by: Will Bates
Low Income Housing 9% – MHFA HTC 2022 Round 2 Tax Credit Allocation Applications- TBD, last year was in March
Low Income Housing 4% – MMB Housing Pool Deadline- Early January 2023
Carryover Application: 11/1/2022
Final CPA Certification: 5/1/2023
CPED/St. Paul PED:
Carryover Application: 11/1/2022
Final CPA Certification: 5/1/2023
Dakota County CDA:
Carryover Application: 10/17/2022
Final CPA Certification: 10/2/2023
Washington County CDA:
Carryover Application: 10/3/2022
Final CPA Certification: 5/1/2023
Partnership Tax Return Due Date- 3/15/2023
Partnership Tax Return Due Date with Extension- 9/15/2023
Individual and C Corp Tax Return Due Date- 4/18/2023
Individual and C Corp Tax Return Due Date with Extension- 10/16/2023
Deadline to provide to employees or independent contractors their W-2, 1099-NEC or 1099-Misc- January 31, 2023
If you have not submitted your 8609 package, please do so as soon as possible to ensure receipt of Form 8609 by the 9-15-23 tax return due date if claiming credits in 2022 tax year.
Ensure your buildings were leased-up by 6-30-23 if you are taking advantage of IRS Notice 2022-5 for taking credits in 2022
by: Kyle Krenske
On December 2, 2022, the Internal Revenue Service (IRS) issued 2022 draft instructions for Schedules K-2 and K-3 for Partnership’s (Form 1065). The instructions provide an exception from filing Schedules K-2 and K-3 for Partnership’s if the four criteria and notification dates are met. On December 5, 2022, the IRS issued 2022 draft instructions for Schedules K-2 and K-3 for S Corporation’s (Form 1120-S). The instructions provide an exception from filing Schedules K-2 and K-3 for S Corporation’s if the three criteria and notification dates are met. The filing exceptions for tax year 2022 are much different from tax year 2021 as the IRS attempted to address taxpayers and practitioners request for expanded relief and clarity.
On November 2, 2022, the Advisory Council on Historic Preservation (ACHP) published an announcement in the Federal Register which provides an exemption for federal agencies to review the effects of certain EV (electrical vehicle) supply equipment on historic properties. This exemption will be retroactive to October 26, 2022 and was in response to the 2021 executive orders to prioritize clean energy vehicles and the Infrastructure Investment and Jobs Act of 2021. However, this exemption does not apply on Tribal Lands unless there is a written notification to the ACHP from the Tribe agreeing with the use of the exemption.
On November 10, 2022, the IRS issued announcement 2022-23 with updated credit amounts for the renewable energy production tax credit (PTC) for facilities placed in service after December 31, 2021. This announcement reflects changes due to the Inflation Reduction Act (IRA) and replaces the amounts previously published in Notice 2022-20.
On November 14, 2022, the IRS published a notice in the Federal Register requesting comments on Form 8609 and Form 8609-A. No changes have been proposed to the current forms. The written comments deadline is January 13, 2023.
On November 21, 2022, more than 2,500 businesses and organizations from every state in the U.S. have signed a letter by the ACTION Campaign urging Congress to expand availability of the Housing Credit during the last few weeks of year 2022. Two of the critical criteria requested of Congress include Expand Housing Credit authority by 50% (or at a minimum to reinstate the 12.5% cut the Housing Credit suffered in 2022) and enhance the use of Private Activity Bond authority for rental housing production by reducing the threshold from 50% to 25% for bond financing.
On November 30, 2022, the IRS published a notice in the Federal Register which provides guidance on prevailing wage and apprenticeship requirements that allow bonus credit percentages for certain renewable energy provisions from the IRA. The beginning of construction date for certain credits is also addressed. Properties qualify for the 30% renewable energy investment tax credit and the $26 per megawatt-hour PTC if the requirements are met in accordance with the IRA.
by: Kyle Krenske
Minnesota did not have a major tax bill enacted during the regular 2022 legislative session, which ended on May 23, 2022. Two law changes were addresses earlier in the session which included the bonus pay for eligible COVID-19 frontline workers and unemployment taxes for businesses.
The Minnesota Historic Structure Rehabilitation Tax Credit program has sunset and the State Historic Preservation Officer (SHPO) is no longer accepting state Part A applications. This program expired on June 30, 2022 because the Minnesota State Legislature adjourned on May 23, 2022 without passing an extension. For projects that received an allocation certificate before the program expired in 2022, construction must be completed and building must be placed in service within three calendar years from the allocation certificate’s date of issuance.
Affordable housing developers will likely recognize the minimum set-aside test requirements of 20/50 or 40/60 under Section 42(g)(1). Until recently, these were the options to choose from when determining the minimum percentage of a rental housing project that must be considered affordable by the IRS to qualify for LIHTC. They work like this – the 20/50 set-aside requires that at least 20% of the building must be occupied by tenants with income at or below 50% of the area’s median gross income (AMI). The 40/60 set-aside works in the same way, 40% of the building and 60% AMI.
