more windows and increased privacy. The scale of the buildings
is more likely to fit into existing residential neighborhoods and hopefully
reduce community opposition. The current criteria allows for a building composed
of eight Town Homes which should address the cost and green space concerns.
No changes to the Rules are suggested.
Board's Recommendation: Department's response accepted.
§50.6(c)(4)(A)
Public Comment: The Rural Rental Housing Association of Texas commented
that it supported the increase to $6,000 for direct hard cost to avoid "cosmetic"
rehabilitations.
A number of commentators questioned the ability of an applicant to gain
points from its general contractor's experience. It was stated that, "A contractor
could have built 10,000 apartments but does that experience ensure a tax credit
project can be placed in service?"
Department's Response: It is thought that the ability of "small" or first
time developers to compete would be adversely impacted by the amount of points
awarded for this item. Therefore points are awarded to applicants who utilize
a contractor with the required experience level. A qualified contractor should
provide a well-built development and complete the work under the Program's
deadlines. While the Department does not recommend any material changes to
§50.6(c)(4)(A) based on the contractor qualifications, there has been
some confusion in past years as to what entities can qualify for these points.
As the phrase "ownership entity" is not defined in the Rules, it is proposed
that the text in subparagraph (A) be modified as provided below. Minor changes
were also made to subparagraph (A) to clarify that the General Contractor's
qualifications must meet the requirements of this section as well as §50.8(c).
The phrase "with a record of material noncompliance" was also added to clause
(iii) for clarification that "noncompliance" included ongoing lapses of noncompliance.
"(A) EXHIBIT 208. Label as EXHIBIT 208, evidence that the Project Owner's
general partner, General Contractor or their principals have a record of successfully
constructing or developing residential units or comparable commercial property
(i.e. dormitory and hotel/motel). Evidence must be one of the following documents:
AIA Document A111-Standard Form of Agreement Between Owner & Contractor,
AIA Document G704-Certificate of Substantial Completion, IRS Form 8609, HUD
Form 9822, development agreements, partnership agreements, or other appropriate
documentation verifying that the general partner, General Contractor or their
principals have the required experience. While points may be awarded for experience
under §50.6(c)(4)(A) during the application process, the criteria and
conditions related to a General Contractor as outlined in §50.8(c) of
this title (relating to Housing Credit Allocations) must be met in order to
receive a final allocation of credits. If the General Contractor or its principals
is shown not to have the required experience upon review of documents required
pursuant to §50.8(c), then the conditions of the Commitment Notice or
carryover agreement will not have been met and the final allocation of credits
may be denied. If rehabilitation experience is being claimed to qualify for
an Application involving new construction, then the rehabilitation must have
been substantial and involved at least $6,000 of direct hard cost per unit."
"(iii) Property Owners in noncompliance or with a record of material noncompliance
with HUD, TxRD, HOME, LIHTC or any other program monitored or involving funds
awarded by the Department, but which are not barred from having an Application
recommended by §50.4(f), or which have had a continuing pattern of defaults
and foreclosures are ineligible to claim the points for this item (10 points)."
Board's Recommendation: Department's response accepted.
§50.6(c)(4)(B)
Public Comment: One commentator stated that this section should be expanded
to require the HUB to show evidence that it has experience and expertise in
the development and/or operation of multifamily housing. It is a concern that
the current requirement which only requires "regular, continuous and substantial
participation" may be giving points to individuals with little experience
and may jeopardize the operation of the development.
A number of commentators suggested that HUB points should be expanded to
include Community Housing Development Organizations (CHDO) so that minority
owned non-profits can be afforded the same opportunity to compete as minority
owned businesses.
Department's Response: The Department wishes to draw from a pool of HUBs
with a broad base of experience. The HUBs qualifications are reviewed carefully
at the time of application. The Department will deny the points if there is
doubt over the ability of the HUB to materially participate in the development
and operation of the project. In limited cases, the Department will require
that another more experienced entity be added to the development team if there
is a concern over the HUB's qualifications.
The goal expressed in §50.1 of the Rules focuses on the use of HUBs.
This specific criteria item awards points to developments which are working
towards that goal. The HUB statute only pertains to for-profit entities. Additionally,
as the minority members of CHDOs are serving on a board of directors, their
level of control cannot be quantified. The CHDOs already may benefit from
participation in the nonprofit set-aside and the other nonprofit participants
also will be ineligible for these points. Therefore, the Department is not
recommending any changes to this section to award points for CHDO participation.
While no content related changes are recommended, the submission requirements
have been consolidated and moved to the end of section §50.6(c)(4) and
some redundant text has been deleted. This has been done to clearly delineate
the required items and to eliminate redundant text.
"(B) EXHIBIT 209. Label as EXHIBIT 209, evidence that a Historically Underutilized
Business ("HUB") as certified by the General Services Commission is the Project
Owner or Controls the Project Owner. With respect to the filing of an Application
and the development, operation and ownership of a Project, the historically
underutilized person or persons whose ownership interests comprise a majority
of a corporation, partnership, joint venture or other business entity, must
maintain this majority and must demonstrate regular, continuous, and substantial
participation in the operation and management activities of the entity. Likewise,
with regard to a sole proprietorship, the individual who comprises the sole
proprietorship must demonstrate regular, continuous, and substantial participation
in the development, operation and ownership of the Project. The Department
shall, during and after the Application Round, monitor those individuals whose
purported ownership interest(s) and participation form the basis upon which
the designation of HUB is being claimed and may require the submission of
additional documentation as required to verify said evidence. The Department's
goal is to have substantive participation by those individuals whose purported
ownership interest(s) and participation form the basis which the designation
as a HUB is claimed. A determination by the Department that there has been
a material misrepresentation as to such participation or that insufficient
evidence has been provided to substantiate such participation will be final
and points awarded for HUB participation will be withdrawn accordingly. The
following documentation must be provided to qualify for these points:
(i) certification from the General Services Commission that the Person
is a HUB; and
(ii) evidence of regular, continuous and substantial participation. This
evidence shall include, but not be limited to, the agreement to personally
guarantee the interim construction loan secured relative to the development
of a Project (and to personally provide all other guarantees to the equity
investor) by the person or persons whose purported ownership interest(s) and
participation form the basis upon which the designation of a HUB is being
claimed. Any such guarantee wherein an Affiliate, partner and or Beneficial
Owner of the guarantor agrees to indemnify, in whole or in part, the guarantor
from the liability arising from the guarantee, shall not constitute said evidence.
(5 points)"
Board's Recommendation: Department's response accepted.
§50.6(c)(6)(A)
Public Comment: A number of commentators asserted that under the draft
Rules mid-rise elderly developments are at a point disadvantage when competing
against multifamily developments because they cannot receive points for provision
of units for large families, §50.6(c)(3)(C), or for low density developments,
§50.6(c)(3)(E). It was discussed that the higher density developments
are required in inner city areas because the land cost requires a higher unit
density in order for the development to be financially feasible. Benefits
from mid-rise development include better security and reduced exposure to
adverse weather conditions, and minimized walking distances for the tenants.
Changing the density and family criteria or adding additional points to this
section was suggested.
A number of commentators also expressed concern over the Department's decision
to increase the age restriction over that provided in the Fair Housing Act.
The increase effectively reduces the population of residents the development
can attract while increasing the average age of the tenants thus creating
environments more suited to assisted living facilities.
Department's Response: It is thought that the 10 point bonus for elderly
developments offsets the points lost for the density and family unit criteria.
The Department evaluates each Application on its relative merits and would
take into account scoring variances between worthy developments.
After discussing the age issue with outside counsel and the Department's
general counsel, it has been determined that the current language, while more
restrictive than federal law with respect to Units constructed for and occupied
by at least one person who is 60 years of age or older, is not a violation
of the Fair Housing Act. Furthermore, the 60 year age criteria conforms with
the elderly definition established by the state legislature. It is the Department's
position that by increasing the age limit, more older persons who can no longer
work and are dependent on an extremely limited income source would be able
to move into a tax credit Unit. Other than this singular comment, the Department
is unaware that this criteria item is causing difficulties in leasing up properties.
Based upon the comment about the increased tenant safety provided by elevators
and shorter walking distances in mid-rise developments, the Department has
come to believe that, from a convenience and safety standpoint, there is not
an inherent difference between one and two flights of stairs in an elderly
development. Therefore, the text in the Rules which references elevators for
buildings over two stories should be modified. The following revision to §50.6(c)(6)(A)
of the Rules is suggested:
"(A) This criterion applies to elderly Projects which must provide significant
facilities and services specifically designed to meet the physical and social
needs of the residents. Significant services may include congregate dining
facilities, social and recreation programs, continuing education, welfare
information and counseling, referral services, transportation and recreation.
Other attributes of such Projects include providing hand rails along steps
and interior hallways, grab bars in bathrooms, routes that allow for barrier-free
lever type doorknobs and single lever faucets. All multistory buildings (two
or more floors) must be served by an elevator. Individual Units shall not
be multistory. Elderly Projects must not contain any Units with three or more
bedrooms. Such a Project must conform to the Federal Fair Housing Act and
must be a Project which:"
Board's Recommendation: Department's response accepted.
§50.6(c)(6)(B)
Public Comment: A number of commentators expressed a desire for flexibility
in adapting the Units for the specific needs of the tenant as opposed to the
requirement under §504 of the Rehabilitation Act of 1973 that all of
the work must be in place upon completion of construction.
One commentator stated that the reduced 9 month restriction does not provide
an incentive to find qualified tenants as most developments include a 12 month
lease up period in their proforma. The handicapped Units will be completed
first and the nine month period will coincide with the lease up period. The
commentator stated that, "We disagree that 2 year restrictions are too strict.
No one forces an applicant to score these points. An applicant should not
score the points unless he or she is prepared for the potential financial
consequences."
Another commentator had the following questions about the requirements
of §504: "Is the intent of the §504 scoring in the Rules to ensure
compliance with the 5% and 2% rule? If so, are these units to be use restricted
for a period of time or can they be leased on a first come first serve basis?
Furthermore, because §504 limits the percentage of handicapped units
to 5% and 2%, an applicant will score 8 points under this criteria whereas
under item (i), the same set aside percentage would score 0 points. (The 2%
restriction under §504 is limited to visual and hearing impaired. This
disability is not considered the same as a mental disability.)"
One commentator thought that too many points are being awarded for this
item and it is encouraging applicants to promise more units than they can
or intend to deliver once the development is up and running. "That gets folks
going after a number to score, as opposed to serving the handicapped, knowing
full well if (they can't find a qualified tenant) after nine months they could
fill it with anybody."
Members of advocacy groups continue to recommend that compliance with §504
should be an item included in the Threshold Criteria. If Selection Criteria
points are still required, they should be awarded for increasing the number
of §504 accessible units by 5%, making the requirement 10% for physically
impaired and 2% for people with hearing/visual impairments. Evidence that
this level of tenant demand for the additional units should be required in
a marketing plan.
One commentator stated a concern that if §504 becomes an item in the
Threshold Criteria, then it could lead to the tax credits being interpreted
as federal funds which would lead to other restrictions associated with Federal
funds such as the Davis Bacon Act.
Department's Response: The Department believes that the requirements of
the Fair Housing Act already serve as a Threshold Criteria item because it
covers all ground floor units for buildings with four or more units and all
dwelling units with buildings served by an elevator. The Department concurs
with the comments regarding the relative inefficiency of customizing units
for Persons prior to knowing their preferences and requirements. To avoid
concentration of units, the percentage of set aside units has been reduced
per the suggestion from the advocacy groups. The Department proposes changes
to allow two options to receive points. The Applicant will either commit to
the Department that a certain number of units will be set aside and marketed
to Persons with Disabilities throughout the compliance and extended use period;
or the Applicant will customize the units upon completion of construction
to meet the requirements of §504. The Department recommends the following
revision to Section 50.6(c)(6)(B) of the Rules.
"(B) EXHIBIT 211. Label as EXHIBIT 211, evidence which establishes that
Units will be provided for persons with physical or mental disabilities as
described in clause (i) or (ii) of this subparagraph. The points for clause
(i) and (ii) are mutually exclusive.
(i) The Project Owner agrees to set aside Units for Persons with Disabilities.
The Department will require a minimum of nine months during which the set
aside Units must either be occupied by tenants who are physically or mentally
disabled or held vacant while being marketed to such tenants. The nine month
period will begin on the date that each building receives its certificate
of occupancy. For buildings which do not receive a certificate of occupancy,
the nine month period will begin on the placed in service date as provided
in the Cost Certification Procedures Manual. When a qualified tenant is located,
the Project Owner will be responsible for adapting the Unit per the tenant's
requirements. The cost of adapting the Unit will be borne by the Project Owner.
If the Project Owner is unable to locate qualified Persons with Disabilities
following a good-faith effort throughout the nine month set aside period,
then the Units may be rented to tenants without disabilities, provided that
the next available Unit (from among those set aside for Persons with Disabilities)
shall first be made available to Persons with Disabilities. To comply with
this provision, the Project Owner must maintain a waiting list of qualified
tenants with disabilities throughout the Compliance Period. Each time a Unit
set aside for Persons with Disabilities becomes available, the Project Owner
must contact an individuals on the waiting list and/or provide notice to local
service providers that the Unit is available. If the waiting list or the local
service provider cannot locate a qualified tenant for the next available Unit,
then the Unit may be rented to a tenant without disabilities. The documentation
requirements at the time of Application and the point system for this clause
are contained in subclauses (I)-(IV) of this clause (documentation for all
three subclauses, (I)-(III), must be provided):
(I) evidence verifying that Adaptable Dwelling Units will be specifically
set aside for persons with physical or mental disabilities. Such evidence
for physical disabilities must be in the form of a certification from an accredited
architect stating the number of Units which are/will be designed to meet American
National Standards for buildings and facilities providing accessibility and
usability for Persons with Disabilities (ANSI A117.1-1986) and will conform
to the Fair Housing Act. Such evidence for persons with mental disabilities
must be in the form of a contract to provide appropriate supportive services
for persons with mental disabilities between the Project Owner and an experienced
service provider;
(II) a copy of the section from the market study which clearly establishes
that there is a demand for the percentage of Units being set aside for Persons
with Disabilities; and
(III) a copy of the Project Owner's marketing plan for Persons with Disabilities
which conforms to the guidelines provided in the Application Submission Procedures
Manual.
(IV) The point system for this clause is:
(-a-) at least 7% of the Units are set-aside for persons with physical
or mental disabilities (5 points); or
(-b-) at least 10% of the Units are set-aside for persons with physical
or mental disabilities (8 points).
(ii) Submit evidence verifying that the Project provides Units specifically
accessible to persons with physical, visual or hearing disabilities as required
by §504 of the Rehabilitation Act of 1973. As required by §504,
a one time inspection and corresponding accessibility transition plan will
be required upon completion of construction. Project Owners making this election
must also comply with the Fair Housing Act. The documentation requirements
at the time of Application and the point system for this clause are contained
in subclauses (I)-(IV) of this clause (documentation for all three subclauses,
(I)-(III), must be provided):
(I) a certification from an accredited architect stating the number of
Units which are/will be accessible per the requirements of §504 as governed
by the Uniform Federal Accessibility Standards (UFAS); and
(II) a copy of the section from the market study which clearly establishes
that there is a demand for the percentage of Units being set aside for Persons
with Disabilities; and
(III) a copy of the Project Owner's marketing plan for Persons with Disabilities
which conforms to the guidelines provided in the Application Submission Procedures
Manual.
(IV) The point system for this clause is:
(-a-) At a minimum, 5% of the Units must be usable for persons with mobility
impairments and 2% of the units shall be made accessible for people with hearing
or visual impairments (5 points); or
(-b-) At a minimum 10% of the Units must be usable for persons with mobility
impairments and 2% of the units shall be made accessible for people with hearing
or visual impairments (8 points)."
Board's Recommendation: Department's response accepted.
§50.6(c)(8) Substantial Readiness to Proceed
Public Comment: One commentator suggested that requiring the commitment
for construction financing from a regulated source places mortgage companies
at a disadvantage when competing for the construction as well as the permanent
loans. It was suggested that if a certain level of financial strength could
be demonstrated through copies of the company's financial statement, then
mortgage companies might also be considered as an eligible source for the
points.
Department's Response: While the Department recognizes that most mortgage
companies have the financial wherewithal to make the loans, the Department
does not want to be in the position of determining who is and is not a qualified
lender. It should be noted that the loan commitment at the time of Application
is not binding. The applicant may use another funding source if better terms
can be provided. No changes to §50.6(c)(8) are suggested.
Board's Recommendation: Department's response accepted.
§50.6(e) Past Performance.
Public Comment: One commentator suggested that the reference to the 1997
Application Round should be changed to 1998 as the construction loan must
be closed in the year following the Application Round. The reference to the
"Application Acceptance Period" also should be changed. If a development had
its Carryover signed in December, then the 150 day period in which the construction
loan must be closed would extend beyond the end of the Application Acceptance
Period. It is suggested that this item be changed to read "Application Round."
The Compliance and Monitoring division recommended that the language which
was added to §50.4(f) of the 1999 Draft Rules (allowing Applicants operating
under agreements to correct compliance problems to be considered for tax credits)
should also be added to this section for consistency. They also recommended
that Project Owners who have been responsible for the decline in properties
that have received funds from the Department should not be eligible for tax
credits.
Department's Response: The Department concurs with these observations and
recommends the following revisions to subsection (e) and paragraph (4) of
§50.6(e):
"(e) Past Performance. In reaching the final ranking of an Application,
the Department will take into consideration the Project Owner's history in
the tax credit program and other affordable housing programs. The Department
may disqualify from this Application Round, any Applicant, Project Owner,
developer and its partners, principals, and/or Affiliates who received an
allocation of credits in the 1998 Application Round and who did not close
the construction loan as required under the Carryover Allocation. The Department
may deduct up to ten points from the final score of any Applicant (or an Affiliate
of) which, in the past, has not placed into service developments for which
the Department has made an allocation, or from the score of a Project Owner
that has failed to perform under the obligations of any previous Commitment
Notice. The Department may, at its sole discretion disqualify or impose limitations
or restrictions upon an Applicant, Project Owner, developer, and its partners,
principals and/or Affiliates with respect to the competition for allocations
of tax credits as a consequence of material misstatement or omission, noncompliance
with any Code requirements, or failure to fulfill any of the terms, conditions
or obligations of the program for any Project that has received a commitment
or allocation, or for failure to place in service buildings for which credits
were allocated. The Department will disqualify an Applicant who has been convicted
of fraud, theft, misappropriation of funds, or who has made misrepresentations
to the Department. The Department will also disqualify an Applicant who is
in noncompliance with the LURA or other similar agreement for any Project
monitored by the Department, or who is in noncompliance under this program
or another program administered by this Department or other governmental entities
unless the Applicant is working to remedy the condition of noncompliance under
a plan which was agreed to in writing by the appropriate regulatory entity.
Additionally, Applicants are advised that the Department reserves the right
to reject Applications which include principals who have been:"
"(4) negligent in the physical upkeep and/or operation of the subject Property
or any other property owned by the Applicant which is receiving funds from
the Department, as deemed so by another federal or state authority. All such
rejections of Applications shall be at the sole discretion of the Department."
Board's Recommendation: Department's response accepted.
§50.6(g) Limitations on the Size of Projects
Public Comment: One commentator suggested that the maximum number of units
should be decreased from 250 to 150 to further distribute credits across the
state and to decrease the concentration of units in a particular area.
Department's Response: It is thought that the current unit limitation provides
for economies of scale in the cost to build and operate the developments without
creating an undue concentration of affordable housing within a submarket.
No changes are suggested for §50.6(g).
Board's Recommendation: Department's response accepted.
PUBLIC COMMENT AND DEPARTMENTAL RESPONSE ON ITEMS OUTSIDE OF THE DRAFT
RULES
This section discusses items that are not specifically addressed in the
version of the Rules submitted for public comment.
Public Comment: Rural Rental Housing Association of Texas suggested that
TxRD should provide TDHCA and TxRD set-aside applicants with written documentation
of pending TxRD allocations. Such documentation should also be provided for
worthy projects receiving debt/equity financing from other sources with TxRD
remaining involved as a lien holder.
Department's Response: This item is already required by the Department
and does not need to be made a Threshold Requirement. The Memorandum of Understanding
which is being developed between the Department and TxRD should help streamline
the provision of this documentation.
Board's Recommendation: Department's response accepted.
Public Comment: One commentator suggested that the increase of the Compliance
Fee from $15 to $25 poses a significant financial burden for those developments
located in areas where median incomes and the corresponding rents are low.
Department's Response: The increase in the Compliance Fees has been established
to keep pace with the cost of satisfying the Department's various inspection
and monitoring requirements. The specific amount of the fee is not addressed
in the Rules. The comment will be forwarded to the Compliance and Monitoring
Division for further analysis. After the analysis is complete, the Department
will make its final determination on how the Compliance Fee should be structured.
Board's Recommendation: Department's response accepted.
Public Comment: One commentator stated, "Now that interest rates are at
an all time low, Projects that are located in targeted Texas counties where
the median incomes are less than half of the metropolitan area's are feasible.
