REST Easy With Mahoney October 2023

Important News for the Affordable Housing Industry

Applicable Federal Rates (AFR)

Index of Applicable Federal Rates

 AnnualMonthly
Short-Term5.07%4.96%
Mid-Term4.09%4.02%
Long-Term4.03%3.96%
 AnnualMonthly
Short-Term5.12%5.01%
Mid-Term4.19%4.11%
Long-Term4.19%4.11%
 AnnualMonthly
Short-Term5.22%5.10%
Mid-Term4.43%4.34%
Long-Term4.46%4.37%
 AnnualMonthly
Short-Term5.30%5.17%
Mid-Term4.69%4.60%
Long-Term4.83%4.72%

Upcoming Deadlines

By Kyle Krenske

MHFA
Carryover Application: 11/1/2023
Final CPA Certifications: 5/1/2024

CPED/St. Paul PED
Carryover Application: 11/1/2023
Final CPA Certifications: 5/1/2024

Dakota County CDA
Carryover Application: 10/16/2023
Final CPA Certification: 10/1/2024

Washington County CDA
Carryover Application: 10/2/2023
Final CPA Certifications: 5/1/2024

Other
MMB applications are due the first Monday in January.

Housing pool allocation: Commencing on the second Tuesday in January and continuing on each Monday through the last Monday in June, the commissioner shall allocate available bonding authority from the housing pool to applications received on or before the Monday of the preceding week for residential rental projects that meet the eligibility criteria under section 474A.047.

Individual and C Corp Tax Return Due Date with Extension: 10/16/2023

Federal & State Updates

By Will Bates

Bonus Investment Tax Credits
The IRS, Department of Energy and the Department of the Treasury announced that applications for low-income communities bonus investment tax credits (ITCs) will open on October 19th at 9 a.m. ET.

The Department of Energy (DOE) and the U.S. Department of the Treasury hosted a virtual informational webinar for potential applicants on September 29, 2023, that was published on YouTube and can be found through a link on the DOE website: https://www.energy.gov/diversity/low-income-communities-bonus-credit-program. Previously, the IRS had released on August 10, 2023 final regulations and Revenue Procedure 2023-27 to address the administration and interpretation of Section 48(e) and the application process for the bonus credit.

The low-income communities bonus program grants a 10% or 20% bonus credit for solar or wind ITCs in low-income communities. This bonus program was a provision in the Inflation Reduction Act of 2022 that allows for the allocation of 700 megawatts of capacity this year through a competitive application process. Depending on the volume of applications, applications for the 2023 bonus credits will be accepted through early 2024.

Updated § 45L New Energy Efficient Home Credit Guidance
On September 27, 2023, The Revenue Service (IRS) issued Notice 2023-65, which contained guidance for taxpayers on the § 45L credit as amended by the IRA. The ENERGY STAR program versions eligible for the § 45L credit were clarified and indicated a shift away from the IECC 2006 standards and towards the current ENERGY STAR standards and the DOE’s Zero Energy Ready Homes Program (ZERH) standards. This switch to current ENERGY STAR standards removes the 3-story limit previously in place for an ENERGY STAR qualifying project (now any height qualifies). Also, the ZERH has a 5-story limit for permits issued before 1-1-2024 and any height for permits issued after 1-1-2024.

New IRS Group Focused on Passthroughs Announced
The IRS announced plans to establish a special pass-through group to focus on large or complex pass-through entities in a press release on September 20, 2023. This new unit will focus on legal entities taxed as Partnerships and S corporations and will be housed in the IRS Large Business and International (LB&I) division. This is part of a larger compliance effort to focus on adding more attention and expanded enforcement to high-income and high-wealth individuals and passthrough entities that have had historically low audit rates and where noncompliance has proliferated over the last decade of IRS budget cuts according to the IRS announcement.

Historic Tax Credit- Updated NPS Guidance on Replacement Materials
The National Park Service (NPS) issued updated guidance on October 5, 2023 on the use of substitute materials in rehabilitated building exteriors while using the federal historic tax credit (HTC). While this guidance does not change the criteria by which NPS will evaluate a proposed project, it may be helpful to a developer and/or historic consultant to provide a decision-making path in the use of substitute materials that may be used as replacement materials in a building exterior. Further details can be found in Preservation Brief 16: The Use of Substitute Materials on Historic Building Exteriors on the NPS website.