Recognizing that there was a lack of affordable housing for renters in the 60-80% AMI range, and that developers could also use more flexibility with things like projecting future revenues or acquiring buildings with tenants that may be over 60%, the average income test set-aside (AIT) was introduced. The AIT allows for a developer to designate units in a building with varying income levels anywhere from 20-80% AMI and is like the 40/60 set-aside in that the final average of unit designations must be at least 40/60.
Here is an example of the AIT:
10-unit building, 100% affordable
2 units at 20%
4 units at 60%
4 units at 80%
Average AMI designation of 60%
There was a lot of hype around the AIT after its introduction with the Consolidated Appropriations Act of 2018, but when the initial regulations related to the AIT were later proposed in 2020 many were not impressed.
The two biggest sticking points:
• No ability to change unit designations after they were initially designated, removing any expected flexibility for developers, property managers, and tenants
• If one unit were to go out of compliance the whole project could potentially fail the minimum set-aside test and end up losing credits for the year (or beyond).
In October of 2022 the final rule was released, and it has brought back the hype. Units are now allowed to be designated upon lease-up, and changes will be allowed to the designations under certain circumstances. The “cliff test” that could have caused an entire project to be out of compliance due to one unit is also gone, as owners will now have opportunities to correct any issues.
For questions on using the Average Income Test minimum set-aside and how it may affect your LIHTC or tax-exempt bond property, please contact the Real Estate Solutions Team at Mahoney.
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.
MDS is gearing up for a busy 2023, with four closings planned for preservation, historic and new construction projects around the Twin Cities. These projects will include approximately $59MM in total development costs and 300-plus units preserved or created.
MDS is also continuing to assist clients with funding applications in process to Minnesota Housing and other funders such as the City of Minneapolis, Hennepin County and Met Council, with award announcements expected later this year. Lastly, MDS continues to build its pipeline of new projects, ranging from existing portfolio recapitalizations to new construction opportunities.
Greetings to those who are reading this. Hello, my name is Alex Cho. My given name was Chung Hyun, and I am from South Korea. I have used Alex as my name since I was 25 to introduce myself to English speakers residing in Korea. Someone I was tutoring at the time told me I look like an Alex so I said ok and adopted the name. I legally changed my name to Alex when I became a US citizen.
I ended up in Minnesota because of my wife Colleen. We met in Korea. Colleen came to Korea as a young Minnesotan wanting to explore the world. She was ready to go home after working for a few years in Korea as an English teacher, however, she decided to stay in Korea for a few more years after we met. We got married in Korea and decided to move to Minnesota to be closer to her family. We have two kids. Our oldest is Henry and the youngest is Charles. It is a coincidence, but we are the family of kings.
I enjoy working at Mahoney because I work with very competent people and I get to meet great people who are making a big impact in the communities they serve. I am very fortunate to be involved in the real estate industry and investment tax credit deals from the inception of the deals, including negotiating with investors, to the final cost certification and tax returns. Every deal is different with its unique quirks but when the great minds come together, there is a solution for every problem. I enjoy being part of the discussions and watching people solve problems to build more affordable housing.
When I am not in the office, I enjoy spending time with my family. I love being outdoors, especially in the summertime. You can often find me biking, swimming, running, or playing soccer. I play soccer for the CSC Co-ed league and in a men’s league. My oldest son’s favorite sport is hockey, so a few years ago I picked up skating so I can play with him.
Trivia questions about me:
How many continents have I lived on for more than 3 years?
How many languages can/could I speak?
When was the last time I visited Korea?
Does Korea ever get cold?
If you want to know the answers to the trivia questions or have questions related to LIHTC, HTC, or ITC email me at firstname.lastname@example.org.
Photo credit for this section: Alex Cho
I joined Mahoney as an Associate on the Audit Solutions Team in November 2012 after graduating from the U of M, Duluth with degrees in Accounting and Finance. In the summer of 2015, I began my transition to the Real Estate Solutions Team. Since then, I have enjoyed assisting our clients with their accounting and tax needs related to developing numerous affordable housing, historic tax credit, and other real estate projects.
I joined Mahoney as an Associate on the Audit Solutions Team in November 2012 after graduating from the U of M, Duluth with degrees in Accounting and Finance. In the summer of 2015 I began my transition to the Real Estate Solutions Team. Since then, I have enjoyed assisting our clients with their accounting and tax needs related to developing numerous affordable housing, historic tax credit, and other real estate projects.
Outside of the office you will typically find me in the great outdoors. I enjoy cooking (prior to joining the accounting profession I was a Chef), watching my two daughters grow up (they are 3 and 5 years old, going on 13), hunting, fishing, playing softball and nearly anything else in the outdoors.
In October I embarked on my second back country elk hunting trip in Colorado. My hunting partner and I (pictured) hiked nearly 30 miles throughout the week and successfully harvested a mature cow elk. We also had a few close encounters with bull elk, had great weather, and met a few new friends. It was a very different experience from our first trip in 2021 which provided us with multiple feet of snow to hike through.
I am looking forward to doing some ice fishing before the busy season ramps up. This cold weather we’ve been having is making great early ice.
You can contact me at email@example.com
Photo credit for this section: Trent Senske