However if interest rates over the next few years rise, projects in metro-areas
are still feasible but those in targeted counties are not feasible. I feel
that the state should fund more projects in the lowest median income areas
of the state at this time while interest rates are low. The demand for affordable
housing is great in these areas and my own personal experience with two projects
in the Rio-Grande Valley shows that young families living in colonias are
moving into these LIHTC units thus breaking the cycle of poverty in colonias."
Department's Response: Besides the use of QCTs, DDAs and TTCs, the current
Rules does not contain policies which target the distribution of units to
specific regions. It is the Department's goal "to encourage diversity through
a broad geographical allocation of tax credits." If developers submit feasible
applications for areas that have been underserved in the past and can demonstrate
a significant need for the tax credits, then their chances of receiving an
allocation should be increased. If as the commentator states, the low interest
rates would make development feasible in areas where the use of LIHTCs would
previously not be an option, then developers should submit applications for
developments in those areas.
Board's Recommendation: Department's response accepted.
Public Comment: One commentator suggested that points should be awarded
for developments with zoning already in place as it indicates that the city
already wants multifamily housing in that area.
Department's Response: Points are already awarded for developments which
can demonstrate compliance with the local consolidated plan. The Department
should continue to allow flexibility in site location. If the site can be
properly zoned before the expiration of the Commitment Notice, then it is
an acceptable site. No changes are recommended to the Rules.
Board's Recommendation: Department's response accepted.
Public Comment: One commentator suggested that bonus points should be awarded
to developing in cities which have not received more than 35 tax credit Units.
Department's Response: While the specific 35 unit measure is not utilized,
allocation to areas which have previously not received an award of credits
or have been under represented in the past, is considered in the Department's
review process. It is not recommended that a specific requirement should become
a point based item at this time. No changes are recommended to the Rules.
Board's Recommendation: Department's response accepted.
Public Comment: One commentator suggested that due to the cost of preparing
the applications it was discouraging not to have a project underwritten. It
was suggested that a minimum number of points should be established as an
underwriting threshold. Developments that scored above the threshold would
have to be underwritten. If the volume of work established by this procedure
was too great, then the underwriting could be outsourced. The current process
was considered arbitrary in that "there should not be a "gate keeper" who
is permitted to arbitrarily decide which applications are underwritten and
considered for allocation."
Department's Response: As clearly stated in the Rules, "(T)he criteria
utilized to realize this goal (allocation of credits) shall include, but are
not limited to, evaluation of geographic location within the state of developments
applying for tax credits, concentration of tax credit developments and other
affordable housing developments within specific markets and submarkets, site
conditions of the developments, and a development's impact on and conformance
with the goals and objectives as stated in the Rules and the Rules." Points
are not the sole determinant of credit allocation. The Program's decision
to recommend a proposed project is and should continue to be based on a review
of all of these factors. There are many cases where a development's design,
site, or proximity to another LIHTC development will preclude it from being
awarded an allocation of credits whether or not it underwrites well. To review
these projects for underwriting risks would not be an efficient use of staff
time and public funds. The reason behind the Department's decision on whether
or not to underwrite an application is clearly documented in writing.
Board's Recommendation: Department's response accepted.
Public Comment: One commentator suggested that, "It is patently unfair
to applicants to have their applications reviewed subjectively. While it is
incumbent upon TDHCA to insure that the credits are not geographically concentrated
on a statewide basis, that is the only subjectivity that should be used when
allocating credits. The point system should be expanded to the extent that
points are awarded for criteria the Rules now permit the TDHCA to decide subjectively.
In other words, points should be awarded for project feasibility, lack of
concentration of low income housing within a specific market, geographic dispersion,
site conditions, and any other criteria the TDHCA deems important."
Department's Response: The primary function of the Selection Criteria is
to encourage a type of housing (low density family or elderly) which is located
in rural and metropolitan areas. This housing should also meet local goals
and provide amenities and services for various tenant groups (adults, children,
persons with disabilities, lower income levels). Although it does serve as
a method of assessing the relative qualifications of an application, the Selection
Criteria do not solely determine which developments should receive an allocation.
To add items such as site condition and geographical distribution would only
add to the level of subjectivity by which an applicant's score would be generated.
Board's Recommendation: Department's response accepted.
Public Comment: One commentator suggested that the use of the term "net
rentable" varies from program to program. Can the final Rules provide a definition
so the applicant will know how to calculate it. Also, as there are two types
of area, net rentable and gross, could the Department please indicate which
type is requested when "area" is stated in the Rules and Application?
Department's Response: The two types of area are defined in the Application
Submission Procedures Manual. The definition is rather detailed and technical
so the best place to reference the term would not be in the Rules. However,
the text "as referenced in the Application Submission Procedures Manual" will
be added where appropriate in the Rules.
Board's Recommendation: Department's response accepted.
Public Comment: One commentator suggested that land cost should be removed
from maximum cost per square foot calculation, as it is not part of basis
nor being funded with the credit.
Department's Response: This is not an item which is discussed in the Rules.
The Department will consider this comment in its review of the underwriting
criteria.
Board's Recommendation: Department's response accepted.
Public Comment: One commentator suggested that the underwriting criteria
which relate to development costs should be adjusted annually using the Consumer
Price Index.
Department's Response: This is not an item which is discussed in the Rules.
The Department will consider this comment in its review of the underwriting
criteria.
Board's Recommendation: Department's response accepted.
Public Comment: A number of commentators suggested that multi-story construction
for the elderly is penalized through the enforcement of the 105% limitation
on common space. A typical comment was: "Even the most efficient multistory
elevator building requires approximately 5% to accommodate hallways, elevators,
maintenance area and laundry. This does not begin to address any spaces for
social and supportive services. The industry standards are 110% for independent
living elderly and 115 to 130% for assisted living. I would suggest that the
state adopt similar standards, or alternatively, limit the total square footage
to a reasonable standard that allows the sponsor to make the choice of whether
the space goes into the unit or into the supportive service areas."
Department's Response: This is not an item which is discussed in the Rules.
The Department will consider this comment in its review of the underwriting
criteria.
Board's Recommendation: Department's response accepted.
CLARIFICATION AND OTHER NON POLICY RELATED DEPARTMENTAL COMMENTS
The following changes were made for clarification purposes only and do
not represent changes to the policy or requirements expressed in the Rules
submitted for public comment.
§50.2 Definitions
(8) Application Acceptance Period
Department Comment: The Multifamily Bond staff suggested that the "Application
Acceptance Period" definition be modified to include the Tax Exempt Bond Project
application requirements as they differ from Applications submitted for an
allocation from the State Housing Credit Ceiling. Also because the age limitation
for exhibits to Threshold and Selection Criteria are tied to the first day
of the "Application Acceptance Period", the use of this term does not make
sense when the reference is applied to Tax Exempt Bond Projects. The Department
concurs with this observation and proposes the following revision to the definition
of Application Acceptance Period in §50.2(8) of the Rules. (The text
for the Tax Exempt Bond application submission requirements were previously
located in §50.6(h) and in the "Application Round" definition in §50.2(8):
"(8) Application Acceptance Period--That period of time as published in
the
Texas Register
during which Applications
for a Housing Credit Allocation from the State Housing Credit Ceiling may
be submitted to the Department. An Application for a Tax Exempt Bond Project
may be filed with the Department at any time during the year after the bond
issuer has received a certificate of reservation from the Texas Bond Review
Board. Tax Exempt Bond Project Applications must be received by the Department
at least 30 days prior to the Ad Hoc Tax Credit Committee meeting at which
the decision to issue a Determination Notice may be approved."
Board's Recommendation: Department's response accepted.
(9) Application Round
Department Comment: The Multifamily Bond staff suggested that the requirements
for submission of applications for Tax Exempt Bond Projects be moved to the
"Application Acceptance Period" definition because the reference to the "available
credits" that applies to the State Housing Credit Ceiling does not apply to
Tax Exempt Bond Projects. The Department concurs with this observation and
proposes the following revision to the definitions under §50.2(9) of
the Rules:
"(9) Application Round--The period beginning with the start of the Application
Acceptance Period and lasting until such time as all available credits from
the State Housing Credit Ceiling (as stipulated by the Department) are allocated,
provided that the Application Round not extend beyond the last day of the
calendar year."
Board's Recommendation: Department's response accepted.
(27) Determination Notice
Department Comment: The Multifamily Bond staff suggested that a definition
be added for "Determination Notice" as this document is issued for Tax Exempt
Bond Projects instead of a Commitment Notice. The Department concurs with
this observation and proposes the following addition to the definitions under
§50.2(27) of the Rules:
"(27) Determination Notice--A notice issued by the Department to the Owner
of a Tax Exempt Bond Project which states that the Project may be eligible
to claim low income housing tax credits without receiving an allocation of
credits from the State Housing Credit Ceiling, sets forth conditions which
must be met by the individual project before the Department will issue the
IRS Form(s) 8609 to the project owner, and specifies the amount of tax credits
necessary for the financial feasibility of the project and its viability as
a qualified low income housing project throughout the credit period."
Board's Recommendation: Department's response accepted.
(34) General Contractor
Department Comment: The typical reference in the Rules is to the General
Contractor rather than the Contractor. It is proposed that the "Contractor"
definition in §50.2(34) of the Rules be changed to "General Contractor".
(34) General Contractor--One who contracts for the construction, or rehabilitation
of an entire building or Project, rather than a portion of the work. The General
Contractor hires subcontractors, such as plumbing contractors, electrical
contractors, etc., coordinates all work, and is responsible for payment to
the said subcontractors. This party may also be referred to as the "Contractor".
Board's Recommendation: Department's response accepted.
(72) Tax Exempt Bond Projects
Department Comment: The Multifamily Bond staff suggested that a definition
for "Tax Exempt Bond Projects" be added to the Rules because the term will
be used throughout the document. The Department concurs with this observation
and proposes the following addition to the definitions in §50.2(72) of
the Rules which conforms to the text previously provided in §50.6(h)(1):
"(72) Tax Exempt Bond Project--A Project which receives at least 50% of
its financing from the proceeds of Tax Exempt bonds which are subject to the
state volume cap as described in the Code, §42(h)(4)(B)."
Board's Recommendation: Department's response accepted.
Department Comment: Throughout the Rules, the term "housing credit allocation"
should be updated to appear in caps since the term is defined in §50.2.
Board's Recommendation: Department's response accepted.
§50.3(c)
Department Comment: It is thought that clarification should be made to
the fact that Tax Exempt Bond Projects do not originate from the State Housing
Credit Ceiling. The following revision to §50.3(c) is proposed:
"(c) The aggregate amount of Housing Credit Allocations made by the Department
during any calendar year shall not exceed the State Housing Credit Ceiling
for such year as provided in the Code, §42. Housing Credit Allocations
made to Tax Exempt Bond Developments are not included in the State Housing
Credit Ceiling."
Board's Recommendation: Department's response accepted.
§50.6(a)(1)(C)
Department Comment: The Credit Underwriting staff suggested that this item
be modified to require photos which are descriptive of the required rehabilitation
work. The Department concurs with this observation and proposes the following
revision to §50.6(a)(1)(C):
"(C) Original photographs of the development site and the surrounding area.
Rehabilitation Projects must also submit original photographs of the existing
signage, buildings, amenities, and interior photographs. The photos for Rehabilitation
Projects should clearly document the typical areas and building components
which exemplify the need for rehabilitation."
Board's Recommendation: Department's response accepted.
§50.6(a)(1)(D)
Department Comment: With the revision to the Rules associated with comment
on §50.6(1)(A), which now requires a statement from the Project Owner
rather than the design architect, the reference in §50.6(a)(1)(D) should
also be modified to read:
"(D) A letter from the Project Owner stating that the Project will adhere
to the Texas Property Code relating to security devices and other applicable
requirements for residential tenancies."
Board's Recommendation: Department's response accepted.
§50.6(a)(3)
Department Comment: To clarify the documentation requirements, the following
changes are suggested to paragraph (3) and paragraph (3)(D)(ii) of §50.6(a)(3)
.
"(3) EXHIBIT 103. There shall exist evidence of readiness to proceed in
the form of at least one of the items under each of subparagraphs (A)-(E)
of this paragraph:"
"(ii) bona fide commitment or term sheet issued by a lending institution
or mortgage company that is actively and regularly engaged in the business
of lending money which is addressed to the ownership entity, or entities which
comprise the Applicant and which has been executed and accepted by both parties
(the term of the loan must be for a minimum of 15 years with at least a 25
year amortization); or"
Board's Recommendation: Department's response accepted.
§50.6(a)(5)
Department Comment: Program staff suggested that the Authorization to Release
Credit Information (Exhibit 106 in the draft Rules) should be moved to Exhibit
105 which contains the Applicant's detailed financial information. It is also
suggested that these items be filed separately from the bound documentation,
so that the confidential financial information can be easily screened prior
to releasing the information under the Open Records Act. The following revision
to §50.6(a)(5) is proposed:
"(5) EXHIBIT 105. Label as Exhibit 105, all of the following documentation
(As instructed in the Application Submission Procedures Manual, this documentation
should be filed separately from the volume containing the Threshold Criteria.):
(A) Using Exhibit 105(A) in the Application Submission Manual, provide
a current financial statement for each Applicant (as defined in the Rules).
Applicant's statement must not be older than 12 months from the first day
of the Application Acceptance Period. If submitting partnership and corporate
financials in addition to the individual statements, the certified financial
statements should not be older than 90 days; and
(B) the Authorization to Release Credit Information, Exhibit 105(B), (which
is provided as part of the Application Submission Procedures Manual), must
be completed by all Persons in Control of the Applicant."
Board's Recommendation: Department's response accepted.
§50.6(a)(6)
Department Comment: In the 1999 draft Rules, a reference was made in §50.4(f)(4)
requiring that if a compliance problem exists, it should be clearly identified
in Exhibit 106, and a copy of the executed remediation plan should be provided.
Program staff is suggesting that the documentation requirements should be
clearly stated in Exhibit 106. The revised text is based on that provided
in §50.4(f)(4). As discussed above, the Authorization to Release Credit
Information should be moved to Exhibit 105.
"(6) EXHIBIT 106. Label as Exhibit 106, all of the following documentation:
(A) the original copy of the completed and executed Previous Participation
and Background Certification Form, Exhibit 106(A), which is provided as part
of the Application Submission Procedures Manual. This form must be completed
with respect to the ownership entity, general partner, general contractor
and their principals; and
(B) label as Exhibit 106(B), a chart which clearly illustrates the complete
organizational structure of the Project Owner. This chart should provide the
names and ownership percentage of all entities and sub-entities with an ownership
interest in the development. The percentage ownership of all Persons in Control
of these entities and sub-entities must also be clearly defined; and
(C) if an Applicant is active in the ownership or management of any other
low income housing tax credit Property (or any Property pursuant to an affordable
housing program administered by a local, state or federal entity) and any
such property is or was materially out of compliance with the rules or regulations
of the appropriate regulatory authority, such property should be clearly identified
in Exhibit 106(A), and a copy of the executed remediation plan must be provided
as Exhibit 106(C)."
Board's Recommendation: Department's response accepted.
§50.6(f) Credit Amount.
Department Comment: The Multifamily Bond staff noted that §50.6(h)
currently states that tax exempt bond developments are not restricted by §50.6(f).
However, the first part of that section references "financial feasibility
and viability" which should still apply to bond projects. The Department concurs
with this observation and suggests the following revision to §50.6(f)(1)
of the Rules:
(1) "The Department shall issue tax credits only in the amount needed for
the financial feasibility and viability of a Project throughout the Compliance
Period. The issuance of tax credits or the determination of any allocation
amount in no way represents or purports to warrant the feasibility or viability
of the Project by the Department. The Department will limit the allocation
of tax credits to no more than $1.2 million per Project or $2.4 million per
Applicant. For these purposes this limitation will apply to all Affiliates
of any Applicant, developer, Project Owner, general partner, sponsor or their
Affiliates or related entities unless otherwise provided by the Department.
Tax Exempt Bond Project Applications are not subject to the per Project and
per Applicant credit limitations as described in this paragraph."
Board's Recommendation: Department's response accepted.
§50.6(h)
Department's Public Comment: With changes made to other sections of the
Rules relating to Tax Exempt Bond Projects, this section should be revised
as shown below. Upon the advice of the Department's outside tax credit counsel,
paragraph (6) of §50.6(h), relating to underwriting the project's financial
feasibility, should be revised as follows:
"(1) Tax Exempt Bond Project Applications are also subject to evaluation
under the QAP and Rules.
(2) Submission Requirements. Tax Exempt Bond Project Applications are subject
to the requirements and underwriting review criteria described in the Application
Submission Procedures Manual. Such projects must meet all Threshold Criteria
requirements stipulated in the most recently approved Rules. Tax Exempt Bond
Financed Projects are not subject to the Selection Criteria and related items
and are not required to submit such documentation. While Tax Exempt Bond Developments
are not subject to the Selection Criteria, such Projects must demonstrate
consistency with the bond issuer's local Consolidated Plan as more fully described
in §50.6(c)(3)(L), Exhibit 207."
(3) Tax Exempt Bond Project Applications are subject to the size restrictions
specified in §50.6(g).
(4) The issuer (if other than the Department) may, at its discretion, enter
into a contractual agreement to allow the Department to underwrite the Project
for financial feasibility. If the Department is not the issuer and does not
have such an agreement, it will require evidence that the issuer has underwritten
the Project for financial feasibility in accordance with the Department's
guidelines contained in the Reference Manual. The Department will review the
issuer's feasibility determination and may make such changes in the amount
of credits to be taken as are appropriate under those guidelines. In the absence
of a contractual agreement between the issuer and the Department or evidence
that the issuer has underwritten the Project, the Department will underwrite
the Project and may make such changes in the amount of credits to be taken
as are appropriate under the Department's guidelines.
(5) Tax Exempt Bond Project Applications are subject to review and approval
by the Ad Hoc Tax Credit Committee of the concentration of low income Projects
within specific markets or submarkets, geographic dispersion of multifamily
housing in any particular market or submarket and site conditions.
(6) If the Department determines that all requirements have been met, the
Ad Hoc Tax Credit Committee, without further action, shall authorize the Department
to issue an appropriate notice to the Sponsor that the Project satisfies the
requirements of the QAP and Rules in accordance with §42(m)(1)(D)."
Board's Recommendation: Department's response accepted.
"Determination Notice" Clarifications for Tax Exempt Bond Projects in §§50.4(j),
§50.6(i), 50.8, 50.11, 50.13
Department Comment: The Multifamily Bond staff suggested that the term
"Determination Notice" be added in a variety of places in the Rules as Tax
Exempt Bond Projects do not receive "Commitment Notices." The following changes
are recommended to §§50.4(j), §50.6(i), 50.8, 50.11, and 50.13:
§50.4(j)
"(j) A Project Owner must indicate acceptance of the Department's offer
of a commitment of tax credit authority or a determination of eligibility
to claim tax credits by executing the Commitment Notice or Determination Notice
and paying the commitment fee specified in §50.11 of this title (relating
to Program Fees) prior to the expiration date set forth in the notice. Together
with or following the Project Owner's acceptance of the commitment or determination,
the owner may request the Department to execute an Agreement and Election
Statement, in the form prescribed by the Department, for the purpose of fixing
the applicable credit percentage for the Project as that for the month in
which the commitment was accepted (or the month the bonds were issued for
Tax Exempt Bond Projects), as provided in the Code, §42(b)(2). Upon receipt
of a duly dated and executed Agreement and Election Statement and the accepted
Commitment Notice or Determination Notice, if the Project Owner is in compliance
with the Rules of this chapter, the Department shall execute the Agreement
and Election Statement and return a copy to the Project Owner. For non Tax
Exempt Bond Projects, the Agreement and Election Statement shall be executed
by the Project Owner no later than five days after the end of the month in
which the offer of commitment was accepted. Current Treasury Regulations,
§1.42-8(a)(1)(v), suggest that in order to permit a Project Owner to
make an effective election to fix the applicable credit percentage for a Project,
the Commitment Notice must be executed by the Department and the Project Owner
in the same month. The Department will cooperate with a Project Owner, as
needed, to assure that the Commitment Notice can be so executed."
§50.6(i)
"(i) Adherence to Obligations. All representations, undertakings and commitments
made by an Applicant in the applications process for a Project, whether with
respect to Threshold Criteria, Selection Criteria or otherwise, shall be deemed
to be a condition to any Commitment Notice, Determination Notice, or Carryover
Allocation for such Project, the violation of which shall be cause for cancellation
of such Commitment Notice, Determination Notice, or Carryover Allocation by
the Department, and if concerning the ongoing features or operation of the
Project, shall be reflected in the LURA. All such representations are enforceable
by the Department, including enforcement by administrative penalties for failure
to perform as stated in the representation and enforcement by inclusion in
deed restrictions to which the Department is a party."
§50.8. Housing Credit Allocations and Determinations of Eligibility
to Claim Tax Credits
"(a) The Housing Credit Allocation Amount shall not exceed the dollar amount
the Department determines is necessary for the financial feasibility and the
long term viability of the Project throughout the Compliance Period. Such
determination shall be made by the Department at the time of issuance of the
Commitment Notice or Determination Notice; at the time the Department makes
a housing credit allocation; and/or the date the building is placed in service.
Any housing credit allocation amount specified in a Commitment Notice, Determination
Notice, or Carryover Allocation Document is subject to change by the Department
dependent upon such determination....