By Will Bates

State Housing Tax Credit- Now Accepting Applications
Minnesota Housing (MN Housing) is now accepting applications for the State Housing Tax Credit to encourage investment in affordable housing throughout Minnesota. The State of Minnesota is offering a tax credit to eligible taxpayers equal to 85% of the amount contributed by the taxpayer to the Minnesota Housing tax credit contribution account during the taxable year. The minimum amount a taxpayer may contribute is $1,000 and the maximum amount is $2,000,000 per taxable year. Applications must be received by December 8th and once accepted, contributions received by December 29th. For more information, visit MN Housing’s website or see our detailed article below: Minnesota State Housing Tax Credit

Empowering Women in the Affordable Housing Industry

By Anjelica Smith

Women’s Affordable Housing Network or WAHN was formed in 2007 by two women in Atlanta. Their goal was to support each other and discuss challenges faced by women in a male-dominated industry.

In 2014, WAHN became a 501(c)(3) nonprofit and began expanding chapters into other states. Their vision is “… to build a national network of people with a shared passion for affordable housing, the empowerment of women, and equity in the workplace for all.” There are currently 17 chapters. The Minnesota chapter is one of the 17 chapters which was formed earlier this year.

Currently, the Minnesota chapter has three committees available to join: events, membership, and sponsorship. They have hosted a few happy hours since May at interesting locations throughout the Twin Cities. The most recent happy hour was hosted at the Pillsbury A-Mill (A-Mill Artists Lofts). The A-Mill Artists Lofts once was a flour milling factory that have now been converted into low-income housing apartments for upcoming artists. They have amazing amenities for these artists so they can be prosperous in the Twin Cities. These include workshop areas throughout the building for artists who use different mediums: painters, sculptors, singers/songwriters, etc. WAHN was able to offer its attendees of the happy hour a tour of the building.

To learn more about the Women’s Affordable Housing Network click here: Minnesota Chapter of WAHN.

Minnesota State Housing Tax Credit

By Megan Brownell

The Minnesota State Housing Tax Credit Program and Contribution Fund is a new program to help finance multifamily and single-family affordable housing throughout the state of Minnesota.

Starting in 2023, this new program will allow eligible Minnesota individual and corporate taxpayers to contribute to the contribution fund and, in return, receive a state Tax Credit Certificate (TCC). The TCC received for contributions made to the fund equals 85% of the amount the taxpayer contributed to the fund during the taxable year. For example, if a taxpayer owes $8,500 in MN state income tax, that taxpayer could make a contribution of $10,000 to the contribution fund and receive and $8,500 TCC to offset their MN state income tax. Additional benefits may be available on your federal tax return.

Taxpayers have the option in the application to designate their contribution to a specific Qualified Project or to a General Contribution Pool where funds will be awarded to projects through a competitive funding process administered by MN Housing.

The contributions will provide funding for loans and/or grants (gap financing for new construction, acquisition, rehabilitation, demolition or removal of existing structures, construction financing, permanent financing, interest rate reduction, and refinancing) for eligible housing projects in communities throughout the state. The loans and grants provided through the program will be funded entirely by taxpayer contributions.

The program also has set-asides for: single family housing, housing in a township or city with a population of 2,500 or less that is outside of the metro area and housing for people earning 50 percent or less of area median income.

Minnesota Housing may issue up to $9.9 million in TCCs in 2023. TCCs are issued on a first come, first served basis in 2023, based on the submission time of the online application. The application process is now open!

There are no state appropriations or other funding sources for the program. This program does not mirror the Federal Low Income Housing Tax Credit program.

Information on how to contribute to the fund and how to receive the state tax credit is published on the Minnesota Housing website and the contribution process for 2023 is as follows:

  • Eligible taxpayers complete the online application by December 8, 2023.
  • Minnesota Housing reviews the application.
  • Minnesota Housing sends the taxpayer payment instructions and a signature document via DocuSign.
  • Taxpayer submits and Minnesota Housing receives signature document and contribution funds within 30 days, or by December 29, 2023, whichever is sooner.
  • Minnesota Housing issues TCC to the taxpayer within 30 days of receiving the signature document and funds.

Contact the Mahoney Real Estate Solutions Team to determine if you are an eligible taxpayer and can take advantage of this new program.

What's Happening at Mahoney Development Services, LLC (MDS)

By Andy Hughes

Mahoney Development Services, LLC (MDS), an affiliate of Mahoney assists Real Estate Developers and Investors with consulting and advisory services to manage the busy development projects in their Real Estate portfolio. See below for what’s going on at MDS.

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MDS concluded a busy application season with a number of applications submitted for projects in the Twin Cities and Greater Minnesota to Minnesota Housing, City of Minneapolis, City of Saint Paul, the Met Council and other local funders.  The applications represented a variety of project types, including new construction, preservation and supportive housing, from 17 to 200-plus units.  MDS is also continuing to work through closings on previously funded projects, with three closings planned for later this fall.

To learn more about Mahoney Development Services visit our MDS page. 

Out and About with The Real Estate Solutions Team

By Veronica Naranjo

The Real Estate Solutions Team at Mahoney has been out and about attending various firm events and affordable housing events in our community. Please take a look and see where we have been recently.

