1. TAX BENEFITS FOR THE GO ZONE Richard S. Goldstein IPED March 29, 2007 St. Petersburg, Florida

2. GO Zone Housing Credits PL 109-135 authorized additional Low Income Housing Tax Credits for GO Zone areas of Louisiana, Mississippi and Alabama for each of 2006, 2007 and 2008 Louisiana obtained approximately $57 Million per year of additional credit authority Mississippi--$35 Million per year Alabama--$15 Million per year

3. Louisiana has forward allocated all its GO Zone Credits, Alabama and Mississippi have some remaining for allocation

4. Difficult Development Area Treatment Allows property placed in service in 2006 through 12/31/2008 to be treated as a difficult development area (applicable for Rita GO Zone and Wilma GO Zone also) DDA treatment permits 30% increase in eligible basis Applies to credit allocations made 20062008 and tax-exempt bonds issued after 12/31/05

5. Non-Metropolitan Area Income Adjustment For non-metro areas in the GO Zone, income determinations are made using national non- metropolitan median income instead of area median income

6. Pending Legislation HR 1562 passed House on 3/27/07 extends placed in service date for DDA treatment to 12/31/2010 Eliminates the 10 Percent Test for GO Zone (including Rita GO Zone and Wilma GO Zone) allocations made in 2006, 2007 and 2008 provided property is placed in service by 12/31/2010 Eliminates CDBG/9 Percent Credit issue (see below)

7. Community Development Block Grants (CDBG) In FY 2006, Congress appropriated an additional $5.2 Billion in CDBG funds for GO Zone areas HUD given wide discretion to waive program restrictions Restriction on use of CDBG for new construction waived by HUD Loans with CDBG funds generally not considered a below market federal loan, therefore can use with 9 Percent Credits

8. Problem is that Section 42 states that exemption from federal subsidy definition only applies when loans are made pursuant to CDBG statute in effect in 1989 HUD waivers inadvertently cause a problem HR 1562 would cure the problem if enacted

9. GO Zone Bonds Allows Louisiana, Mississippi and Alabama to issue additional GO Zone bonds ($2,500 x population in GO Zone) Bonds must be issued before 1/1/2011 95% of proceeds of each issue must be used for residential rental projects, and cost of acquisition, construction, reconstruction or renovation of non-residential real property and public utility property Can also be issued to finance mortgage revenue bonds (homeownership)

10. Special GO Zone Bond Rules Income targeting is 20% @ 60% of AMGI or 40% @ 70% AMGI Bonds are not subject to the bond volume cap, i.e., do not generate automatic 4% credits Cannot finance private golf courses, country clubs, massage parlors, hot tub facilities, suntan facilities, racetrack/gambling facilities and liquor stores Interest exempt from AMT Home improvement loans up to $150,000

11. Bonus Depreciation Depreciation deduction equal to 50% of adjusted basis allowable in year placed in service for GO Zone property (does not include Rita or Wilma) Remaining depreciation is reduced by 50% Allowed for residential rental property, nonresidential rental property or which has a class life of 20 years or less (e.g., site improvements, personal property) Must be placed in service by 12/31/08 for residential rental property (extended to 12/31/10 for property in most impacted GO Zone areas) Does not include bond financed property If elect out for any class of property, must elect out for all property in class

12. Other Tax Incentives Historic rehabilitation credit increased by 30%--10 to 13% for non-certified structures and 20 to 26% for certified historic rehabs Additional $300 Million of New Markets Credits for 2005 and 2006 and $400 Million for 2007 for CDEs involved in GO Zone recovery