(b) When the Project Owner is in full compliance with the Rules and the
Rules in this chapter, the Commitment Notice, the Carryover Allocation Procedures
Manual and all fees as specified within §50.11 of this title (relating
to Program Fees) have been received by the Department, the Department, if
requested, shall execute a Carryover Allocation Document which has been properly
completed, executed and notarized by the Project Owner. The Department shall
return one executed copy to the Project Owner. Requirements for Carryover
Allocations apply only to projects which receive an allocation from the State
Housing Credit Ceiling.
(e) The Department shall not allocate additional credits to a Project Owner
who is unable to provide evidence, satisfactory to the Department, of progress
towards placements in service for a Project(s) that is in carryover or that
has received a Determination Notice. An allocation will be made in the name
of the Applicant identified in the related Commitment Notice or Determination
Notice. If an allocation is made in the name of the party expected to be the
general partner in an eventual owner partnership, the Department may, upon
request, approve a transfer of allocation to such owner partnership in which
such party is the sole general partner. Any other transfer of an allocation
will be subject to review and approval by the Department. The approval of
any such transfer does not constitute a representation to the effect that
such transfer is permissible under the Code or without adverse consequences
thereunder, and the Department may condition its approval upon receipt and
approval of complete documentation regarding the new owner including all the
criteria for scoring, evaluation and underwriting, among others, which were
applicable to the original Applicant.
(f) The Department shall make a housing credit allocation, either in the
form of IRS Form 8609, with respect to current year allocations for buildings
placed in service, or in the Carryover Allocation Document, for buildings
not yet placed in service, to any Project Owner who holds a Commitment Notice
which has not expired, and for which all fees as specified in §50.11
of this title (relating to Program Fees), have been received by the Department.
For Tax Exempt Bond Projects, the Housing Credit Allocation shall be made
in the form of a Determination Notice. For an IRS Form 8609 to be issued with
respect to a building in a Project with a Housing Credit Allocation, satisfactory
evidence must be received by the Department that such building is completed
and has been placed in service in accordance with the provisions of the Department's
Cost Certification Procedures Manual..."
§50.11 Program Fees
"(b)...in the event that a Commitment Notice or Determination Notice is
issued by the Department to the Project Owner."
"(c) Each Project Owner that receives a Commitment Notice or Determination
Notice shall submit to the Department..."
§50.13. Withdrawals, Cancellations, Amendments.
"(a) A Project Owner may withdraw an Application prior to receiving a Commitment
Notice, Determination Notice, Carryover Allocation Document or Housing Credit
Allocation, or may cancel a Commitment Notice or Determination Notice by submitting
to the Department a notice, as applicable, of withdrawal or cancellation.
"(b) The Department may consider an amendment to a Commitment Notice, Determination
Notice or Carryover Allocation, or other requirement with respect to a Project
if the revisions:"
"(c) The Department may cancel a Commitment Notice, Determination Notice
or Carryover Allocation prior to the issuance of IRS Form 8609 with respect
to a Project if:
(1) the Project Owner or any member of the Development Team, or the Project,
as applicable, fails to meet any of the conditions of such Commitment Notice,
Determination Notice or Carryover Allocation or any of the undertakings and
commitments made by the Project Owner in the application process for the Project."
Board's Recommendation: Department's response accepted.
The proposed new sections are adopted pursuant the authority
of the Texas Government Code, Chapter 2306; Chapter 2001 and 2002, Texas Government
Code, V.T.C.A., and Section 42 of Internal Revenue Code of 1986, as amended,
(26 U.S.C.A) which provides the Department with the authority to adopt rules
governing the administration of the Department and its programs; and Executive
Order AWR-91-4 (June 17, 1991), which provides this Department with the authority
to make housing credit allocations in the State of Texas. Section 42 of Internal
Revenue Code of 1986, as amended, (26 U.S.C.A), provides for credits against
federal income taxes for owners of qualified low income rental housing projects.
That section provides for the allocation of available tax credit amount by
state housing credit agencies. As required by the Internal Revenue Code, Section
42 (m)(1), the Department developed a Qualified Allocation Plan which was
adopted by the governing board of the Department and submitted to the Governor
in accordance with Texas Government Code Section 2306.671(b) and is contingent
upon the Governor's approval in accordance with Texas Government Code Section
2306.671(c).
§50.1.Scope.
The Rules in this chapter apply to the allocation by the Texas Department
of Housing and Community Affairs (the Department) of certain low income housing
tax credits authorized by applicable federal income tax laws. The Internal
Revenue Code of 1986, §42, as amended, provides for credits against federal
income taxes for owners of qualified low income rental housing Projects. That
section provides for the allocation of the available tax credit amount by
state housing credit agencies. Pursuant to Executive Order AWR-91-4 (June
17, 1991), the Department was authorized to make housing credit allocations
for the State of Texas. As required by the Internal Revenue Code, §42(m)(1),
the Department developed a Qualified Allocation Plan (QAP) which is set forth
in §50.3-§50.8 of this title (relating to State Housing Credit Ceiling,
Applications; Environmental Assessments; Market Study; Commitments; Extensions;
Carryover Allocations; Agreements and Elections; Extended Commitments, Set-Asides,
Commitments and Preferences, Threshold Criteria; Evaluation Factors; Selection
Criteria; Final Ranking; Credit Amount; Tax Exempt Bond Financed Projects;
Compliance Monitoring, Housing Credit Allocations). Sections in this chapter
establish procedures for applying for and obtaining an allocation of the low
income housing tax credit, along with insuring that the proper Threshold Criteria,
Selection Criteria, priorities and preferences are followed in making such
allocations. It shall be the goal of this Department and the Board, through
these provisions, to encourage diversity through broad geographic allocation
of tax credits within the state and to promote maximum utilization of the
available tax credit amount. The criteria utilized to realize this goal shall
include, but are not limited to, evaluation of geographic location within
the state of developments applying for tax credits, concentration of tax credit
developments and other affordable housing developments within specific markets
and submarkets, site conditions of the developments, and a development's impact
on and conformance with the goals and objectives as stated in the QAP and
the Rules. The foregoing shall be implemented to be consistent with ensuring
that the tax credits are allocated to owners of Projects that will serve the
Department's public policy objectives and federal requirements to provide
housing to persons and families of very low and low income. It is the policy
of the Department to encourage the use of Historically Underutilized Businesses
(HUBs) in all of the Department's programs. In response to this policy, the
Department has established a minimum goal of 30% participation of HUBs in
the low income housing tax credit program. Project Owners are encouraged to
achieve these minimum goals. To assure maximum utilization and optimum geographic
distribution of tax credits in rural areas, although not mandated to do so,
the Department is developing Memorandums of Understanding (MOU) with the TxRD-USDA.
Such MOUs will seek to achieve increased sharing of information, reduction
of processing procedures, and fulfillment of project compliance requirements
involving existing, rehabilitated, and new construction housing projects financed
by TxRD-USDA.
§50.2.Definitions.
The following words and terms, when used in this chapter, shall have
the following meanings, unless the context clearly indicates otherwise.
(1)
Ad Hoc Tax Credit Committee--That Committee comprised of
members of the Board of the Department charged with the direct oversight of
the Low Income Housing Tax Credit Program, also referred to as the "Committee."
(2)
Adaptable Dwelling Unit--As described in the Fair
Housing Act, a unit which meets the minimal accessibility requirements specified
in the Act (i.e. usable doors, an accessible route, accessible environmental
controls, and usable kitchens and bathrooms) and the "adaptable" structural
feature or reinforced bathroom walls for later installation of grab bars."
(3)
Affiliate--An individual, corporation, partnership,
joint venture, limited liability company, trust, estate, association, cooperative
or other organization or entity of any nature whatsoever that directly, or
indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with any other Person, and specifically shall include
parents or subsidiaries.
(4)
Agreement and Election Statement--A document in which
the Project Owner elects, irrevocably, to fix the applicable credit percentage
with respect to a building or buildings, as that in effect for the month in
which the Department and the Project Owner enter into a binding agreement
as to the housing credit dollar amount to be allocated to such building or
buildings, which Agreement and Election Statement shall be executed by the
Project Owner no later than five days after the end of the month of execution
of the agreement as to housing credit dollar amount.
(5)
Applicable Percentage--The percentage used to determine
the amount of the low income housing tax credit, as defined more fully in
the Code, §42(b).
(6)
Applicant--Any Person and any Affiliate of such Person,
corporation, a partnership, joint venture, association, or other that submits
an Application to the Department requesting a tax credit allocation pursuant
to the Rules and the QAP. The Applicant is also the Project Owner unless the
Applicant transfers or assigns its interest in the Project (which assignment
can only occur with the consent of the Department). Each Project Owner, and
each of the Project Owner's successors in interest, shall be obligated to
carry out the commitments made to the Department by the Applicant.
(7)
Application--An Application in the form prescribed
by the Department, including any required exhibits or other supporting materials,
filed with the Department by a Project Owner requesting a low income housing
tax credit allocation.
(8)
Application Acceptance Period--That period of time
as published in the Texas Register during which Applications for a Housing
Credit Allocation from the State Housing Credit Ceiling may be submitted to
the Department. An Application for a Tax Exempt Bond Project may be filed
with the Department at any time during the year after the bond issuer has
received a certificate of reservation from the Texas Bond Review Board. Tax
Exempt Bond Project Applications must be received by the Department at least
30 days prior to the Ad Hoc Tax Credit Committee meeting at which the decision
to issue a Determination Notice may be approved.
(9)
Application Round--The period beginning with the start
of the Application Acceptance Period and lasting until such time as all available
credits from the State Housing Credit Ceiling (as stipulated by the Department)
are allocated, provided that the Application Round not extend beyond the last
day of the calendar year.
(10)
Application Submission Procedures Manual--That certain
manual produced by the Department which sets forth procedures, forms, and
guidelines for the filing of Applications for low income housing tax credits,
which manual may be amended from time to time by the Department.
(11)
Appraiser--A real estate professional certified or
licensed by the Texas Appraiser Licensing and Certification Board who has
satisfied continuing education requirements. The appraiser must have, at a
minimum, five years appraisal experience, preferably in the geographic area
of the property to be appraised. It is desirable, but not required, that the
appraiser have a professional designation or be an active member of a professional
accredited appraisal institution.
(12)
Area Median Gross Income (AMGI)--The tenant income
requirements pursuant to the qualified low income housing project requirements
of the Code, §42(g).
(13)
Applicable Fraction--The fraction used to determine
the Qualified Basis of the qualified low income building, which is the smaller
of the Unit fraction or the floor space fraction, as defined more fully in
the Code, §42(c)(1).
(14)
Beneficial Owner--A "Beneficial Owner" means:
(A)
Any Person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares;
(i)
voting power which includes the power to vote, or to direct
the voting as any other Person or the securities thereof; and/or
(ii)
investment power which includes the power to dispose,
or direct the disposition of, any Person or the securities thereof.
(B)
Any Person who, directly or indirectly, creates or uses
a trust, proxy, power of attorney, pooling arrangement or any other contract,
arrangement or device with the purpose or effect of divesting such Person
of Beneficial Ownership (as defined herein) of a security or preventing the
vesting of such Beneficial Ownership as part of a plan or scheme to evade
inclusion within the definitional terms contained herein; and
(C)
Any Person who has the right to acquire Beneficial Ownership
during the Compliance Period, including but not limited to any right to acquire
any such Beneficial Ownership;
(i)
through the exercise of any option warrant or right,
(ii)
through the conversion of a security,
(iii)
pursuant to the power to revoke a trust, discretionary
account or similar arrangement, or
(iv)
pursuant to the automatic termination of a trust, discretionary
account, or similar arrangement.
(D)
Provided, however, that any Person who acquires a security
or power specified in subparagraph (C)(i), (ii) or (iii) of this paragraph,
with the purpose or effect or changing or influencing the control of any other
Person, or in connection with or as a participant in any transaction having
such purpose or effect, immediately upon such acquisition is deemed to be
the Beneficial Owner of the securities which may be acquired through the exercise
or conversion of such security or power. Any securities not outstanding which
are subject to options, warrants, rights or conversion privileges as deemed
to be outstanding for the purpose of computing the percentage of outstanding
securities of the class owned by such Person but are not deemed to be outstanding
for the purpose of computing the percentage of the class by any other Person.
(15)
Board--The governing Board of Directors of the
Department and may also denote as used in this chapter, the Committee.
(16)
Carryover Allocation--An allocation of current year
tax credit authority by the Department pursuant to the provisions of the Code,
§42(h)(1)(E) and Treasury Regulations, §1.42-6.
(17)
Carryover Allocation Document--A document issued
by the Department to a Project Owner pursuant to §50.4(k) of this title
(relating to Applications; Environmental Assessments; Market Study; Reservations;
Notification; Commitments; Extensions; Carryover Allocations; Agreements and
Elections; Extended Commitments).
(18)
Carryover Allocation Procedures Manual--That certain
manual produced by the Department which sets forth procedures, forms, and
guidelines for the filing of request for Carryover Allocations for low income
housing tax credits, which said manual may be amended from time to time by
the Department.
(19)
Code--The Internal Revenue Code of 1986, as amended
from time to time, together with any applicable regulations, rules, rulings,
revenue procedures, information statements or other official pronouncements
issued thereunder by the United States Department of the Treasury or the Internal
Revenue Service relating to the Low Income Housing Tax Credit Program authorized
by the Code, §42, and as may be amended from time to time.
(20)
Commitment Notice--A notice issued by the Department
to a Project Owner pursuant to §50.4(h) of this title (relating to Applications;
Environmental Assessments; Market Study; Commitments; Extensions; Carryover
Allocations; Agreements and Elections; Extended Commitments) and also referred
to as the "commitment".
(21)
Compliance Period--With respect to a building, the
period of 15 taxable years, beginning with the first taxable year of the Credit
Period pursuant to the Code, §42(i)(1).
(22)
Control--(including the terms "controlling," "controlled
by, and/or "under common control with") the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies
of any Person, whether through the ownership of voting securities, by contract
or otherwise, including specifically ownership of more than 50% of the general
partner interest in a limited partnership, or designation as a managing general
partner or the managing member of a limited liability company.
(23)
Cost Certification Procedures Manual--That certain
manual produced by the Department which sets forth procedures, forms, and
guidelines for the filing of requests for IRS Form 8609s for Projects placed
in service under the Low Income Housing Tax Credit Program, which said manual
may be amended from time to time by the Department.
(24)
Credit Period--With respect to a building within
a Project, the period of ten taxable years beginning with the taxable year
the building is placed in service or, at the election of the Project Owner,
the succeeding taxable year, as more fully defined in the Code, §42(f)(1).
(25)
Declaration of Land Use Restrictive Covenants (LURA)--An
agreement between the Department, the Project Owner and all successors in
interest in the Project Owner which encumbers the Project with respect to
provisions stipulated in the Code, §42, §§50.1-50.16 of this
title (relating to Low Income Housing Tax Credit Qualified Allocation Plan
and Rules), and the Texas Government Code, Chapter 2306 as may be amended
from time to time. The LURA includes an Extended Low Income Housing Commitment
Agreement.
(26)
Department--The Texas Department of Housing and Community
Affairs, a public and official governmental Department of the State of Texas
created and organized under the Texas Department of Housing and Community
Affairs Act, Texas Government Code, Chapter 2306 and Texas Civil Statutes,
Article 4413(501) as amended by the 73rd Legislature, Chapter 725 and 141.
(27)
Determination Notice--A notice issued by the Department
to the Owner of a Tax Exempt Bond Project which states that the Project may
be eligible to claim low income housing tax credits without receiving an allocation
of credits from the State Housing Credit Ceiling, sets forth conditions which
must be met by the individual project before the Department will issue the
IRS Form(s) 8609 to the project owner, and specifies the amount of tax credits
necessary for the financial feasibility of the project and its viability as
a qualified low income housing project throughout the credit period.
(28)
Development Team--All Persons or Affiliates thereof
which play(s) a material role in the development, construction, rehabilitation,
management and/or continuing operation of the subject Property, which will
include any consultant(s) hired by the Applicant for the purpose of the filing
of an Application for low income housing tax credits with the Department.
(29)
Difficult Development Area--Any area which is so
designated by the Secretary of the United States Department of Housing and
Urban Development (HUD) as an area which has high construction, land, and
utility costs relative to area median family income.
(30)
Eligible Basis--With respect to a building within
a Project, the building's Eligible Basis as defined in the Code, §42(d).
(31)
Equity Gap--The difference between the total sources
of financing for the Project and the total Project costs that is to be filled
with the proceeds of the credit.
(32)
Extended Low Income Housing Commitment Agreement--An
agreement between the Department, the project owner and all successors in
interest to the project owner concerning the extended low income housing use
of buildings within the project throughout the extended use period as provided
in the Code, §42(h)(6).
(33)
Financial Statement--Document(s) which provides information
about the Applicant's economic resources, claims against those resources,
and the interests of owners at specific dates as more fully described in subparagraphs
(A)-(D) of this definition.
(A)
Statement of Financial Position/Balance Sheet--a listing,
as of a particular date, of all assets and claims against those assets (liabilities).
The difference is equity.
(B)
Income Statement--a listing that relates to a specific
period of time, presenting an entity's results of operations.
(C)
Statement of Retained Earnings--reports all changes in
retained earnings during the accounting period, reconciles beginning and ending
retained earning balances and provides a connecting link between the income
statement and the balance sheet.
(D)
Cash Flow Statement--a report listing the changes in an
entity's cash and cash equivalents, classified by principal sources and uses,
for a given period.
(34)
General Contractor--One who contracts for the
construction, or rehabilitation of an entire building or Project, rather than
a portion of the work. The General Contractor hires subcontractors, such as
plumbing contractors, electrical contractors, etc., coordinates all work,
and is responsible for payment to the said subcontractors. This party may
also be referred to as the "contractor".
(35)
General Projects--Any project which is not a Qualified
Nonprofit Project or is not under consideration in the Rural/Prison set-aside
as such terms are defined by the Department.
(36)
General Pool--The pool of credits that have been
returned or recovered from prior years' allocations or current year's Commitment
Notices after the Board has made its initial allocation of the current year's
available credit ceiling. General pool credits will be used to fund Applications
on the waiting list without regard to set-aside.
(37)
Governmental Entity--Includes federal or state agencies,
departments, boards, bureaus, commissions, authorities, and political subdivisions,
special districts and other similar entities.
(38)
Historically Underutilized Businesses--Pursuant to
Texas Civil Statutes, Article 601b, §§1.02, 1.03, and 1.04, entitled
State Purchasing and General Services Act which is codified at Chapter 2161,
Texas Government Code, entitled Historically Underutilized Businesses, a business
in the form of a corporation, partnership or joint venture which is at least
51% owned, or a sole proprietorship which is 100% owned by a person or persons
who have been historically underutilized due to their identification as a
member of a certain group. The following are the groups which will be considered
pursuant to this definition:
(A)
African Americans--persons having origins in any of the
Black racial groups of Africa;
(B)
Hispanic Americans--persons of Mexican, Puerto Rican, Cuban,
Central or South American, or other Spanish or Portuguese culture or origin,
regardless of race;
(C)
Asian-Pacific Americans--persons whose origins are from
Japan, China, Taiwan, Korea, Vietnam, Laos, Cambodia, Philippines, Samoa,
Guam, U.S. Trust Territories of the Pacific and the Northern Marianas;
(D)
Native Americans--persons who are American Indians, Eskimos,
Aleuts, or Native Hawaiians; or
(E)
Women--includes all women of any ethnicity.
(39)
Homeless Person--An individual or family that
lacks a fixed, regular, and adequate nighttime residence as more fully defined
in 24 Code of Federal Regulations, §841.1, and as may be amended from
time to time.
(40)
Housing Credit Agency--A governmental entity charged
with the responsibility of allocating low income housing tax credits pursuant
to the Code, §42. For the proposes of these Rules, the Department is
the sole "Housing Credit Agency" of the State of Texas.
(41)
Housing Credit Allocation--An allocation by the Department
to a Project Owner of low income housing tax credit in accordance with §50.8
of this title (relating to Housing Credit Allocations).
(42)
Housing Credit Allocation Amount--With respect to
a Project or a building within a Project, that amount the Department determines
to be necessary for the financial feasibility of the Project and its viability
as a qualified low income housing Project throughout the Compliance Period
and allocates to the Project.
(43)
HUD--The United States Department of Housing and
Urban Development, or its successor.
(44)
Ineligible Building Types--Single family detached
housing, duplexes, and triplexes shall not be included in tax credit developments
(except as provided for in this definition). Fourplexes are also prohibited
unless they are developed in clusters of four or more contiguous property
under common ownership, management and Control. The only exceptions to this
definition are:
(A)
Any project comprised of single family detached homes,
duplexes or triplexes of 35 units or less that is located within a city or
county with a population of not more than 20,000 or 50,000, respectfully,
shall not be considered to include an Ineligible Building Type. The proposed
units must be located on contiguous property under common ownership, management
and Control or dispersed within an existing residential subdivision.
(B)
An existing Rural Project that is federally assisted within
the meaning of §42(d)(6)(B) of the Code and is under common ownership,
management and Control shall not be considered to include an Ineligible Building
Type. For qualifying federally assisted Rural Projects, construction activity
must be rehabilitation only, with no expansion to the existing development.