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July 19, 2023: Mahoney had its annual summer party. We celebrated with food, swimming, and a pickleball tournament.

July 20, 2023 – Members of the Real Estate Solutions Team went to Top Projects, a program that recognizes the best building and construction projects in Minnesota.

July 27, 2023 – Members of our Real Estate Solutions Team went to volunteer at the Bridge for Youth, an emergency shelter for homeless youth with the Minnesota Women’s Affordable Housing Network (WAHN).

July 31, 2023 – Our Real Estate Solutions Team spent an afternoon at Topgolf.

August 16, 2023 – Members from Mahoney and the Real Estate Solutions Team spent an afternoon volunteering at Dress for Success.

August 24, 2023 – Mahoney went to Valleyfair!

September 8, 2023 – Mahoney held its annual golf tournament. Kyle from the Real Estate Solutions Team was on the winning team!

September 13, 2023 – Members of the Real Estate Solutions Team went to FlannelJax’s to do some axe throwing with other young professionals.

 

September 26, 2023 – Members of the Real Estate Solutions Team attended the open house for MPHA’s Family Housing Expansion Project, which comprises of 84 two- and three-bedroom units in 16 small apartment buildings spread across Minneapolis.

September 26, 2023 – Women from the Real Estate Solutions Team attended the Minnesota Women’s Affordable Housing Network happy hour and got a tour of the Pillsbury A-Mill.

September 28, 2023 – Members of the Real Estate Solutions Team attended the annual fundraising breakfast for Alliance Housing.

September 29, 2023 – Mahoney went to Trellis Co.’s Chancellor Manor to do some mulching.

October 5, 2023 – Members of the Real Estate Solutions Team attended Accessible Space, Inc.’s Mission Support Luncheon.

REST Employee Spotlight

By Logan Wolfe

Hello, my name is Logan Wolfe. I graduated from Concordia University, St. Paul, June of 2023 and began working for Mahoney as an associate on the Real Estate Solutions Team July of 2023. I am currently enjoying the switch from being school oriented to developing my professional career as an accountant.  Over the past few months, I have spent most of my workdays assisting with cost certifications and asking the experts around me as many questions as possible to further develop my accounting knowledge. I am currently looking forward to my first busy season and plan to begin studying for the CPA exams once the 2024 busy season is complete.

 

I grew up in Mankato and come from a close family with 3 sisters. Outside of work, one can typically find me helping the various members of my family in the seemingly never-ending list of projects that either need to be started or completed. The main project that my father and I have been working on over the past couple of years has been the construction of an above ground pool and deck at my parents’ house (pictured above). Yes, this of course came with multiple side projects, but the outdoor projects have since come to an end. A project that I am looking forward to, when time allows me to participate, is the remodeling of my eldest sister’s newly purchased house.

In the coming years, I hope to begin traveling more frequently than I have been able to in the past. One of my buck list destinations is Italy, where I would like to visit some of the beautiful Cathedrals and art museums.
Thank you for reading a little bit about me and please feel free to contact me with any questions regarding real estate development or Mahoney at lwolfe@mahoneycpa.com.

Photo Credit: Logan Wolfe

REST Employee Spotlight

By Donna Stevermer

Hi there! My name is MaDonna Stevermer, but most people call me Donna. I joined Mahoney in 1990 and I am currently the Partner in charge of the Real Estate Solutions Team (REST). I was fortunate to have worked with John Ries for approximately 30 years and learned an incredible amount from him. I hope that I am able to pass on my knowledge to our wonderful team. I enjoy working with our real estate clients and assisting them with their tax and accounting needs in connection with developing affordable housing and historic tax credit projects. It is so fun to see the projects when they are completed and hear stories of the residents.

On a personal note, August 18, 2023, marked a significant milestone in my life as I married Dave Graham, the love of my life. The day was nothing short of amazing. We were surrounded by family and friends and enjoyed a day filled with love, laughter and the promise of a wonderful future together. For our honeymoon we went to Bar Harbor, Maine. We had a great time hiking in Acadia National Park, seeing lots of whales on a whale watching adventure and we even went up in a 4 seat Cessna plane. It was hard to come back to reality.

Dave has 10 acres in Wisconsin in which we enjoy raising chickens, growing popcorn and last year Dave decided he wanted to raise honeybees – so now we have lots of honey! Eventually, I will move to Wisconsin. I know, first I marry a Packer fan and then I am moving to Wisconsin. What am I thinking? Fear not – I will always bleed purple and in my heart. I will always be a Minnesotan. I even surprised Dave with a customized “Graham” Viking’s jersey with number 18 (our wedding day) in hopes he will one day like purple better than green.

Photo Credit: CKS Photography