Rural Projects purchased from HUD will also qualify as being federally assisted.
(45)
Intermediary Costs--Costs associated with the
sale or use of tax credits to raise equity capital. Such costs include but
are not limited to syndication and partnership organization costs and fees,
filing fees, broker commissions, related attorney and accounting fees, appraisal,
engineering, environmental site assessment, etc.
(46)
IRS--The Internal Revenue Service, or its successor.
(47)
Local Tax Exempt Organization--An entity which is
described in the Code, §501(c)(3) or (4), as these cited provisions may
be amended from time to time, and which is registered or qualified to conduct
business in the State of Texas and/or the governmental unit wherein the Project
will be situated.
(48)
Person--Means, without limitation, any natural person,
corporation, partnership, limited partnership, joint venture, limited liability
company, trust, estate, association, cooperative, government, political subdivision,
agency or instrumentality or other organization of any nature whatsoever and
shall include any group of Persons acting in concert toward a common goal.
(49)
Persons with Disabilities--A person who:
(A)
has a physical, mental or emotional impairment that;
(i)
is expected to be of a long, continued and indefinite duration,
(ii)
substantially impedes his or her ability to live independently,
and
(iii)
is of such a nature that the ability could be improved
by more suitable housing conditions, or
(B)
has a developmental disability, as defined in section 102(7)
of the Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C.
6001-6007).
(50)
Prison Community--A city or town which is located
outside of a Metropolitan Statistical Area (MSA) or Primary Metropolitan Statistical
Area (PMSA) and was awarded a state prison as set forth in the Reference Manual.
(51)
Project--A low income rental housing Property the
owner of which represents that it is or will be a qualified low income housing
Project within the meaning of the Code, §42(g). With regards to this
definition, the "Project" is that Property which is the basis for the Application
for low income housing tax credits. May also be referred to as the subject
"property".
(52)
Project Consultant--Any Person (without ownership
interest in the Project) who provides professional services relating to the
filing of an Application, Carryover Allocation Document, and/or cost certification
documents.
(53)
Project Owner--Any Person or Affiliate thereof that
owns or proposes to develop the Project or expects to acquire Control of the
Project pursuant to a purchase contract satisfactory to the Department.
(54)
Property--The real estate and all improvements thereon
which are the subject of the Application (including all items of personal
property affixed or related thereto), whether currently existing or proposed
to be built thereon in connection with the Application.
(55)
Qualified Allocation Plan--An allocation plan executed
by the Governor of the State of Texas which sets forth the Threshold Criteria,
Selection Criteria, priorities, preferences, and compliance and monitoring
as provided in the Code, §42(m)(1) and as further provided in §50.3
through §50.8 of this title (relating to State Housing Credit Ceiling,
Applications; Environmental Assessments; Market Study; Commitments; Extensions;
Carryover Allocations; Agreements and Elections; Extended Commitments, Set-Asides,
Commitments and Preferences, Threshold Criteria; Evaluation Factors; Selection
Criteria; Final Ranking; Credit Amount; Tax Exempt Bond Financed Projects;
Compliance Monitoring, Housing Credit Allocations).
(56)
Qualified Basis--With respect to a building within
a Project, the building's Eligible Basis multiplied by the Applicable Fraction,
within the meaning of the Code, §42(c)(1).
(57)
Qualified Census Tract--Any census tract which is
so designated by the Secretary of HUD and, for the most recent year for which
census data are available on household income in such tract, in which 50%
or more of the households have an income which is less than 60% of the area
median family income for such year.
(58)
Qualified Market Analyst--A real estate appraiser
certified or licensed by the Texas Appraiser or Licensing and Certification
Board or a real estate consultant or other professional currently active in
the subject property's market area who demonstrates competency, expertise,
and the ability to render a high quality written report. The individual's
experience and educational background will provide the general basis for determining
competency as a Market Analyst. Such determination will be at the sole discretion
of the Department. The Qualified Market Analyst must not be related to or
Affiliated with the Project Consultant, or the independent CPA employed for
certifying the 10% test and/or the final Project cost certification.
(59)
Qualified Nonprofit Organization--An organization
that is described in the Code, §501(c)(3) or (4), as these cited provisions
may be amended from time to time, that is exempt from federal income taxation
under the Code, §501(a), that is not Affiliated with or Controlled by
a for profit organization, and includes as one of its exempt purposes the
fostering of low income housing within the meaning of the Code, §42(h)(5)(C).
(60)
Qualified Nonprofit Project--A Project in which a
Qualified Nonprofit Organization has Control (directly or through a partnership
or wholly-owned subsidiary) and materially participates (within the meaning
of the Code, §469(h), as may be amended from time to time) in its development
and operation throughout the Compliance Period.
(61)
Real Estate Owned (REO) Projects--Any existing residential
development that is owned or that is being sold by an insured depository institution
in default, or by a receiver or conservator of such an institution, or is
a property owned by HUD, Federal National Mortgage Association (Fannie Mae),
Federal Home Loan Mortgage Corporation (Freddie Mac), federally chartered
bank, savings bank, savings and loan association, Federal Home Loan Bank or
a federally approved mortgage company or any other federal agency.
(62)
Reference Manual--That certain manual, and any amendments
thereto, produced by the Department which sets forth reference material pertaining
to the Low Income Housing Tax Credit Program.
(63)
Rehabilitation Expenditure--Amounts incurred in connection
with the rehabilitation which the Project Owner represents to be "Rehabilitation
Expenditures" within the meaning of the Code, §42(e)(2).
(64)
Residential Development--Any Project that is comprised
of at least one "Unit" as such term is defined in this title.
(65)
Rules--The Department's low income housing tax credit
Rules, §§50.1-50.16 of this title (relating to Low Income Housing
Tax Credit Qualified Allocation Plan and Rules) excluding §§50.3-50.8
of this title (relating to State Housing Credit Ceiling, Applications; Environmental
Assessments; Market Study; Commitments; Extensions; Carryover Allocations;
Agreements and Elections; Extended Commitments, Set-Asides, Commitments and
Preferences, Threshold Criteria; Evaluation Factors; Selection Criteria; Final
Ranking; Credit Amount; Tax Exempt Bond Financed Projects; Compliance Monitoring,
Housing Credit Allocations).
(66)
Rural Project--A Project located within an area which:
(A)
is situated outside the boundaries of a PMSA or MSA; or
(B)
is situated within the boundaries of a PMSA or MSA if it
has a population of not more than 20,000 and does not share boundaries with
an urbanized area; or
(C)
is located in an area that is eligible for funding by TxRD.
(67)
Selection Criteria--Criteria used to determine
housing priorities of the State under the Low Income Housing Tax Credit Program.
(68)
Small Development--A Project consisting of not more
than ten single-family detached Units or 35 multifamily Units, which is not
a part of, or contiguous to, a larger Project.
(69)
Special Housing Project--Any Project developed specifically
for Special Housing Need Groups, including mental health/mental retardation
Projects, group homes, housing for the homeless, transitional housing, elderly
Projects, congregate care facilities, projects for persons with HIV/AIDS,
or as otherwise defined in the State Consolidated Plan.
(70)
State Housing Credit Ceiling--The limitation imposed
by the Code, §42(h), on the aggregate amount of housing credit allocations
that may be made by the Department during any calendar year, as determined
from time to time by the Department in accordance with the Code, §42(h)(3).
(71)
Sustaining Occupancy--The figure at which occupancy
income is equal to all operating expenses and mandatory debt service requirements
for a Project.
(72)
Tax Exempt Bond Project--A Project which receives
at least 50% of its financing from the proceeds of Tax Exempt bonds which
are subject to the state volume cap as described in the Code, §42(h)(4)(B).
(73)
Threshold Criteria--Criteria used to determine the
Project's qualifications which are the minimum level of acceptability for
consideration under the Low Income Housing Tax Credit Program.
(74)
Total Housing Development Cost--The total of all
costs incurred or to be incurred by the Project Owner in acquiring, constructing,
rehabilitating and financing a Project, as determined by the Department based
on the information contained in the Project Owner's Application. Such costs
include Intermediary Costs, reserves and any expenses attributable to commercial
areas. Projects which include commercial space must allocate the relative
portion of all applicable expenses to the commercial space and exclude the
same from Total Housing Development Costs. In determining the Equity Gap calculation,
the Department will not deduct from the Project's sources of funds the amount
of financing associated with the commercial use, unless such financing specifically
identifies in its terms that it is being provided for the commercial use.
(75)
Town Home--Each Town Home living unit is one of a
group of no less than four units that are adjoined by common walls. Town Homes
shall not have more than two walls in common with adjacent units. Town Homes
shall not have other units above or below another unit. Town Homes shall not
share a common back wall. Town Homes shall have individual exterior entries.
(76)
TxRD--The Rural Development (RD) services of the
United States Department of Agriculture (USDA) serving the State of Texas
(formerly known as TxFmHA) or its successor.
(77)
Unit--Any residential rental unit in a Project consisting
of an accommodation containing separate and complete physical facilities and
fixtures for living, sleeping, eating, cooking and sanitation. The term "Unit"
includes a single room occupancy housing unit used on a non-transient basis.
§50.3.State Housing Credit Ceiling.
(a)
The Department shall determine the State Housing Credit
Ceiling for each calendar year as provided in the Code, §42(h)(3)(C).
(b)
The Department shall publish each such determination in
the Texas Register within 30 days after notification by the Internal Revenue
Service.
(c)
The aggregate amount of Housing Credit Allocations made
by the Department during any calendar year shall not exceed the State Housing
Credit Ceiling for such year as provided in the Code, §42. Housing Credit
Allocations made to Tax Exempt Bond Developments are not included in the State
Housing Credit Ceiling
§50.4.Applications; Environmental Assessments; Market Study; Commitments; Extensions; Carryover Allocations; Agreements and Elections; Extended Commitments.
(a)
Any Project Owner requesting a Housing Credit Allocation
for a Project must submit an Application to the Department which Application
shall be originally executed by the Project Owner. This Application shall
contain full and complete information as to each item specified in the Application
Submission Procedures Manual, as amended. The Department is also authorized
to request the Project Owner to provide any additional information it deems
relevant as clarification to the Application. Failure to provide any required
information either in the Application Submission Procedures Manual or otherwise
required by the Department will result in the Application being deemed incomplete
and not accepted for filing. The Department will require, as a part of a completed
Application, information to be submitted by the Project Owner which identifies
the number of HUBs to be used in the development and/or continuous operation
of the Project, in a form specified within the Application Submission Procedures
Manual. Further, the Department will require the Project Owner to supply sufficient
documentation which will represent the means by which these HUBs were or are
to be selected. The Project Owner is also advised that the Department will
be requesting information pertaining to the use of HUBs in the actual development
of the Project at the time of final allocation of tax credits, pursuant to
§50.8(f) of this title (relating to Housing Credit Allocations).
(b)
As part of the complete Application the Applicant must
submit the most current Phase I Environmental Assessment of the subject Property,
dated not more than 12 months prior to the first day of the Application Acceptance
Period. In the event that a Phase I Environmental Assessment on the Project
is older than 12 months, the Project Owner may supply the Department with
an update letter from the Person or organization which prepared the initial
assessment; provided, however, that the Department will not accept any Phase
I Environmental Assessment which is more than 24 months old. An environmental
report that is not submitted with the Application will result in the Application
being deemed incomplete and not accepted for filing.
(1)
This environmental assessment should be conducted and reported
in conformity with the standards of the American Society for Testing and Materials
(ASTM) and such other recognized industry standards as a reasonable person
would deem relevant in view of the Property's anticipated use for human habitation.
The environmental assessment shall be conducted by an environmental or professional
engineer and be prepared at the expense of the Project Owner. The report must
include, but is not limited to:
(A)
a review of records, interviews with people knowledgeable
about the Property;
(B)
a certification that the environmental engineer has conducted
an inspection of the Property, the building(s), and adjoining Properties,
as well as any other industry standards concerning the preparation of this
type of environmental assessment;
(C)
a noise study is recommended for developments located in
close proximity to industrial zones, major highways, active rail lines and
civil and military airfields;
(D)
a copy of the current FEMA Flood Map encompassing the site
and a determination of the flood risk for the proposed development; and
(E)
the report should include a statement that clearly states
that the person or company preparing the environmental assessment will not
materially benefit from the development in any other way than receiving a
fee for the environmental assessment.
(2)
If the report recommends further studies or establishes
that environmental hazards currently exist on the Property, or are originating
off-site but would nonetheless affect the Property, the Project Owner must
act on such a recommendation or provide either a plan for the abatement or
elimination of the hazard. Evidence of action or a plan for the abatement
or elimination of the hazard must be presented upon Application submittal.
(3)
Projects which have had a Phase II Environmental Assessment
performed and hazards identified, the Project Owner is required to maintain
a copy of said assessment on site available for review by all persons which
either occupy the Property or are applying for tenancy.
(4)
Projects whose funds have been obligated by TxRD will
not be required to supply this information; however, the Project Owners of
such Projects are hereby notified that it is their responsibility to ensure
that the Property is maintained in compliance with all state and federal environmental
hazard requirements.
(5)
Those Projects which have or are to receive first
lien financing from HUD may submit HUD's environmental assessment report,
provided that it conforms with the requirements of this subsection.
(c)
The Market Study required by the Department shall comply
with the Uniform Standards of Professional Appraisal Practice paragraphs (1)-(2)
of this subsection and, the Market Analysis and Appraisal Policy provided
in the Reference Manual. The Market Study shall be prepared for the Department
at the expense of the Project Owner. The Market Study shall follow the format
of and contain at a minimum, the information required by the Market Analysis
and Appraisal Policy. If any of the required information in the Market Analysis
and Appraisal Policy is not obtainable, the Market Analyst shall provide a
statement to such effect and offer an alternative analysis intended to address
the applicable question.
(1)
A Market Study (must be prepared by a Qualified Market
Analyst as described in this QAP and Rules and in the Market Analysis and
Appraisal Policy). This Qualified Market Analyst shall be independent of the
Project Owner. A Market Study, is required as part of the complete Application,
unless the Project has an obligation of TxRD funds. Projects whose funds have
been obligated by TxRD are not required to provide the Department with a market
study; provided that the Department may request information with respect to
the operating expenses, proposed new construction or rehabilitation cost or
other information. The market study should not be updated more than six months
prior to the first day of the Application Acceptance Period. In the event
that a Market Study on a Project is older than six months, a Project Owner
may supply the Department with an updated Market Study from the entity or
organization which prepared the initial report. The Department will not accept
any Market Study more than 12 months old.
(2)
The Department may determine from time to time that
information not requested in the Market Analysis and Appraisal Policy will
be relevant to the Department's evaluation of the need for the Project and
the allocation of the requested Housing Credit Allocation Amount. The Department
may request additional information from the Market Analyst to meet this need.
(3)
A written opinion is required from the Qualified Market
Analyst who prepared the Market Study required under paragraph (1) of this
subsection, stating that:
(A)
the projected Total Housing Development Costs of the proposed
Project do or do not appear to be reasonable. The Qualified Market Analyst
must provide the Department with sufficient documentation to support his/her
conclusion with regards to the reasonableness of the projected development
costs;
(B)
the projected Total Operating Costs of the proposed Project
do or do not appear to be reasonable. The Qualified Market Analyst must provide
the Department with sufficient documentation to support his/her conclusions
with regards to the reasonableness of the projected operating costs;
(C)
the proposed Project, in light of the vacancy and absorption
rates for the applicable market area and/or any applicable submarket area,
is or is not likely to result in an unreasonably high vacancy rate for comparable
Units within the market area and/or any applicable submarket area (i.e., standard,
well maintained Units within such market area that are reserved for occupancy
by low and very low income tenants). The Qualified Market Analyst must provide
the Department with sufficient documentation to support his/her conclusion
with regard to the effects of the Project's development on the vacancy rates
for comparable Units within the market area and/or any applicable submarket
area;
(D)
the projected initial rents for the Project are or are
not below the rental range for comparable Projects within the market area.
The Qualified Market Analyst must provide the Department with sufficient documentation
to support his/her conclusion with respect to the data on comparable rents
in the Project's market area; and
(E)
Project reserves are or are not adequate to cover operating
shortfalls until the Project achieves Sustaining Occupancy. The Qualified
Market Analyst must provide the Department with sufficient documentation to
support his/her conclusions with regards to the adequacy of the Project reserves.
(4)
All Applicants shall acknowledge by virtue of
filing an Application that the Department shall not be bound by any such opinion
or the Market Study itself, and may substitute its own analysis and underwriting
conclusions for those submitted by the Qualified Market Analyst.
(d)
A Project Owner may file an Application at any time during
the Application Acceptance Period(s), as published from time to time by the
Department in the Texas Register. Applicants which submit the Application
prior to the close of the published Bonus Period will be notified of Threshold
Criteria deficiencies to allow for corrective action. Applicants must submit
the documentation required to correct the deficiency within 10 working days
from the receipt of such notice. Only one opportunity to supply the required
documentation will be granted. Applications with corrected deficiencies will
not be eligible for the Selection Criteria points associated with the bonus
period. Applications submitted after the close of the Bonus Period that show
material deficiencies will be terminated per subsection (c)(3)(E) of this
section and the Project Owners will only have the opportunity to re-apply
if the Application Acceptance Period is still open.
(e)
An Application that does not fulfill the requirements of
this Qualified Allocation Plan and Rules and the current Application Submission
Procedures Manual will be deemed not to have been timely filed and the Department
shall not be deemed to have accepted the Application. The Department may,
at its sole discretion, request supplemental information from an Applicant
to clarify information contained in previously submitted documentation. The
department may place additional time constraints for the timely filing of
such documentation.
(f)
The Department will not recommend an Application for funding
if it includes a member of the Development Team who has been, or is:
(1)
barred, suspended, or terminated from procurement in a
state or federal program or who is listed in the List of Parties Excluded
from Federal Procurement or Nonprocurement Programs, whether in the hard copy
or electronic form;
(2)
convicted within the past five years, under indictment
for or is on probation for a state or federal crime involving fraud, bribery,
theft, misrepresentations of material facts, misappropriation of funds, or
other similar criminal offenses;
(3)
subject to enforcement action under state or federal
securities law, or is the subject of an enforcement proceeding with a state
or federal agency or another governmental entity unless any such action has
been concluded and no adverse action or finding (or entry into a consent order)
has been taken with respect to such member; or
(4)
active in the ownership or management of any other
low income housing tax credit Property (or any Property pursuant to an affordable
housing program administered by a local, state or federal entity) that is
or was materially out of compliance with the rules or regulations of the appropriate
regulatory authority. The Department may recommend an Application whose Development
Team member is working to remedy the condition of non compliance under a plan
which was agreed to in writing by the appropriate regulatory entity. If such
a problem exists, it should be clearly identified in Exhibit 106 and a copy
of the executed remediation plan should be provided. If the Department is
the regulatory entity, then the remediation plan entered into with the Compliance
Division should be submitted.
(g)
After eligible Applications have been evaluated, ranked
and underwritten in accordance with the QAP and the Rules the Department shall
make its recommendations to the Committee and the Board at their next meeting
for the issuance of Commitment Notices.
(h)
The Board's decisions shall be based upon its evaluation
of the Project's consistency with the criteria and requirements set forth
in the QAP and the Rules. In making a determination to allocate tax credits,
the Department and Board shall be authorized not to rely solely on the number
of points scored by an Applicant. They shall in addition, be entitled to take
into account, as appropriate, such factors as Project feasibility, underwriting,
concentration of low income Projects within specific markets or submarkets,
geographic dispersion of multifamily housing in any particular market or submarket,
as well as dispersion of the credits on a state-wide basis, site conditions,
the experience of the Development Team, the type of housing being proposed
and/or the Project's impact on the Low Income Housing Tax Credit Program's
goals and objectives as stated in the QAP and the Rules and as otherwise provided
under this chapter. The Board shall authorize the Department to allocate credits
among as many different entities as practicable without diminishing the quality
of the housing that is built.
(1)
If the Board approves the Application, the Department will
issue a Commitment Notice to the Project Owner which:
(A)
shall confirm that the Board has approved the Application;
and
(B)
shall state the Department's commitment to make a Housing
Credit Allocation to the Project Owner in a specified amount, subject to the
feasibility determination described at §50.8(a) of this title (relating
to Housing Credit Allocations), compliance by the Project Owner with the remaining
requirements of this chapter, and any other conditions set forth therein by
the Department. This Commitment Notice shall expire on the date specified
therein, unless the commitment has been accepted and the conditions to receipt
of an allocation set forth therein shall have been met.
(2)
The Department shall notify, in writing, the
mayor or other equivalent chief executive officer of the municipality in which
the Property is located informing him/her of the Boards issuance of a Commitment
Notice.
(3)
If the Board disapproves or fails to act upon the
Application, the Department shall issue to the Project Owner a written notice
stating the reason(s) for the Board's disapproval or failure to act.
(i)
A Project Owner may request that the Department extend
the expiration date of a Commitment Notice which has not expired or the date
for the submission of the Carryover Allocation Document by submitting a written
request for such action, accompanied by the extension fee specified in §50.11
of this title (relating to Program Fees). The request shall specify the term
of the extension requested and the reason(s) why the Project Owner has been
unable to satisfy the requirements of this chapter prior to the original expiration
date. The Department, in its sole discretion, may consider and grant such
extension requests; provided, however, that in no event shall the expiration
date of a Commitment Notice be extended beyond the last business day of the
applicable calendar year.
(j)
A Project Owner must indicate acceptance of the Department's
offer of a commitment of tax credit authority or determination of eligibility
to claim tax credits by executing the Commitment Notice or Determination Notice
and paying the commitment fee specified in §50.11 of this title (relating
to Program Fees) prior to the expiration date set forth in the notice. Together
with or following the Project Owner's acceptance of the commitment or determination,
the owner may request the Department to execute an Agreement and Election
Statement, in the form prescribed by the Department, for the purpose of fixing
the applicable credit percentage for the Project as that for the month in
which the commitment was accepted (or the month the bonds were issued for
Tax Exempt Bond Projects), as provided in the Code, §42(b)(2). Upon receipt
of a duly dated and executed Agreement and Election Statement and the accepted
Commitment Notice or Determination Notice, if the Project Owner is in compliance
with the Rules of this chapter, the Department shall execute the Agreement
and Election Statement and return a copy to the Project Owner. For non Tax
Exempt Bond Projects, the Agreement and Election Statement shall be executed
by the Project Owner no later than five days after the end of the month in
which the offer of commitment was accepted. Current Treasury Regulations,
§1.42-8(a)(1)(v), suggest that in order to permit a Project Owner to
make an effective election to fix the applicable credit percentage for a Project,
the Commitment Notice must be executed by the Department and the Project Owner
in the same month. The Department will cooperate with a Project Owner, as
needed, to assure that the Commitment Notice can be so executed.
(k)
Prior to the expiration of the Commitment Notice a Project
Owner who has been issued a Commitment Notice may request the Department to
execute a Carryover Allocation Document. The Carryover Allocation must be
properly completed, signed, dated and notarized by the Project Owner and delivered
to the Department along with any and all other documentation prescribed in
the Carryover Allocation Procedures Manual, as amended. The commitment fee
as specified in §50.11 of this title (relating to Program Fees) must
be received by the Department prior to the processing of any Carryover Allocation
Documentation.
(l)
If the entire State Housing Credit Ceiling for the applicable
calendar year has been committed or allocated in accordance with this chapter,
the Department shall place all remaining Applications which have satisfied
all Threshold Criteria on a waiting list. All such waiting list Applications
will be weighed one against the other and a priority list shall be developed
by the Department and approved by the Ad Hoc Tax Credit Committee. If at any
time prior to the end of the Application Round, one or more Commitment Notices
expire and a sufficient amount of the State Housing Credit Ceiling becomes
available, the Department shall issue a Commitment Notice to Applications
on the waiting list in order of priority subject to the amount of returned
credits and the 10% Nonprofit Set-Aside allocation required under §42(h)(5)
of the Code. In the event that the Department makes a Commitment Notice or
offers a commitment within the last month of the calendar year, it will require
immediate action by the Applicant to assure that an allocation or Carryover
Allocation can be issued before the end of that same calendar year.
(m)
Within 15 business days of the date an Application is received,
the Department shall notify in writing the mayor or other equivalent chief
executive officer of the municipality, if the Project or a part thereof is
located in a municipality; otherwise the Department shall notify the chief
executive officer of the county in which the Project or a part thereof is
located, to advise such individual that the Project or a part thereof will
be located in his/her jurisdiction and request any comments which such individual
may have concerning such Project. Such comments shall be part of the documents
required to be reviewed by the Board under this subsection if received by
the Department within 30 days after receipt of such certified mail notification
to said individual; otherwise, if comments are received by the Department
after 30 days, same may be reviewed at the discretion of the Board under this
subsection. If the local municipal authority expresses opposition to the Project,
the Department will give consideration to the objections raised and will visit
the proposed site or Project within 30 days of notification.
(n)
The Department shall give notice of a proposed project
to the state representative and state senator representing the area where
a project would be located. The state representative or senator may hold a
community meeting at which the Department shall provide appropriate representation.
(o)
Prior to the Department's issuance of the IRS Form 8609
declaring that the Project has been placed in service for purposes of the
Code, §42, Project Owners must date, sign and acknowledge before a notary
public a LURA and send the original to the Department for execution. The Project
Owner shall then record said LURA, along with any and all exhibits attached
thereto, in the real Property records of the county where the Project is located
and return the original document, duly certified as to recordation by the
appropriate county official, to the Department. If any liens (other than mechanics'
or materialmen's liens) shall have been recorded against the Project and/or
the Property prior to the recording of the LURA, the Project Owner shall obtain
the subordination of the rights of any such lienholder, or other effective
consent, to the survival of certain obligations contained in the LURA following
the foreclosure of any such lien. Receipt of such certified recorded original
LURA by the Department is required prior to issuance of IRS Form 8609. A representative
of the Department shall physically inspect the Property for compliance with
the Application and the representatives, warranties, covenants, agreements
and undertakings contained therein before the IRS Form 8609 is issued.
§50.5.Set-Asides, Commitments and Preferences.
(a)
At least 10% of the State Housing Credit Ceiling for each
calendar year shall be allocated to Qualified Nonprofit Projects which meet
the requirements of the Code, §42(h)(5). Such organizations may compete
in only one of the following set-asides:
(1)
Non Profit 10%;
(2)
Rural Projects/Prison Communities 15%; or
(3)
General Projects 75%.
(b)
The Department may redistribute the credits depending on
the level of demand exhibited during the Allocation Round; provided that no
more than 90% of the State's Housing Credit Ceiling for the calendar year
may go to Projects which are not Qualified Nonprofit Projects. The Department
will reserve 25% of the 15% Rural Projects/Prison Communities set-aside for
projects financed through Rural Development (TxRD) (formerly Farmer's Home).
Should there not be sufficient qualified applications submitted for the TxRD
set-aside, then the allocations would revert back to the Rural Projects/Prison
Communities set-aside pool. Information concerning the appropriate set-aside
for each Application Round will be published in the Texas Register. Applicants
may submit only one Application for each site.
(c)
Unless the Department makes a recommendation to the Board
based on the need to fulfill the goals of the Program as expressed in this
QAP and Rules and the Board grants a waiver, a Commitment Notice shall not
be issued with respect to any Project where the cost for the total development,
acquisition, construction or rehabilitation exceeds the limitations established
from time to time by the Department and the Board as more specifically provided
in the Reference Manual. The Department's recommendation to the Board shall
be clearly documented. The Department will reduce the Applicant's estimate
of developer's and/or Contractor fees in instances where these fees are considered
excessive, as more specifically provided for within the Application Submission
Procedures Manual, as amended. In the instance where the Contractor is an
Affiliate of the Project Owner and both parties are claiming fees, Contractor's
overhead, profit, and general requirements, the Department will reduce the
total fees estimated to a level that it deems appropriate. Further, the Department
shall deny or reduce the amount of low income housing tax credits on any portion
of costs which it deems excessive or unreasonable. The Department also may
require bids in support of the costs proposed by any Applicant.
(d)
The Department may, at any time and without additional
administrative process, determine to award credits to projects previously
evaluated and awarded credits if it determines that such previously awarded
credits are or may be invalid and the owner was not responsible for such invalidity.
To the maximum extent feasible, the Department will use credits carried forward
from the prior year or recovered during the current year to make awards pursuant
to subsections (a)-(d) of this section.
§50.6.Threshold Criteria; Evaluation Factors; Selection Criteria; Final Ranking; Credit Amount; Tax Exempt Bond Financed Projects.
(a)
Threshold Criteria. To have an Application considered for
Selection Criteria, a Project Owner must first supply all required information
and demonstrate that the Project meets all of the requirements of the Threshold
Criteria set forth as follows and as more specifically provided for in the
Application Submission Procedures Manual, as amended. Applications not meeting
Threshold Criteria may be terminated as otherwise provided under this chapter.
No Ineligible Building Types will be considered for allocation of tax credits
under this QAP and the Rules, and thus Ineligible Building Types do not satisfy
Threshold Criteria. Project Owners whose Applications do not meet Threshold
Criteria will be so informed in writing. The following are the Threshold Criteria
that are mandatory requirements at the time of Application submission:
(1)
EXHIBIT 101. Label as EXHIBIT 101, the following documents:
(A)
A letter from the Project Owner specifying the type of
amenities proposed for the development. If fees in addition to rent are charged
for amenities reserved for an individual tenant's use (i.e. covered parking,
storage, etc.), then the amenity may not be included among those provided
to satisfy this exhibit. Therefore, the letter must clearly indicate those
amenities for which fees may be collected. Projects larger than 35 units must
provide at least four of the amenities provided in clauses (i)-(x) of this
subparagraph. Small Developments (35 Units or less) and Special Housing Projects
must provide at least two of the amenities provided in clauses (i)-(x) of
this subparagraph.
(i)
full perimeter fencing with controlled gate access;
(ii)
designated playground and equipment;
(iii)
community laundry room/laundry hook-up in Units;
(iv)
furnished community room;
(v)
recreation facilities;
(vi)
public telephone(s) available to tenants 24 hours a day;
(vii)
on-site day care, senior center, or community meals room;
(viii)
storage areas;
(ix)
computer facilities; or
(x)
covered parking.
(B)
All of the architectural drawings requested in clause (i)-(iii)
of this subparagraph must be submitted. While full size design or construction
documents are not required, the drawings should have a scale and/or show the
dimensions.
(i)
a site plan;
(ii)
typical floor plans for each residential and common area
building configuration and typical unit floor plans for each type of unit.
The net rentable area as calculated in Exhibit 2A of the Reference Manual
should be clearly stated on each unit floor plan; and
(iii)
typical elevations of residential and common area buildings.
Elevations should include a percentage estimate of exterior composition, i.e.
50% brick, 50% siding.
(C)
Original photographs of the development site and the surrounding
area. Rehabilitation Projects must also submit original photographs of the
existing signage, buildings, amenities, and interior photographs. The photos
for Rehabilitation Projects should clearly document the typical areas and
building components which exemplify the need for rehabilitation.
(D)
A letter from the Project Owner stating that the Project
will adhere to the Texas Property Code relating to security devices and other
applicable requirements for residential tenancies."
(2)
EXHIBIT 102. Label as EXHIBIT 102, the completed
"New Construction and Rehabilitation Breakdown" form provided in the Application
Submission Procedures Manual. Rehabilitation developments must establish that
the rehabilitation will be substantial and will involve at least $6,000 per
unit in direct hard costs. Additionally, all rehabilitation Projects must
provide a detailed work write-up/physical assessment report prepared by a
registered architect, professional engineer or general Contractor. The work
write-up/physical assessment report must detail the scope of work to be performed
throughout the rehabilitation and must specify the estimated cost associated
with each item of work to be performed.
(3)
EXHIBIT 103. There shall exist evidence of readiness
to proceed in the form of at least one of the items under each of subparagraphs
(A)-(E) of this paragraph:
(A)
Label as EXHIBIT 103(A), evidence of site control through
one of the following:
(i)
a recorded warranty deed in the name of the ownership entity,
or entities which comprise the Applicant;
(ii)
a contract for sale or lease (the minimum term of the
lease must be at least 45 years) in the name of the ownership entity, or entities
which comprise the Applicant which is valid for the entire period the development
is under consideration for tax credits or at least 90 days, whichever is greater;
or
(iii)
an exclusive option to purchase in the name of the ownership
entity, or entities which comprise the Applicant which is valid for the entire
period the development is under consideration for tax credits or at least
90 days, whichever is greater.
(B)
Label as EXHIBIT 103(B), evidence of current and appropriate
zoning in the form of a letter from the appropriate municipal authority. In
lieu of such documentation the Applicant must submit evidence that a rezoning
request has been filed with the appropriate municipal authority as of the
date of submission of the Application. Any commitment of tax credits to the
Applicant will be contingent upon proper rezoning prior to Carryover Allocation.
If zoning is not required, the Applicant must submit a letter from the local
municipal/county authority so stating. If the Property is currently a non-conforming
use as presently zoned, provide the following:
(i)
a detailed narrative of the nature of non-conformance;
(ii)
the applicable destruction threshold;
(iii)
owners rights to reconstruct in the event of damage;
and
(iv)
penalties of noncompliance.
(C)
Label as EXHIBIT 103(C), evidence of the availability of
all necessary utilities/services to the development site. Exhibits must be
in the form of a letter from the appropriate municipal provider/local service
provider, or in the form of the last monthly bill which must clearly identify
the development by name and address. If utilities are not already accessible,
then the letter must clearly state an estimated time frame for provision of
the utilities and an estimate of the infrastructure cost that will be borne
by the developer. Letters from the appropriate provider must not be older
than 12 months from the first day of the Application Acceptance Period. If
utilities are not already accessible (undeveloped areas), the letter should
not be older than 3 months from the first day of the Application Acceptance
Period. Necessary utilities are GAS/ELECTRIC, TRASH, WATER, and SEWER.
(D)
Label as EXHIBIT 103(D), evidence of permanent financing
in only one of the following forms:
(i)
bona fide permanent financing in place as evidenced by
a valid and binding loan agreement and a deed(s) of trust in an amount not
less than the projected liens to be placed upon the Project upon completion
of construction in the name of the ownership entity which identifies the mortgagor
as the Applicant or entities which comprise the general partner;
(ii)
bona fide commitment or term sheet issued by a lending
institution or mortgage company that is actively and regularly engaged in
the business of lending money which is addressed to the ownership entity,
or entities which comprise the Applicant and which has been executed and accepted
by both parties (the term of the loan must be for a minimum of 15 years with
at least a 25 year amortization); or
(iii)
if the development will be financed through owner contributions,
provide a letter from an independent CPA verifying the capacity of the Applicant
to provide the proposed financing and that funds are committed solely for
such purpose with a letter from the Applicant's bank or banks confirming that
such funds have been provided for or deposited in a separate account at said
bank(s).
(E)
Label as EXHIBIT 103(E), either:
(i)
a copy of the current title policy which shows that the
ownership of the land/Project is vested in the exact name of the Applicant,
or entities which comprise the Applicant; or
(ii)
a copy of a current title commitment with the proposed
insured matching exactly the name of the Applicant or entities which comprise
the Applicant and the title of the land/Project vested in the name of the
exact name of the seller as indicated on the sales contract.
(4)
EXHIBIT 104. Label as EXHIBIT 104, evidence
of pre-Application notification by the Applicant to the local chief executive
officer(s) (i.e., mayor and county judge), state senator, and state representative
of the locality of the development. The pre-Application notification will
consist of a letter which at least includes the text described in Exhibit
113. Evidence of such notification shall be a copy of the letter sent to the
official and proof of delivery in the form of a certified mail receipt, overnight
mail receipt, or confirmation letter from said official. Proof of notification
should not be older than three months from the first day of the Application
Acceptance Period.
(5)
EXHIBIT 105. Label as Exhibit 105, all of the following
documentation (As instructed in the Application Submission Procedures Manual,
this documentation should be filed separately from the volume containing the
Threshold Criteria.):
(A)
Using Exhibit 105(A) in the Application Submission Manual,
provide a current financial statement for each Applicant (as defined in the
QAP). Applicant's statement must not be older than 12 months from the first
day of the Application Acceptance Period. If submitting partnership and corporate
financials in addition to the individual statements, the certified financial
statements should not be older than 90 days; and
(B)
the Authorization to Release Credit Information, Exhibit
105(B) (which is provided as part of the Application Submission Procedures
Manual), must be completed by all Persons in Control of the Applicant.
(6)
EXHIBIT 106. Label as EXHIBIT 106, all of the
following documentation:
(A)
the original copy of the completed and executed Previous
Participation and Background Certification Form, Exhibit 106(A), which is
provided as part of the Application Submission Procedures Manual. This form
must be completed with respect to the ownership entity, general partner, general
contractor and their principals;
(B)
label as Exhibit 106(B), a chart which clearly illustrates
the complete organizational structure of the Project Owner. This chart should
provide the names and ownership percentage of all entities and sub-entities
with an ownership interest in the development. The percentage ownership of
all Persons in Control of these entities and sub-entities must also be clearly
defined; and
(C)
if an Applicant is active in the ownership or management
of any other low income housing tax credit Property (or any Property pursuant
to an affordable housing program administered by a local, state or federal
entity) and any such property is or was materially out of compliance with
the rules or regulations of the appropriate regulatory authority, such property
should be clearly identified in Exhibit 106(A) and a copy of the executed
remediation plan must be provided as Exhibit 106(C)."
(7)
EXHIBIT 107. Label as EXHIBIT 107, a current
rent roll for occupied Projects undergoing rehabilitation. The rent roll must
disclose terms and rate of the lease, rental rates offered at the date of
the rent roll, Unit mix, tenant names or vacancy, dates of first occupancy
and expiration of lease. Vacant and proposed new construction Projects are
exempt from this requirement.
(8)
EXHIBIT 108. Label as EXHIBIT 108, for new construction
and rehabilitation developments, a 15-year proforma estimate of operating
expenses and supporting documentation used to generate projections (excerpts
from the market study, operating statements from comparable properties, etc.).
Rehabilitation developments must also submit historical monthly operating
statements of the subject development for 12 consecutive months ending not
more than 45 days prior to the first day of the Application Acceptance Period.
In lieu of the monthly operating statements, two annual operating statement
summaries may be provided. If 12 months of operating statements or two annual
operating summaries can not be obtained, then the monthly operating statements
since the date of acquisition of the development and any other supporting
documentation used to generate projections may be provided.
(9)
EXHIBIT 109. Label as EXHIBIT 109 on the cover page
only, a Market Study addressing all items listed in §50.4(c) of this
title (relating to Applications; Environmental Assessments; Market Study;
Commitments; Extensions; Carryover Allocations; Agreements and Elections;
Extended Commitments) and/or required by the Reference Manual.
(10)
EXHIBIT 110. Label as EXHIBIT 110 on the cover page
only, a Phase I Environmental Study prepared in accordance with §50.4(c)
of this title (relating to Applications; Environmental Assessments; Market
Study; Commitments; Extensions; Carryover Allocations; Agreements and Elections;
Extended Commitments).
(11)
EXHIBIT 111. Label as EXHIBIT 111, for Applicants
seeking credits from the Non Profit Set-Aside, all of the following documents
that confirm that the Applicant is a Qualified Nonprofit Organization pursuant
to Code, §42(h)(5)(C):
(A)
an IRS determination letter which states that the Qualified
Nonprofit Organization is a 501(c)(3) or (4) entity;
(B)
if the Project involves a joint-venture between a Qualified
Nonprofit Organization and a for-profit entity, an agreement which shows that
the nonprofit organization Controls the Project (directly or indirectly) and
will materially participate (within the meaning of the Code §469(h) in
the development and operation of the Project throughout the Compliance Period;
(C)
a current list of all directors and officers of the nonprofit
organization, along with information pertaining to their primary occupations
and disclosing any relationship; as an Affiliate or otherwise, with other
members of the Applicant and/or any members or Affiliate of the Development
Team, including any market analyst, CPA, appraiser, or other professional
performing any services with respect to the Project and/or the subject Property;
and
(D)
a copy of the articles of incorporation of the nonprofit
organization which specifically states the fostering of affordable housing
is one of the entities exempt purposes.
(12)
EXHIBIT 112. Label as EXHIBIT 112, for Applicants
applying for acquisition credits or if the Applicant is affiliated with the
seller, all of the following documentation:
(A)
an appraisal, which complies with the Market Analysis &
Appraisal Policy provided in the Reference Manual, of the Property separately
stating the value of the land and the improvements where applicable;
(B)
a valuation report from the county tax appraisal district;
and
(C)
a bona fide valid contract verifying the acquisition cost
and clearly identifying the selling Persons or entities, and details any relationship
between the seller and the Applicant or any Affiliation with the Development
Team, Qualified Market Analyst or any other professional or other consultant
performing services with respect to the Project.
(13)
EXHIBIT 113. Label as EXHIBIT 113, a copy of
the public notice published in a widely circulated newspaper in the area in
which the proposed development will be located. Such notice must run at least
twice within a two week period, except on holidays, prior to the submission
of the Application to the Department. The notice must be prepared in accordance
with the guidelines established in the Application Submission Procedures Manual.
Such notice can not be older than 3 months from the first day of the Application
Acceptance Period.
(14)
EXHIBIT 114. This exhibit must be the original copy
of the completed and executed General Contractor Certification Form provided
as part of the Application Submission Procedures Manual.
(b)
Evaluation Factors. The Department will consider Applications
for a housing credit allocation using the evaluation and point system described
in this subsection and in the Application Submission Procedures Manual.
(1)
Applications will be initially evaluated against the Threshold
Criteria as they are accepted for filing in the Department during any Application
Acceptance Period. Applications not meeting the Threshold Criteria may be
terminated and may, at the Department's discretion, be returned to the Applicant
without further review. The Department shall not be responsible for the Applicant's
failure to meet the Threshold Criteria, and any oversight or failure of the
Department's staff to notify the Applicant of such inability to satisfy the
Threshold Criteria shall not confer upon the Applicant any rights to which
it would not otherwise be entitled. All Applicants may withdraw and subsequently
refile an Application, as well as file a new Application before the filing
deadline.
(2)
Applications will then be ranked according to the
points scored under the Selection Criteria in accordance with the Rules and
the Application Submission Procedures Manual. Applications not scored by the
Department's staff shall be deemed to have the points allocated through self-scoring
by the Applicants until actually scored. This shall apply only for ranking
purposes.
(3)
In addition to the number of points scored, the decision
to underwrite a Project shall be subject to considerations contained in §50.4(h)
of this title (relating to Applications; Environmental Assessments; Market
Study; Commitments; Extensions; Carryover Allocations; Agreements and Elections;
Extended Commitments). The Department, the Committee, and the Board shall
evaluate an Application on the basis of additional factors beyond scoring
criteria such as underwriting analysis, geographic dispersion of multi-family
housing as well as tax credit allocation, site conditions, impact on the Low
Income Housing Tax Credit Program's goals and objectives as stated in the
QAP and the Rules, and as otherwise provided under this chapter. If such evaluation
warrants, the Application will be forwarded to the Committee and to the Board
for approval. In making its recommendation to the Board, the Department shall
enumerate the reason(s) for the Project's selection, including all discretionary
factors used in making its determination. The Department may have an outside
third party perform the underwriting evaluation to the extent it determines
appropriate. The expense of any third party underwriting evaluation shall
be paid by the Applicant prior to the commencement of the aforementioned evaluation.
(4)
Applications which have not received a Commitment
Notice at the end of the Application Round may be placed on a waiting list
to be established by the Department and approved by the Committee and the
Board. At the end of each calendar year, all Applications which have not received
a Commitment Notice shall be deemed terminated, unless the Department shall
determine to retain or act upon such Applications as provided hereinafter
at §50.15 of this title (relating to Forward Reservations; Binding Commitments).
The Applicant may re-apply to the Department during the next Application Acceptance
Period.
(c)
Selection Criteria. Pursuant to subsection (b) of this
section, Applications receiving the highest number of points in each set aside
category, in each Application Acceptance Period, if a sufficient amount of
the State Housing Credit Ceiling is available, will be eligible for an evaluation
by an Underwriter subject to §50.4(h) of this title (relating to Applications;
Environmental Assessments; Market Study; Commitments; Extensions; Carryover
Allocations; Agreements and Elections; Extended Commitments). All Applications
will be ranked according to the Selection Criteria listed in paragraphs (1)-(9)
of this subsection. If no additional set-aside credits are available, the
Application shall be scored and evaluated in the General Pool using the criteria
to which such General Pool Applications are subject, without special set-aside
scoring points being considered.
(1)
DEVELOPMENT LOCATION.
(A)
EXHIBIT 201. Label as EXHIBIT 201, evidence that the subject
Property is located within:
(i)
a Qualified Census Tract (QCT) as defined by the Secretary
of HUD and qualifies for the 30% increase in Eligible Basis, pursuant to the
Code, §42(d)(5)(C), a Difficult Development Area (DDA) or a Targeted
Texas County (TTC). Developments in a QCT should submit a copy of the census
map must clearly show that the proposed development is located within a QCT.
Census tract numbers must be clearly marked on the map, and must be identical
to the QCT number stated in the Department's Reference Manual. Applicants
for Projects in a Difficult Development Area or a Targeted Texas County must
indicate this designation in the space provided in the Application Submission
Procedures Manual;
(ii)
a designated state or federal empowerment/enterprise zone.
Such developments must submit a letter and a map from a city/county official
verifying that the proposed development is located within such a designated
zone. Letter should be no older than 90 days from the first day of Application
Acceptance Period; or
(iii)
a city-sponsored Tax Increment Financing Zone (TIF),
Public Improvement District (PIDs), or other neighborhood preservation/redevelopment
district organized under the Texas Local Government code. Such developments
must submit all of the following documentation: a letter from a city/county
official verifying that the proposed development is located within the city
sponsored zone or district; a map from the city/county official which clearly
delineates the boundaries of the district; and a certified copy of the appropriate
resolution or documentation from the mayor, local city council, county judge,
or county commissioners court which documents that the designated area was:
(I)
created by the local city council/county commission,
(II)
targets a specific geographic area which was not created
solely for the benefit of the Applicant, and
(III)
offers tangible and significant area-specific incentives
or benefit over and above those normally provided by the city or county (5
points).
(2)
HOUSING NEEDS CHARACTERISTICS.
(A)
The proposed development is located in a county in which
10% or more of the households are below the poverty level as set forth in
the Department's "County Data Elements Guide" incorporated into the Reference
Manual. Utilize the percentages in clauses (i)-(iv) of this subparagraph to
assess the appropriate score:
(i)
10% to 20% of households are below the poverty level (3
points);
(ii)
21% to 31% of households are below the poverty level (5
points);
(iii)
32% to 42% of households are below the poverty level
(7 points); or
(iv)
42% + of households are below the poverty level (9 points).
(B)
The proposed development is located in a county in which
20% or more of the rental units have a cost burden as set forth in the County
Data Elements guide. Utilize the following percentages to assess the appropriate
score:
(i)
20% to 30% of rental units have a cost burden (4 points);
(ii)
31% to 41% of rental units have a cost burden (6 points);
or
(iii)
42% + of rental units have a cost burden (8 points).
(3)
PROJECT CHARACTERISTICS.
(A)
EXHIBIT 202. Label as EXHIBIT 202, evidence that the proposed
development to be purchased qualifies as a federally assisted building within
the meaning of the Code, §42(d)(6)(B), and is in danger of having the
mortgage assigned to HUD, TxRD, or creating a claim on a federal mortgage
insurance fund (such evidence must be a letter from the institution to which
the development is in danger of being assigned); OR evidence that the Applicant
is purchasing(ed) a Property owned by HUD, an insured depository institution
in default, or a receiver or conservator of such an institution, or is an
REO Property. Such evidence must be in the form of a binding contract to purchase
from such federal or other entity as described in this paragraph, closing
statements, or recorded warranty deed (5 points).
(B)
EXHIBIT 203. Label as EXHIBIT 203, evidence that the proposed
development is a low income building with mortgage prepayment eligibility
as provided for in the Code, §42(d)(6)(C). Such evidence must be a copy
of the HUD regulatory agreement which evidences the prepayment clause (5 points).
(C)
The proposed development's composition offers a Unit mix
which is conducive to housing large families. To qualify for these points,
these Units must have at least 1000 square feet of net rentable area for three
bedrooms or 1200 square feet of net rentable area for four bedrooms. Unless
the building is served by an elevator, the 3 or 4 bedroom Units should not
be located above the building's second floor. If the Project is a mixed-income
development, only tax credit Units should be used in computing the percentage
of qualified Units for this selection item.
(i)
15% of the Units in the development are three or four bedrooms
(5 points); and
(ii)
an additional point will be awarded for each additional
5% increment of Units that are three or four bedrooms up to 30% of the Units
(a maximum of three points) (3 points).
(D)
EXHIBIT 204. Label as Exhibit 204, a letter from the design
architect which certifies that at least four of the following energy saving
devices will be utilized in the construction of each tax credit Unit. The
devices selected must be certified as included in each tax credit Unit of
the Project upon Cost Certification. Letter must specify where the items will
be used and what efficiency standards will be met (R-values, SEER rating,
flue efficiencies, etc.) (3 Points):
(i)
ceiling fans in living room and each bedroom;
(ii)
insulation of at least R-19 for walls and R-30 for ceilings;
(iii)
solar screens;
(iv)
gas heating system with a minimum 80% flue efficiency;
(v)
energy efficient air conditioning system with a 12 SEER
or above rating;
(vi)
dual pane insulating, low-e windows;
(vii)
evaporative cooling system; or
(viii)
utilization of appliances and residential light fixtures
that qualify for the US EPA and the US Department of Energy's Energy Star
Label. At a minimum, this shall include the installation of programmable thermostats,
water heaters, refrigerators and dishwashers in each unit.
(E)
The proposed development provides low density housing of
less than 16 Units per acre or as follows:
(i)
16 Units or less per acre (6 points); or
(ii)
17 to 20 Units per acre (4 points).
(F)
The subject Project is an existing Residential Development
without maximum rent limitations or set-asides for affordable housing seeking
rehabilitation credits. If maximum rent limitations had existed previously,
then the restrictions must have expired at least one year prior to the date
of Application to the Department (8 points).
(G)
The subject Project is a mixed-income development comprised
of both market rate Units and qualified tax credit Units. To qualify for these
points, the project must be located in a submarket where the average rents
for comparable market rate units are at least 10% higher on a per net rentable
square foot basis than the maximum allowable rents under the Program. Additionally,
the proposed rents for the market rate units in the project must be at least
5% higher on a per net rentable square foot basis than the maximum allowable
rents under the Program.
(i)
Project's Applicable Fraction is no greater than 75% (6
points).
(ii)
Project's Applicable Fraction is no greater than 60% (10
points).
(H)
EXHIBIT 205. Label as EXHIBIT 205, evidence that the proposed
historic residential development has received an historic property designation
by a federal, state or local governmental entity. Such evidence must be in
the form of a letter from the designating entity identifying the development
by name and address and stating that the project is:
(i)
listed in the National Register of Historic Places under
the U.S. Department of the Interior in accordance with the National Historic
Preservation Act of 1966;
(ii)
located in a registered historic district and certified
by the U.S. Department of the Interior as being of historic significance to
that district;
(iii)
identified in a city, county, or state historic preservation
list; or
(iv)
designated as a state landmark (6 points).
(I)
Property Owner will set-aside Units for households with
incomes at 50% or less of Area Median Gross Income (AMGI). The rents for these
Units must not be higher than the allowable tax credit rents at the 50% AMGI
level. The property owner will set aside Units at 50% AMGI and will maintain
the percentage of such Units continuously over the compliance and extended
use period as specified in the LURA. For the purposes of this subparagraph
(maintaining the promised percentage of set aside 50% AMGI Units), if at re-certification
the tenant's household income exceeds 140% of the 50% AMGI level, then the
Unit remains a 50% AMGI Unit until the next available Unit of comparable or
smaller size is designated to replace this Unit. Once the over 50% AMGI Unit
is replaced, then the rent for the previously qualified 50% AMGI Unit may
be increased under the LIHTC requirements. Rent increases, if any, should
comply with lease provisions and local tenant-landlord laws. If the Project
is a mixed-income development, only tax credit Units should be used in computing
the percentage of qualified Units for this selection item. Utilize the percentages
in clause (i)-(ii) of this subparagraph to assess the appropriate score.
(i)
four points will be awarded for the first 10% of the Units
in the development that are set-aside for tenants with incomes at 50% or less
of AMGI (4 points); and
(ii)
an additional point will be awarded for every 5% of additional
Units set-aside for tenants with incomes at 50% or less of AMGI up to a maximum
of four points (4 points).
(J)
Proposed development is comprised of fourplexes in clusters
of four or more buildings or Town Home development of at least 16 Units. To
qualify for these points the development must be on contiguous property under
common ownership, management, and Control and must have a density of no more
than 16 Units per acre (5 points).
(K)
EXHIBIT 206. Label as EXHIBIT 206, for rehabilitation evidence
that a majority of the development's residential Units, as of the end of the
Application Acceptance Period, are vacant and uninhabitable. Such evidence
must be in the form of a letter and report from the local municipal authority
citing substantial code violations. To qualify for these points, the Applicant
or its Affiliates must not have owned a significant interest in, or have had
Control of the Project during the period in which such Units were rendered
uninhabitable (4 points).
(L)
EXHIBIT 207. Label as EXHIBIT 207, evidence from the local
municipal authority stating that the proposed development fulfills a need
for additional affordable rental housing as evidenced in a local Consolidated
Plan, Comprehensive Plan, State Low Income Housing Plan or other planning
document and is supported by the local municipal authority. If the State Low
Income Housing Plan is utilized for this exhibit, then a letter from the local
municipal authority stating that there is no local plan and that the city
supports the state plan must be submitted with the letter from the state (5
points).
(M)
The Project is a Small Development. A Small Development
is defined as a Project consisting of not more than 35 multifamily Units,
which is not a part of, or contiguous to, a larger Project. A Project may
not receive points for this characteristic if it would otherwise qualify as
a Rural Project (5 points).
(4)
SPONSOR CHARACTERISTICS.
(A)
EXHIBIT 208. Label as EXHIBIT 208, evidence that the Project
Owner's general partner, General Contractor or their principals have a record
of successfully constructing or developing residential units or comparable
commercial property (i.e. dormitory and hotel/motel). Evidence must be one
of the following documents: AIA Document A111-Standard Form of Agreement Between
Owner & Contractor, AIA Document G704-Certificate of Substantial Completion,
IRS Form 8609, HUD Form 9822, development agreements, partnership agreements,
or other appropriate documentation verifying that the general partner, General
Contractor or their principals have the required experience. While points
may be awarded for experience under §50.6(c)(4)(A) during the application
process, the criteria and conditions related to a General Contractor as outlined
in §50.8(c) of this title (relating to Housing Credit Allocations) must
be met in order to receive a final allocation of credits. If the General Contractor
or its principals is shown not to have the required experience upon review
of documents required pursuant to §50.8(c), then the conditions of the
Commitment Notice or carryover agreement will not have been met and the final
allocation of credits may be denied. If rehabilitation experience is being
claimed to qualify for an Application involving new construction, then the
rehabilitation must have been substantial and involved at least $6,000 of
direct hard cost per unit.
(i)
The evidence must clearly indicate:
(I)
that the project has been completed (i.e. Development Agreements,
Partnership Agreements, etc. must be accompanied by certificates of completion.);
(II)
that the names on the forms and agreements tie back to
the ownership entity, general partner, general contractor and their respective
principals as listed in the Application; and
(III)
the number of units completed or substantially completed.
(ii)
The term "successfully" is defined as acting in a capacity
as the general contractor or developer of:
(I)
at least 100 residential units or comparable commercial
property; or
(II)
at least 35 residential units or comparable commercial
property if the project applying for credits is a Rural Project.
(iii)
Property Owners in noncompliance or with a record of
material noncompliance with HUD, TxRD, HOME, LIHTC or any other program monitored
or involving funds awarded by the Department, but which are not barred from
having an Application recommended by §50.4(f), or which have had a continuing
pattern of defaults and foreclosures are ineligible to claim the points for
this item (10 points).
(B)
EXHIBIT 209. Label as EXHIBIT 209, evidence that a Historically
Underutilized Business ("HUB") as certified by the General Services Commission
is the Project Owner or Controls the Project Owner. With respect to the filing
of an Application and the development, operation and ownership of a Project,
the historically underutilized person or persons whose ownership interests
comprise a majority of a corporation, partnership, joint venture or other
business entity, must maintain this majority and must demonstrate regular,
continuous, and substantial participation in the operation and management
activities of the entity. Likewise, with regard to a sole proprietorship,
the individual who comprises the sole proprietorship must demonstrate regular,
continuous, and substantial participation in the development, operation and
ownership of the Project. The Department shall, during and after the Application
Round, monitor those individuals whose purported ownership interest(s) and
participation form the basis upon which the designation of HUB is being claimed
and may require the submission of additional documentation as required to
verify said evidence. The Department's goal is to have substantive participation
by those individuals whose purported ownership interest(s) and participation
form the basis which the designation as a HUB is claimed. A determination
by the Department that there has been a material misrepresentation as to such
participation or that insufficient evidence has been provided to substantiate
such participation will be final and points awarded for HUB participation
will be withdrawn accordingly. The following documentation must be provided
to qualify for these points:
(i)
certification from the General Services Commission that
the Person is a HUB; and
(ii)
evidence of regular, continuous and substantial participation.
This evidence shall include, but not be limited to, the agreement to personally
guarantee the interim construction loan secured relative to the development
of a Project (and to personally provide all other guarantees to the equity
investor) by the person or persons whose purported ownership interest(s) and
participation form the basis upon which the designation of a HUB is being
claimed. Any such guarantee wherein an Affiliate, partner and or Beneficial
Owner of the guarantor agrees to indemnify, in whole or in part, the guarantor
from the liability arising from the guarantee, shall not constitute said evidence
(5 points).
(5)
PARTICIPATION OF LOCAL TAX EXEMPT ORGANIZATIONS.
EXHIBIT 210 Label as EXHIBIT 210, evidence that the Property owner has an
executed agreement with a Local Tax Exempt Organization for the provision
of special supportive services that would not otherwise be available to the
tenants. The supportive services will be evaluated based upon the following:
(A)
the duration of the service agreement;
(B)
the accessibility and appropriateness of the service to
the tenants;
(C)
the experience of the service provider; and
(D)
the importance of the service in enhancing the tenants
standard of living. The supportive service will be included in the Declaration
of Land Use Restrictive Covenants ("LURA") (Up to 5 points).
(6)
TENANT POPULATIONS WITH SPECIAL HOUSING NEEDS.
(A)
This criterion applies to elderly Projects which must provide
significant facilities and services specifically designed to meet the physical
and social needs of the residents. Significant services may include congregate
dining facilities, social and recreation programs, continuing education, welfare
information and counseling, referral services, transportation and recreation.
Other attributes of such Projects include providing hand rails along steps
and interior hallways, grab bars in bathrooms, routes that allow for barrier-free
lever type doorknobs and single lever faucets. All multistory buildings (two
or more floors) must be served by an elevator. Individual Units shall not
be multistory. Elderly Projects must not contain any Units with three or more
bedrooms. Such a Project must conform to the Federal Fair Housing Act and
must be a Project which:
(i)
which is intended for, and solely occupied by Persons 62
years of age or older; or
(ii)
in which all Units (excluding those occupied by an employee
or owner) are constructed for, and occupied by at least one Person who is
60 years of age or older; and
(iii)
which adheres to policies and procedures which demonstrate
a firm commitment by the owner and manager to provide housing for Persons
60 years of age or older (10 points).
(B)
EXHIBIT 211. Label as EXHIBIT 211, evidence which establishes
that Units will be provided for persons with physical or mental disabilities
as described in clause (i) or (ii) of this subparagraph. The points for clause
(i) and (ii) are mutually exclusive.
(i)
The Project Owner agrees to set aside Units for Persons
with Disabilities. The Department will require a minimum of nine months during
which the set aside Units must either be occupied by tenants who are physically
or mentally disabled or held vacant while being marketed to such tenants.
The nine month period will begin on the date that each building receives its
certificate of occupancy. For buildings which do not receive a certificate
of occupancy, the nine month period will begin on the placed in service date
as provided in the Cost Certification Procedures Manual. When a qualified
tenant is located, the Project Owner will be responsible for adapting the
Unit per the tenant's requirements. The cost of adapting the Unit will be
borne by the Project Owner. If the Project Owner is unable to locate qualified
Persons with Disabilities following a good-faith effort throughout the nine
month set aside period, then the Units may be rented to tenants without disabilities,
provided that the next available Unit (from among those set aside for Persons
with Disabilities) shall first be made available to Persons with Disabilities.
To comply with this provision, the Project Owner must maintain a waiting list
of qualified tenants with disabilities throughout the Compliance Period. Each
time a Unit set aside for Persons with Disabilities becomes available, the
Project Owner must contact an individual on the waiting list and/or provide
notice to local service providers that the Unit is available. If the waiting
list or the local service provider cannot locate a qualified tenant for the
next available Unit, then the Unit may be rented to a tenant without disabilities.
The documentation requirements at the time of Application and the point system
for this clause are contained in subclauses (I)-(IV) of this clause (documentation
for all three subclauses, (I)-(III), must be provided):
(I)
evidence verifying that Adaptable Dwelling Units will be
specifically set aside for persons with physical or mental disabilities. Such
evidence for physical disabilities must be in the form of a certification
from an accredited architect stating the number of Units which are/will be
designed to meet American National Standards for buildings and facilities
providing accessibility and usability for Persons with Disabilities (ANSI
A117.1-1986) and will conform to the Fair Housing Act. Such evidence for persons
with mental disabilities must be in the form of a contract to provide appropriate
supportive services for persons with mental disabilities between the Project
Owner and an experienced service provider;
(II)
a copy of the section from the market study which clearly
establishes that there is a demand for the percentage of Units being set aside
for Persons with Disabilities; and
(III)
a copy of the Project Owner's marketing plan for Persons
with Disabilities which conforms to the guidelines provided in the Application
Submission Procedures Manual.
(IV)
The point system for this clause is:
(-a-)
at least 7% of the Units are set-aside for persons with
physical or mental disabilities (5 points); or
(-b-)
at least 10% of the Units are set-aside for persons
with physical or mental disabilities (8 points).
(ii)
Submit evidence verifying that the Project provides Units
specifically accessible to persons with physical, visual or hearing disabilities
as required by §504 of the Rehabilitation Act of 1973. As required by
§504, a one time inspection and corresponding accessibility transition
plan will be required upon completion of construction. Project Owners making
this election must also comply with the Fair Housing Act. The documentation
requirements at the time of Application and the point system for this clause
are contained in subclauses (I)-(IV) of this clause (documentation for all
three subclauses, (I)-(III), must be provided):
(I)
a certification from an accredited architect stating the
number of Units which are/will be accessible per the requirements of §504
as governed by the Uniform Federal Accessibility Standards (UFAS); and
(II)
a copy of the section from the market study which clearly
establishes that there is a demand for the percentage of Units being set aside
for Persons with Disabilities; and
(III)
a copy of the Project Owner's marketing plan for Persons
with Disabilities which conforms to the guidelines provided in the Application
Submission Procedures Manual.
(IV)
The point system for this clause is:
(-a-)
At a minimum, 5% of the Units must be usable for persons
with mobility impairments and 2% of the Units shall be made accessible for
people with hearing or visual impairments (5 points); or
(-b-)
At a minimum 10% of the Units must be usable for
persons with mobility impairments and 2% of the Units shall be made accessible
for people with hearing or visual impairments (8 points).
(C)
EXHIBIT 212. Label as EXHIBIT 212, evidence that the Project
is designed solely for transitional housing for homeless persons on a non-transient
basis, with supportive services designed to assist tenants in locating and
retaining permanent housing. Such evidence must include a detailed narrative
describing the type of proposed housing; a referral agreement with an established
organization which provides services to the homeless; and a marketing plan
designed to attract qualified tenants and housing providers, as well as a
list of supportive services (15 points).
(7)
PUBLIC HOUSING WAITING LISTS. EXHIBIT 213. Label
as EXHIBIT 213, evidence that the Property owner has committed in writing
to the local public housing authority (PHA) the availability of Units and
that the Property owner agrees to consider households on the PHA's waiting
list as potential tenants. Evidence of this commitment must include all of
the following documentation:
(A)
a copy of the Property owner's letter to the PHA. If no
PHA is within the locality of the development, the Property owner must utilize
the nearest authority or office responsible for administering Section 8 programs;
(B)
a copy of the marketing plan submitted with letter to the
local PHA;
(C)
verification of receipt by the PHA in the form of certified
return receipt or overnight mail receipt; and
(D)
a letter received from an appropriate municipal authority
or local PHA stating the need for additional affordable housing Units within
its jurisdiction (3 points).
(8)
SUBSTANTIAL READINESS TO PROCEED. EXHIBIT 214.
Label as EXHIBIT 214, evidence of substantial readiness to proceed. Such evidence
must be in the form of an enforceable construction financing commitment from
a regulated financial institution that is actively and regularly engaged in
the business of lending money. Such a commitment must be a written approval
of a loan or grant (i.e., preliminary approval by the lender's loan committee)
and be subject only to conditions fully under the control of the Applicant
to satisfy (excluding the allocation of tax credits) (4 Points).
(9)
BONUS POINTS.
(A)
EXHIBIT 215. Label as Exhibit 215, evidence that Sponsor
agrees to provide a right of first refusal to purchase the Project upon or
following the end of the Compliance Period for the minimum purchase price
provided in, and in accordance with the requirements of, §42(i)(7) of
the Code (the "Minimum Purchase Price"), to a Qualified Nonprofit Organization;
the Department; and an individual tenant with respect to a single family building
or a tenant cooperative and/or a resident management corporation in the Project
or other association of tenants in the Project with respect to multifamily
developments (together, including the tenants of a single family building,
a "Tenant Organization"). Sponsor may qualify for this bonus by agreeing that
the LURA with respect to the Project will, in substance, contain the following
terms.
(i)
Upon the earlier to occur of:
(I)
the Sponsor's determination to sell the Project, or
(II)
the Sponsor's request to the Department, pursuant to §42(h)(6)(I)
of the Code, to find a buyer who will purchase the Project pursuant to a "qualified
contract" within the meaning of §42(h)(6)(F) of the Code, the Sponsor
shall provide a notice of intent to sell the Project ("Notice of Intent")
to the Department and to such other parties as the Department may direct at
that time. If the Sponsor determines that it will sell the Project at the
end of the Compliance Period, the Notice of Intent shall be given no later
than two years prior to expiration of the Compliance Period.
(ii)
During the two years following the giving of Notice of
Intent, the Sponsor may enter into an agreement to sell the Project only in
accordance with a right of first refusal for sale at the Minimum Purchase
Price with parties in the following order of priority:
(I)
during the first six-month period after the Notice of Intent,
only with a Qualified Nonprofit Organization that is also a community housing
development organization, as defined for purposes of the federal HOME Investment
Partnerships Program at 24 C.F.R. §92.1 (a "CHDO") and is approved by
the Department,
(II)
during the second six-month period after the Notice of
Intent, only with a Qualified Nonprofit Organization or a Tenant Organization;
and
(III)
during the second year after the Notice of Intent, only
with the Department or with a Qualified Nonprofit Organization approved by
the Department or a Tenant Organization approved by the Department.
(iii)
After the later to occur of:
(I)
the end of the Compliance Period; or
(II)
two years from delivery of a Notice of Intent, the Sponsor
may sell the Project without regard to any right of first refusal established
by the LURA if no offer to purchase the Project at or above the Minimum Purchase
Price has been made by a Qualified Nonprofit Organization, a Tenant Organization
or the Department, or a period of 120 days has expired from the date of acceptance
of such offer without the sale having occurred, provided that the failure
to close within such 120-day period shall not have been caused by the Sponsor
or matters related to the title for the Project.
(iv)
At any time prior to the giving of the Notice of Intent,
the Sponsor may enter into an agreement with one or more specific Qualified
Nonprofit Organizations and/or Tenant Organizations to provide a right of
first refusal to purchase the Project for the Minimum Purchase Price, but
any such agreement shall only permit purchase of the Project by such organization
in accordance with and subject to the priorities set forth in paragraph (ii)
of this subparagraph.
(v)
The Department shall, at the request of the Sponsor, identify
in the LURA a Qualified Nonprofit Organization or Tenant Organization which
shall hold a limited priority in exercising a right of first refusal to purchase
the Project at the Minimum Purchase Price, in accordance with and subject
to the priorities set forth in clause (ii) of this subparagraph (5 points).
(B)
Application is received within the first ten working days
of the Application Acceptance Period (2 points).
(d)
Final Ranking. The Department will evaluate Projects according
to the strength of the Project in meeting the Threshold and Selection Criteria.
In the event that two or more Applications receive the same number of points
in any given set-aside category, the Department in addition to factors outlined
in §50.4(h) of this title (relating to Applications; Environmental Assessments;
Market Study; Commitments; Extensions; Carryover Allocations; Agreements and
Elections; Extended Commitments) will utilize the following factors in the
order presented in paragraphs (1)-(7) of this subsection in making a determination
as to which Project will receive a preference in consideration for a tax credit
commitment:
(1)
which serve the lowest income tenants;
(2)
which serve low income tenants for the longest period
of time, in the form of a longer Compliance Period and/or extended low income
use period (as set forth in the Extended Low Income Housing Commitment Agreement);
(3)
which is a Special Housing Project as defined in §50.2
of this title (relating to Definitions);
(4)
which have substantial community support as evidenced
by the commitment of local public funds toward the construction, rehabilitation
and acquisition and subsequent rehabilitation of the Project;
(5)
which demonstrates the highest substantial readiness
to proceed as evidenced by the Selection Criteria, more specifically provided
for in subsection (c)(8) of this section;
(6)
which provide for the most efficient usage of the
low income housing tax credit on a per Unit basis; and
(7)
whose Unit composition provides the highest percentage
of three bedrooms or greater sized Units.
(e)
Past Performance. In reaching the final ranking of an Application,
the Department will take into consideration the Project Owner's history in
the tax credit program and other affordable housing programs. The Department
may disqualify from this Application Round, any Applicant, Project Owner,
developer and its partners, principals, and/or Affiliates who received an
allocation of credits in the 1998 Application Round and who did not close
the construction loan as required under the Carryover Allocation. The Department
may deduct up to ten points from the final score of any Applicant (or an Affiliate
of) which, in the past, has not placed into service developments for which
the Department has made an allocation, or from the score of a Project Owner
that has failed to perform under the obligations of any previous Commitment
Notice. The Department may, at its sole discretion disqualify or impose limitations
or restrictions upon an Applicant, Project Owner, developer, and its partners,
principals and/or Affiliates with respect to the competition for allocations
of tax credits as a consequence of material misstatement or omission, noncompliance
with any Code requirements, or failure to fulfill any of the terms, conditions
or obligations of the program for any Project that has received a commitment
or allocation, or for failure to place in service buildings for which credits
were allocated. The Department will disqualify an Applicant who has been convicted
of fraud, theft, misappropriation of funds, or who has made misrepresentations
to the Department. The Department will also disqualify an Applicant who is
in noncompliance with the LURA or other similar agreement for any Project
monitored by the Department, or who is in noncompliance under this program
or another program administered by this Department or other governmental entities
unless the Applicant is working to remedy the condition of noncompliance under
a plan which was agreed to in writing by the appropriate regulatory entity.
Additionally, Applicants are advised that the Department reserves the right
to reject Applications which include principals who have been:
(1)
excluded from federal and non federal procurement programs
(either debarment or suspension);
(2)
convicted of a felony offense;
(3)
indicted or subject to enforcement action under state
of federal securities law; and
(4)
negligent in the physical upkeep and/or operation
of the subject Property or any other property owned by the Applicant which
is receiving funds from the Department, as deemed so by another federal or
state authority. All such rejections of Applications shall be at the sole
discretion of the Department.
(f)
Credit Amount.
(1)
The Department shall issue tax credits only in the amount
needed for the financial feasibility and viability of a Project throughout
the Compliance Period. The issuance of tax credits or the determination of
any allocation amount in no way represents or purports to warrant the feasibility
or viability of the Project by the Department. The Department will limit the
allocation of tax credits to no more than $1.2 million per Project or $2.4
million per Applicant. For these purposes this limitation will apply to all
Affiliates of any Applicant, developer, Project Owner, general partner, sponsor
or their Affiliates or related entities unless otherwise provided for by the
Department. Tax Exempt Bond Project Applications are not subject to the per
Project and per Applicant credit limitations.
(2)
In making determinations with respect to the limitation
the Department may take into account such factors as the percentage of interest
held by a particular individual or any Affiliate thereof in a Project, the
amount of fees or other compensations paid to a particular individual or any
Affiliate thereof with respect to a Project, any other financial benefits,
either directly or indirectly through Beneficial Ownership received by a particular
individual or any Affiliate thereof with respect to a Project. The Committee,
in its sole discretion, may allocate credits to a Project Owner in addition
to those awarded at the time of the initial Carryover Allocation in instances
where there is bona fide substantiation of cost overruns and the Department
has made a determination that the allocation is needed to maintain the Project's
financial viability as a qualified low income Project. The limitation does
not apply:
(A)
to an entity which raises or provides equity for one or
more Projects, solely with respect to its actions in raising or providing
equity for such Projects (including syndication related activities as agent
on behalf of investors);
(B)
to the provision by an entity of "qualified commercial
financing" within the meaning of the Code, §49(a)(1)(D)(ii) (without
regard to the 80% limitation thereof);
(C)
to a Qualified Nonprofit Organization or other not-for-profit
entity, to the extent that the participation in a Project by such organization
consists of the provision of loan funds or grants; and
(D)
to a Project Consultant with respect to the provision of
consulting services.
(g)
Limitations on the Size of Projects.
(1)
Minimum Project size will be limited to 16 units unless
otherwise provided for under the Ineligible Building Types definition.
(2)
Rural Projects involving new construction must not
exceed 76 Units. All other Projects involving new construction or requesting
a combination of rehabilitation and new construction tax credits will be limited
to 250 Units (248 Units if fourplexes).
(h)
Tax Exempt Bond Financed Projects.
(1)
Tax Exempt Bond Project Applications are also subject to
evaluation under the QAP and Rules.
(2)
Submission Requirements. Tax Exempt Bond Project Applications
are subject to the requirements and underwriting review criteria described
in the Application Submission Procedures Manual. Such projects must meet all
Threshold Criteria requirements stipulated in the most recently approved QAP
and Rules. Tax Exempt Bond Financed Projects are not subject to the Selection
Criteria and related items and are not required to submit such documentation.
While Tax Exempt Bond Developments are not subject to the Selection Criteria,
such Projects must demonstrate consistency with the bond issuer's local Consolidated
Plan as more fully described in §50.6(c)(L), Exhibit 207.
(3)
Tax Exempt Bond Project Applications are subject to
the size restrictions specified in §50.6(g).
(4)
The issuer (if other than the Department) may, at
its discretion, enter into a contractual agreement to allow the Department
to underwrite the Project for financial feasibility If the Department is not
the issuer and does not have such an agreement, it will require evidence that
the issuer has underwritten the Project for financial feasibility in accordance
with the Department's guidelines contained in the Reference Manual. The Department
will review the issuer's feasibility determination and may make such changes
in the amount of credits to be taken as are appropriate under those guidelines.
In the absence of a contractual agreement between the issuer and the Department
or evidence that the issuer has underwritten the Project, the Department will
underwrite the Project and may make such changes in the amount of credits
to be taken as are appropriate under the Department's guidelines.
(5)
Tax Exempt Bond Project Applications are subject to
review and approval by the Ad Hoc Tax Credit Committee of the concentration
of low income Projects within specific markets or submarkets, geographic dispersion
of multifamily housing in any particular market or submarket and site conditions.
(6)
If the Department determines that all requirements
have been met, the Ad Hoc Tax Credit Committee, without further action, shall
authorize the Department to issue an appropriate notice to the Sponsor that
the Project satisfies the requirements of the QAP and Rules in accordance
with §42(m)(1)(D).
(i)
Adherence to Obligations. All representations, undertakings
and commitments made by an Applicant in the applications process for a Project,
whether with respect to Threshold Criteria, Selection Criteria or otherwise,
shall be deemed to be a condition to any Commitment Notice, Determination
Notice, or Carryover Allocation for such Project, the violation of which shall
be cause for cancellation of such Commitment Notice, Determination Notice,
or Carryover Allocation by the Department, and if concerning the ongoing features
or operation of the Project, shall be reflected in the LURA. All such representations
are enforceable by the Department, including enforcement by administrative
penalties for failure to perform as stated in the representation and enforcement
by inclusion in deed restrictions to which the Department is a party.
§50.7.Compliance Monitoring.
(a)
The Code, §42(m)(1)(B)(iii), requires each State Allocating
Agency to include in its "Qualified Allocation Plan" a procedure that the
agency (or an agent or other private Contractor of such agency) will follow
in monitoring Projects for noncompliance with the provisions of the Code,
§42 and in notifying the Internal Revenue Service (the "Service"), or
its successor, of such noncompliance of which such agency becomes aware. This
procedure does not address forms and other records that may be required by
the Service on examination or audit.
(b)
The Department will also monitor compliance with any additional
covenants made by the Project Owner in the Extended Low Income Housing Commitment
Agreement.
(c)
The owner of a low income housing Project must keep records
for each qualified low income building in the Project showing:
(1)
the total number of residential rental Units in the building
(including the number of bedrooms and the size in square feet of each residential
rental Unit);
(2)
the percentage of residential rental Units in the
building that are low income Units;
(3)
the rent charged on each residential rental Unit in
the building including documentation to support the utility allowance;
(4)
the number of occupants in each low income Unit;
(5)
the low income Unit vacancies in the building and
information that shows when, and to whom, the next available Units were rented;
(6)
the annual income certification of each low income
tenant per Unit, in the form designated by the Department in the Compliance
Reference Guide, as may be amended;
(7)
documentation to support each low income tenant's
income certification, consistent with the verification procedures required
by HUD under §8 of the United States Housing Act of 1937 (§8). In
the case of a tenant receiving housing assistance payments under §8,
the documentation requirement is satisfied if the public housing authority
provides a statement to the Project Owner declaring that the tenant's income
does not exceed the applicable income limit under the Code, §42(g) as
described in the Compliance Reference Guide;
(8)
the Eligible Basis and Qualified Basis of the building
at the end of the first year of the Credit Period;
(9)
the character and use of the nonresidential portion
of the building included in the building's Eligible Basis under the Code,
§42(d), (e.g. tenant facilities that are available on a comparable basis
to all tenants and for which no separate fee is charged for use of the facilities,
or facilities reasonably required by the Project); and
(10)
additional information as required by the Department.
(d)
Record retention provision. The owner of a low income housing
Project is required to retain the records described in subsection (c) of this
section for at least six years after the due date (with extensions) for filing
the federal income tax return for that year; however, the records for the
first year of the tax Credit Period must be retained for at least six years
beyond the due date (with extensions) for filing the federal income tax return
for the last year of the Compliance Period of the building.
(e)
Certification and Review.
(1)
On or before February 1st of each year, the Department
will send each Project Owner of a completed Project an Owner's Certification
of Program Compliance to be completed by the Owner and returned to the Department
on or before the first day of March of each year in the Compliance Period.
Any Project for which the certification is not received by the Department,
is received past due, or is incomplete, improperly completed or not signed
by the Project Owner, will be considered not in compliance with the provisions
of the Code. The Owner Certification of Program Compliance shall cover the
proceeding calendar year and shall include the following statements of the
Owner:
(A)
the Project met the minimum set-aside test which was applicable
to the Project;
(B)
there was no change in the Applicable Fraction of any building
in the Project, or that there was a change, and a description of the change;
(C)
the owner has received an annual income certification from
each low income tenant and documentation to support that certification;
(D)
each low income Unit in the Project was rent-restricted
under the Code, §42(g)(2) and Internal Revenue Service Final Regulation
§1.42 - 10 regarding utility allowances;
(E)
all Units in the Project were for use by the general public
and used on a non-transient basis (except for transitional housing for the
homeless provided under the Code, §42(i)(3)(B)(iii));
(F)
each building in the Project was suitable for occupancy,
taking into account local health, safety, and building codes;
(G)
either there was no change in the Eligible Basis (as defined
in the Code, §42(d)) of any building in the Project, or that there has
been a change, and the nature of the change;
(H)
all tenant facilities included in the Eligible Basis under
the Code, §42(d), of any building in the Project, such as swimming pools,
other recreational facilities, and parking areas, were provided on a comparable
basis without charge to all tenants in the building;
(I)
if a low income Unit in the Project became vacant during
the year, reasonable attempts were, or are being, made to rent that Unit or
the next available Unit of comparable or smaller size to tenants having a
qualifying income before any other Units in the Project were, or will be,
rented to tenants not having a qualifying income;
(J)
if the income of tenants of a low income Unit in the Project
increased above the limit allowed in the Code, §42(g)(2)(D)(ii), the
next available Unit of comparable or smaller size in the Project was, or will
be, rented to tenants having a qualifying income;
(K)
a LURA including an extended low income housing commitment
agreement as described in the Code, §42(h)(6)(B), was in effect for buildings
subject to the Revenue Reconciliation Act of 1989, §7106(c)(1) (generally
any building receiving an allocation after 1989);
(L)
no change in the ownership of a Project has occurred during
the reporting period;
(M)
the Project Owner has not been notified by the Internal
Revenue Service that the Project is no longer "a qualified low income housing
project" within the meaning of the Code, §42; and
(N)
the Project met all terms and conditions which were recorded
in the LURA, or if no LURA was required to be recorded, the Project met all
representations of the Project Owner in the Application for credits.
(2)
Review.
(A)
The Department will review each Owner's Certification of
Program Compliance for compliance with the requirements of the Code, §42.
(B)
Each year, the Department will perform monitoring reviews
of at least 20% of the low income housing Projects. A monitoring review will
include an inspection of the income certification, the documentation the Project
Owner has received to support that certification, the rent record for each
low income tenant, and any additional information that the Department deems
necessary, for at least 20% of the low income Units in those Projects. The
Department shall give reasonable notice to the Project Owner that an inspection
will occur; however, the Projects and records to be reviewed will be selected
by the Department in its discretion. Monitoring reviews will be performed
at the location of the Project, unless the Project is required to have fewer
than ten low income Units.
(C)
The Department may, at the time and in the form designated
by the Department, require the Project Owners to submit for compliance review,
information on tenant income and rent for each low income Unit, and may require
a Project Owner to submit for compliance review a copy of the income certification,
the documentation the Project Owner has received to support that certification
and the rent record for any low income tenant.
(3)
Exception. The Department may, at its discretion,
enter into a Memorandum of Understanding with the TxRD, whereby the TxRD agrees
to provide to the Department information concerning the income and rent of
the tenants in buildings financed by the TxRD under its §515 program.
Owners of such buildings may be excepted from the review procedures of paragraph
(2)(B) or (C) of this subsection or both; however, if the information provided
by TxRD is not sufficient for the Department to make a determination that
the income limitation and rent restrictions of the Code, §42(g)(1) and
(2), are met, the Project Owner must provide the Department with additional
information.
(f)
Inspection provision. The Department retains the right
to perform an on site inspection of any low income housing Project including
all books and record pertaining thereto through either the end of the Compliance
Period or the end of the period covered by any Extended Low Income Housing
Commitment Agreement, whichever is later. An inspection under this subsection
may be in addition to any review under subsection (e)(2) of this section.
(g)
Notices to Owner. The Department will provide prompt written
notice to the owner of a low income housing Project if the Department does
not receive the certification described in subsection (e)(1) of this section
or discovers through audit, inspection, review or any other manner, that the
Project is not in compliance with the provisions of the Code, §42. The
notice will specify a correction period which will not exceed 90 days, during
which the owner may respond to the Department's findings, bring the Property
into compliance, or supply any missing certifications. The Department may
extend the correction period for up to six months if it determines there is
good cause for granting an extension. If any communication to the Project
Owner under this section is returned to the Department as unclaimed or undeliverable,
the Project may be considered not in compliance without further notice to
the Project Owner.
(h)
Notice to the Internal Revenue Service.
(1)
Regardless of whether the noncompliance is corrected, the
Department is required to file IRS Form 8823, Low Income Housing Credit Agencies
Report of Noncompliance, with the Internal Revenue Service. IRS Form 8823
will be filed not later than 45 days after the end of the correction period
specified in the Notice to Owner, but will not be filed before the end of
the correction period. The Department will explain on IRS Form 8823 the nature
of the noncompliance and will indicate whether the Project Owner has corrected
the noncompliance or has otherwise responded to the Department's findings.
(2)
The Department will retain records of noncompliance
or failure to certify for six years beyond the Department's filing of the
respective IRS Form 8823. In all other cases, the Department will retain the
certification and records described in this section for three years from the
end of the calendar year the Department receives the certifications and records.
(i)
Notices to the Department.
(1)
A Project Owner must notify the Department in writing prior
to any sale, transfer, exchange, or renaming of the Project or any portion
of the Project, and this notification requirement shall be included in a LURA
with respect to each Project. For Rural Projects that are federally assisted
or purchased from HUD, the Department shall not authorize the sale of any
apportionment of the entire tax credit development.
(2)
A Project Owner must notify the Department in writing
of any change of address to which subsequent notices or communications shall
be sent.
(j)
Liability. Compliance with the requirements of the Code,
§42 is the sole responsibility of the owner of the building for which
the credit is allowable. By monitoring for compliance, the Department in no
way assumes any liability whatsoever for any action or failure to act by the
owner including the owner's noncompliance with the Code, §42.
(k)
These provisions apply to all buildings for which a low
income housing credit is, or has been, allowable at any time. The Department
is not required to monitor whether a building or Project was in compliance
with the requirements of the Code, §42, prior to January 1, 1992. However,
if the Department becomes aware of noncompliance that occurred prior to January
1, 1992, the Department is required to notify the Service in a manner consistent
with subsection (g) of this section.
§50.8.Housing Credit Allocations.
(a)
The Housing Credit Allocation Amount shall not exceed the
dollar amount the Department determines is necessary for the financial feasibility
and the long term viability of the Project throughout the Compliance Period.
Such determination shall be made by the Department at the time of issuance
of the Commitment Notice or Determination Notice; at the time the Department
makes a housing credit allocation; and/or the date the building is placed
in service. Any housing credit allocation amount specified in a Commitment
Notice, Determination Notice or Carryover Allocation Document is subject to
change by the Department dependent upon such determination. Such a determination
shall be made by the Department based on its evaluation and procedures, considering
the items specified in the Code, §42(m)(2)(B), AND THE DEPARTMENT IN
NO WAY OR MANNER REPRESENTS OR WARRANTS TO ANY PROJECT OWNER, SPONSOR, INVESTOR,
LENDER OR OTHER ENTITY THAT THE PROJECT IS, IN FACT, FEASIBLE OR VIABLE.
(b)
When the Project Owner is in full compliance with the QAP
and the Rules in this chapter, the Commitment Notice, the Carryover Allocation
Procedures Manual and all fees as specified within §50.11 of this title
(relating to Program Fees) have been received by the Department, the Department,
if requested, shall execute a Carryover Allocation Document which has been
properly completed, executed and notarized by the Project Owner. The Department
shall return one executed copy to the Project Owner. Requirements for Carryover
Allocations apply only to projects which receive an allocation from the State
Housing Credit Ceiling.
(c)
The General Contractor hired by the Project Owner must
meet specific criteria as defined by the Seventy-fifth Legislature. A general
contractor hired by an applicant or an applicant , if the applicant serves
as general contractor must demonstrate a history of constructing similar types
of housings without the use of federal tax credits. Evidence must be submitted
to the Department which sufficiently documents that the general contractor
has constructed some housing without the use of low income housing credits.
This documentation will be required as a condition of the commitment notice
or carryover agreement, and must be complied with prior to commencement of
construction and at cost certification and final allocation of credits.
(d)
All Carryover Allocations will be contingent upon the following:
(1)
the Project Owner's closing of the construction loan shall
occur within 150 days from the date of the execution of the Carryover Allocation
Document with a one-time 30 day extension. All requests for extensions by
Applicants shall be submitted to the Department for review. The Committee
may grant extensions, in its sole discretion, on a case-by-case basis. The
Committee may, in its sole discretion, waive related fees. Copies of the closing
documents must be submitted to the Department within two weeks after the closing.
The Carryover Allocation will automatically be revoked if the Project Owner
fails to meet the aforementioned closing deadline, and all credits previously
allocated to that Project will be returned to the general pool for reallocation;
and
(2)
the Project Owner must commence and continue substantial
construction activities within a year of the execution of the Carryover Allocation
document and evidence such activity in a format prescribed by the Department,
(as more fully defined in the Carryover Allocation Procedures Manual), outlining
progress towards placing the Project in service in an expeditious manner.
All requests for extensions by Applicants shall be submitted to the Department
for review, and the Committee may grant extensions, in its sole discretion,
on a case-by-case basis.
(e)
The Department shall not allocate additional credits to
a Project Owner who is unable to provide evidence, satisfactory to the Department,
of progress towards placements in service for a Project(s) that is in carryover
or that has received a Determination Notice. An allocation will be made in
the name of the Applicant identified in the related Commitment Notice or Determination
Notice. If an allocation is made in the name of the party expected to be the
general partner in an eventual owner partnership, the Department may, upon
request, approve a transfer of allocation to such owner partnership in which
such party is the sole general partner. Any other transfer of an allocation
will be subject to review and approval by the Department. The approval of
any such transfer does not constitute a representation to the effect that
such transfer is permissible under the Code or without adverse consequences
thereunder, and the Department may condition its approval upon receipt and
approval of complete documentation regarding the new owner including all the
criteria for scoring, evaluation and underwriting, among others, which were
applicable to the original Applicant
(f)
The Department shall make a housing credit allocation,
either in the form of IRS Form 8609, with respect to current year allocations
for buildings placed in service, or in the Carryover Allocation Document,
for buildings not yet placed in service, to any Project Owner who holds a
Commitment Notice which has not expired, and for which all fees as specified
in §50.11 of this title (relating to Program Fees), have been received
by the Department. For Tax Exempt Bond Projects, the Housing Credit Allocation
shall be made in the form of a Determination Notice. For an IRS Form 8609
to be issued with respect to a building in a Project with a Housing Credit
Allocation, satisfactory evidence must be received by the Department that
such building is completed and has been placed in service in accordance with
the provisions of the Department's Cost Certification Procedures Manual. The
Department shall mail or deliver IRS Form 8609 (or any successor form adopted
by the Internal Revenue Service) to the Project Owner, with Part I thereof
completed in all respects and signed by an authorized official of the Department.
The delivery of the IRS Form 8609 will only occur only after the Project Owner
has complied with all procedures and requirements listed within the Cost Certification
Procedures Manual. Regardless of the year of Application to the Department
for low income housing tax credits, the current year's Cost Certification
Procedures Manual must be utilized when filing all cost certification requests.
A separate housing credit allocation shall be made with respect to each building
within a Project which is eligible for a housing credit; provided, however,
that where an allocation is made pursuant to a Carryover Allocation Document
on a project basis in accordance with the Code, §42(h)(1)(F), a housing
credit dollar amount shall not be assigned to particular buildings in the
Project until the issuance of IRS Form 8609s with respect to such buildings.
(g)
In making a housing credit allocation, the Department shall
specify a maximum Applicable Percentage, not to exceed the Applicable Percentage
for the building permitted by the Code, §42(b), and a maximum Qualified
Basis amount. In specifying the maximum applicable percentage and the maximum
Qualified Basis amount, the Department shall disregard the first-year conventions
described in the Code, §42(f)(2)(A) and §42(f)(3)(B). The housing
credit allocation made by the Department shall not exceed the amount necessary
to support the extended low income housing commitment as required by the Code,
§42(h)(6)(C)(i).
(h)
Project inspections shall be required to show that the
Project is built or rehabilitated according to required plans and specifications.
At a minimum, all Project inspections must include an inspection for quality
during the construction process while defects can reasonably be corrected
and a final inspection at the time the Project is placed in service. All such
Project inspections shall be performed by the Department or by an independent,
third party inspector acceptable to the Department. The Project Owner shall
pay all fees and costs of said inspections.
(i)
After the entire Project is placed in service, which must
occur prior to the deadline specified in the Carryover Allocation Document,
the Project Owner shall be responsible for furnishing the Department with
documentation which satisfies the requirements set forth in the Cost Certification
Procedures Manual. A newly constructed or rehabilitated building is not placed
in service until all units in such building have been completed and certified
by the appropriate local authority or registered architect as ready for occupancy.
The Cost Certification must be submitted for the entire project, therefore
partial Cost Certifications are not allowed. The Department may require copies
of invoices and receipts and statements for materials and labor utilized for
the new construction or rehabilitation and, if applicable, a closing statement
for the acquisition of the Project as well as for the closing of all interim
and permanent financing for the Project. If the Applicant does not fulfill
all representations made in the Application, the Department may make reasonable
reductions to the tax credit amount allocated via the IRS Form 8609 or may
withhold issuance of the IRS Form 8609s until these representations are met.
§50.9.Department Records; Certain Required Filings.
(a)
At all times during each calendar year the Department shall
maintain a record of the following:
(1)
the cumulative amount of the State Housing Credit Ceiling
that has been reserved pursuant to reservation notices during such calendar
year;
(2)
the cumulative amount of the State Housing Credit
Ceiling that has been committed pursuant to Commitment Notices during such
calendar year;
(3)
the cumulative amount of the State Housing Credit
Ceiling that has been committed pursuant to Carryover Allocation Documents
during such calendar year;
(4)
the cumulative amount of housing credit allocations
made during such calendar year; and
(5)
the remaining unused portion of the State Housing
Credit Ceiling for such calendar year.
(b)
Not less frequently than quarterly during each calendar
year, the Department shall publish in the
Texas Register
each of the items of information referred to in subsection (a) of
this section.
(c)
The Department shall mail to the Internal Revenue Service,
not later than the 28th day of the second calendar month after the close of
each calendar year during which the Department makes housing credit allocations,
the original of each completed (as to Part I) IRS Form 8609, a copy of which
was mailed or delivered by the Department to a Project Owner during such calendar
year, along with a single completed IRS Form 8610, Annual Low Income Housing
Credit Agencies Report. When a Carryover Allocation is made by the Department,
a copy of IRS Form 8609 will be mailed or delivered to the Project Owner by
the Department in the year in which the building(s) is placed in service,
and thereafter the original will be mailed to the Internal Revenue Service
in the time sequence in this subsection. The original of the Carryover Allocation
Document will be filed by the Department with IRS Form 8610 for the year in
which the allocation is made. The original of all executed Agreement and Election
Statements shall be filed by the Department with the Department's IRS Form
8610 for the year a housing credit allocation is made as provided in this
section.
§50.10.Department Responsibilities.
In making a housing credit allocation under this chapter, the Department
shall rely upon information contained in the Project Owner's Application to
determine whether a building is eligible for the credit under the Code, §42.
The Project Owner shall bear full responsibility for claiming the credit and
assuring that the Project complies with the requirements of the Code, §42.
The Department shall have no responsibility for ensuring that a Project Owner
who receives a housing credit allocation from the Department will qualify
for the housing credit. The Department will reject, and consider barring the
Project Owner from future participation in the Department's tax credit program
as a consequence thereof, any Application in which fraudulent information,
knowingly false documentation or other misrepresentation has been provided.
The aforementioned policy will apply at any stage of the evaluation or approval
process.
§50.11.Program Fees.
(a)
Each Project Owner that submits an Application shall submit
to the Department, along with such Application, a non refundable Application
fee, as set forth in the Application Submission Procedures Manual.
(b)
For each Project that is to be evaluated by an independent
third party underwriter in accordance with §50.6(b)(3) of this title
(relating to Threshold Criteria; Evaluation Factors; Selection Criteria; Final
Ranking; Credit Amount; Tax Exempt Bond Financed Projects), the Project Owner
will be so informed in writing prior to the commencement of any reviews by
said underwriter. The cost for the third party underwriting will be set forth
in the Application Submission Procedures Manual, and must be received by the
Department prior to the engagement of the underwriter. The fees paid by the
Project Owner to the Department for the third party underwriting will be credited
against the commitment fee established in subsection (c) of this section,
in the event that a Commitment Notice or Determination Notice is issued by
the Department to the Project Owner.
(c)
Each Project Owner that receives a Commitment Notice or
Determination Notice shall submit to the Department, not later than the expiration
date on the commitment billing notice, a non refundable commitment fee, as
set forth in the Application Submission Procedures Manual. The commitment
fee shall be paid by cashier's check. Projects located within one of the targeted
Texas counties, as indicated in the Reference Manual, will be exempt from
the requirement to pay a commitment fee, in the event that Commitment Notice
is issued.
(d)
Each Project Owner that requests an extension of the expiration
date of a Commitment Notice, or an extension of the documentation submission
date for Carryover, Closing of Construction Loan, Substantial Construction
Commencement, Placed in Service and Cost Certification, shall submit to the
Department, along with such request, a non refundable extension fee. The amount
of the extension fee shall be set forth in the Application Submission Procedures
Manual. This fee shall be paid by cashier's check and shall be submitted as
discussed in §50.12 of the QAP and Rules. All extensions shall be granted
at the discretion of the Department.
(e)
Upon the Project being placed in service, the Project Owner
will pay a compliance monitoring fee in the form of a cashier's check, as
set forth in the Application Submission Procedures Manual. The compliance
monitoring fee must be received by the Department prior to the release of
the IRS Form 8609 on the Project.
(f)
Public information requests are processed by the Department
in accordance with the provisions of Texas Civil Statutes, Article 6252-17a,
codified as Government Code, Chapter 552, and as amended by the Acts during
the 73rd Legislature, and as may be amended from time to time. The General
Services Commission and the Department determine the cost of copying, and
other costs of production.
(g)
The amounts of the Application fee, commitment fee, compliance
monitoring fee, administrative fees, extension fee, and other applicable fees
as specified in the Application Submission Procedures Manual will be revised
by the Department from time to time as necessary to ensure that such fees
compensate the Department for its administrative costs and expenses.
§50.12.Manner and Place of Filing Applications.
(a)
All Applications, letters, documents, or other papers filed
with the Department will be received only between the hours of 8:00 a.m. and
5:00 p.m. on any day which is not a Saturday, Sunday or a holiday established
by law for state employees.
(b)
All Applications and related documents submitted to the
Department shall be mailed or delivered to Low Income Housing Tax Credit Program,
Texas Department of Housing and Community Affairs, 507 Sabine, Suite 400,
Austin, Texas 78701.
§50.13.Withdrawals, Cancellations, Amendments.
(a)
A Project Owner may withdraw an Application prior to receiving
a Commitment Notice, Determination Notice, Carryover Allocation Document or
Housing Credit Allocation, or may cancel a Commitment Notice or Determination
Notice by submitting to the Department a notice, as applicable, of withdrawal
or cancellation.
(b)
The Department may consider an amendment to a Commitment
Notice, Determination Notice or Carryover Allocation or other requirement
with respect to a Project if the revisions:
(1)
are consistent with the Code and the tax credit program;
(2)
do not occur while the Project is under consideration
for tax credits;
(3)
do not involve a change in the number of points scored
(unless the Project's ranking is adjusted because of such change);
(4)
do not involve a change in the Project's site; or
(5)
do not involve a change in the set-aside election.
(c)
The Department may cancel a Commitment Notice, Determination
Notice or Carryover Allocation prior to the issuance of IRS Form 8609 with
respect to a Project if:
(1)
the Project Owner or any member of the Development Team,
or the Project, as applicable, fails to meet any of the conditions of such
Commitment Notice or Carryover Allocation or any of the undertakings and commitments
made by the Project Owner in the applications process for the Project;
(2)
any statement or representation made by the Project
Owner or made with respect to the Project Owner, the Development Team or the
Project is untrue or misleading;
(3)
an event occurs with respect to any member of the
Development Team which would have made the Project's Application ineligible
for funding pursuant to §50.4(f) of this title (relating to Applications;
Environmental Assessments; Market Study; Commitments; Extensions; Carryover
Allocations; Agreements and Elections; Extended Commitments), if such event
had occurred prior to issuance of the Commitment Notice or Carryover Allocation;
or
(4)
the Project Owner, any member of the Development Team,
or the Project, as applicable, fails to comply with these Rules or the procedures
or requirements of the Department.
§50.14.Waiver and Amendment of Rules.
(a)
The Board, in its discretion, may waive any one or more
of these Rules in cases of natural disasters such as fires, hurricanes, tornadoes,
earthquakes, or other acts of nature as declared by Federal or State authorities.
(b)
The Department may amend this chapter and the Rules contained
herein at any time in accordance with the provisions of Texas Civil Statutes,
Article 6252-13a, codified as Government Code, Chapter 2001, and as amended
by the Acts of the Seventy-third Legislature, and as may be amended from time
to time.
§50.15.Forward Reservations; Binding Commitments.
(a)
Anything in §50.4 of this title (relating to Applications;
Environmental Assessments; Market Study; Commitments; Extensions; Carryover
Allocations; Agreements and Elections; Extended Commitments) or elsewhere
in this chapter to the contrary notwithstanding, the Department with approval
of the Board may determine to issue commitments of tax credit authority with
respect to Projects from the State Housing Credit Ceiling for the calendar
year following the year of issuance (each a "forward commitment"). The Department
may make such forward commitments:
(1)
with respect to Projects placed on a waiting list in any
previous Application Round during the year; or
(2)
pursuant to an additional Application Round.
(b)
If the Department determines to make forward commitments
pursuant to a new Application Round, it shall provide information concerning
such round in the
Texas Register
. In inviting
and evaluating Applications pursuant to an additional Allocation Round, the
Department may waive or modify any of the set-asides set forth in §50.5(a)
and (b) of this title (relating to Set-Asides, Commitments and Preferences)
and make such modifications as it determines appropriate in the Threshold
Criteria, evaluation factors and Selection Criteria set forth in §50.6
of this title (relating to Threshold Criteria, Evaluation Factors; Selection
Criteria; Final Ranking; Credit Amount; Tax Exempt Bond Financed Projects)
and in the dates and times by which actions are required to be performed under
this chapter. The Department may also, in an additional Application Round,
include Projects previously evaluated within the calendar year and rank such
Projects together with those for which Applications are newly received.
(c)
Unless otherwise provided in the Commitment Notice with
respect to a Project selected to receive a forward commitment or in the announcement
of an Application Round for Projects seeking a forward commitment, actions
which are required to be performed under this chapter by a particular date
within a calendar year shall be performed by such date in the calendar year
of the anticipated allocation rather than in the calendar year of the forward
commitment.
(d)
Any forward commitment made pursuant to this section shall
be made subject to the availability of State Housing Credit Ceiling in the
calendar year with respect to which the forward commitment is made. No more
than 15% of the per capita component of State Housing Credit Ceiling anticipated
to be available in the State of Texas in a particular year shall be allocated
pursuant to forward commitments to Project Applications carried forward without
being ranked in the new Application Round pursuant to subsection (f) of this
section. If a forward commitment shall be made with respect to a Project placed
in service in the year of such commitment, the forward commitment shall be
a "binding commitment" to allocate the applicable credit dollar amount within
the meaning of the Code, §42(h)(1)(C).
(e)
If tax credit authority shall become available to the Department
later in a calendar year in which forward commitments have been awarded, the
Department may allocate such tax credit authority to any eligible Project
which received a forward commitment, in which event the forward commitment
shall be canceled with respect to such Project.
(f)
In addition to or in lieu of making forward commitments
pursuant to subsection (a) of this section, the Department may determine to
carry forward Project Applications on a waiting list or otherwise received
and ranked in any Application Round within a calendar year to the subsequent
calendar year, requiring such additional information, Applications and/or
fees, if any, as it determines appropriate. Project Applications carried forward
may, within the discretion of the Department, either be awarded credits in
a separate allocation round on the basis of rankings previously assigned or
may be ranked together with Project Applications invited and received in a
new Application Round. The Department may determine in a particular calendar
year to carry forward some Project Applications under the authority provided
in this subsection, while issuing forward commitments pursuant to subsection
(a) of this section with respect to others.
§§50.16.Deadlines for Allocation of Low Income Housing Tax Credits.
(a)
Not later than November 15 of each year, the Department
shall prepare and submit to the Board for adoption the draft Qualified Allocation
Plan required by federal law for use by the Department in setting criteria
and priorities for the allocation of tax credits under the low income housing
tax credit program.
(b)
The Board shall adopt and submit to the governor the Qualified
Allocation Plan not later than January 31.
(c)
The governor shall approve, reject, or modify and approve
the Qualified Allocation Plan not later than February 28.
(d)
An Applicant for a low income housing tax credit to be
issued a Commitment Notice during the initial Application Round in a calendar
year must submit an Application to the Department not later than May 15.
(e)
The Board shall authorize the Department to issue a Commitment
Notice for allocation for the initial Application Round of low income housing
tax credits each year in accordance with the Qualified Allocation Plan not
later than July 31.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on February
11, 1999.
TRD-9900886
Daisy A. Stiner
Executive Director
Texas Department of Housing and Community Affairs
Effective date: March 3, 1999
Proposal publication date: December 4, 1998
For further information, please call: (512) 475-3726