1. PISD & Qualification Issues Michael Kotin Kay-Kay Realty Corp. 2007

2. Placed-in-Service Dates

3. Two Types of Developments:

4. Placed-in-Service Dates Two Types of Developments:  New Construction

5. Placed-in-Service Dates Two Types of Developments:  New Construction  Acquisition / Rehab

6. Placed-in-Service Dates  New Construction

7. Placed-in-Service Dates  New Construction By December 31st of year which is 2 years from allocation year.

8. Placed-in-Service Dates  New Construction By December 31st of year which is 2 years from allocation year.  Example: if allocation received in 2006, PISD must occur before December 31, 2008.

9. Placed-in-Service Dates  New Construction By December 31st of year which is 2 years from allocation year. Defined statutorily by first certificate of occupancy in each building.

10. Placed-in-Service Dates  New Construction By December 31st of year which is 2 years from allocation year. Defined statutorily by first certificate of occupancy in each building.  May vary from building to building.

11. Placed-in-Service Dates  New Construction By December 31st of year which is 2 years from allocation year. Defined statutorily by first certificate of occupancy in each building. Occupancy cannot predate PISD.

12. Placed-in-Service Dates  Acquisition / Rehab

13. Placed-in-Service Dates  Acquisition / Rehab Date chosen by Owner.

14. Placed-in-Service Dates  Acquisition / Rehab Date chosen by Owner.  PISD election need not be made until filing due date of tax return for year units are placed in service.

15. Placed-in-Service Dates  Acquisition / Rehab Date chosen by Owner. Not dictated by Certificate of Occupancy.

16. Placed-in-Service Dates  Acquisition / Rehab Date chosen by Owner. Not dictated by Certificate of Occupancy Rehab need not be completed.

17. Placed-in-Service Dates  Acquisition / Rehab Date chosen by Owner. Not dictated by Certificate of Occupancy Rehab need not be completed.  At least one unit in each building must be suitable for occupancy.

18. Placed-in-Service Dates  Acquisition / Rehab Date chosen by Owner. Not dictated by Certificate of Occupancy. Rehab need not be completed Tenancies may predate PISD.

19. Acquisition / Rehab

20. Choice of PISD impacts:

21. Acquisition / Rehab Choice of PISD impacts:  Aggregation period for expenses.

22. Acquisition / Rehab Choice of PISD impacts:  Aggregation period for expenses.  Capitalization period for construction interest.

23. Acquisition / Rehab Choice of PISD impacts:  Aggregation period for expenses.  Capitalization period for construction interest.  Applicable credit percentage.

24. Acquisition / Rehab Choice of PISD impacts:  Aggregation period for expenses.  Capitalization period for construction interest.  Applicable credit percentage.  Start period for credits.

25. Acquisition / Rehab  Aggregation period for expenses:

26. Acquisition / Rehab  Aggregation period for expenses: Generally, rehab costs may be aggregated for 24 month period prior to PISD.

27. Acquisition / Rehab  Aggregation period for expenses: Generally, rehab costs may be aggregated for 24 month period prior to PISD. PLUS

28. Acquisition / Rehab  Aggregation period for expenses: Generally, rehab costs may be aggregated for 24 month period prior to PISD. PLUS Costs incurred through the end of the owner’s taxable year.

29. Acquisition / Rehab  Aggregation period for construction interest:

30. Acquisition / Rehab  Aggregation period for construction interest: Generally, may capitalize interest until property is placed in service.

31. Acquisition / Rehab  Aggregation period for construction interest: Generally, may capitalize interest until property is placed in service. For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits.

32. Acquisition / Rehab  Aggregation period for construction interest: Generally, may capitalize interest until property is placed in service. For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits. Best to delay PISD as long as possible in order to increase total eligible basis.

33. Acquisition / Rehab  Aggregation period for construction interest: Generally, may capitalize interest until property is placed in service. For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits. Best to delay PISD as long as possible in order to increase total eligible basis. Careful to meet 50% test.

34. Acquisition / Rehab  Applicable credit percentage:

35. Acquisition / Rehab  Applicable credit percentage: PISD may be chosen by taxpayer after end of year.

36. Acquisition / Rehab  Applicable credit percentage: PISD may be chosen by taxpayer after end of year. Chosen after all monthly credit percentages for year have been published.

37. Acquisition / Rehab  Applicable credit percentage: PISD may be chosen by taxpayer after end of year. Chosen after all monthly credit percentages for year have been published. May choose the month with the highest published credit percentage.

38. Acquisition / Rehab  Start period for credits:

39. Acquisition / Rehab  Start period for credits: “Look back” applies no matter when in year units are placed in service.

40. Acquisition / Rehab  Start period for credits: “Look back” applies no matter when in year units are placed in service. “Look back” goes back to LATTER of:

41. Acquisition / Rehab  Start period for credits: “Look back” applies no matter when in year units are placed in service. “Look back” goes back to LATTER of:  1 st day of taxpayer’s taxable year, or

42. Acquisition / Rehab  Start period for credits: “Look back” applies no matter when in year units are placed in service. “Look back” goes back to LATTER of:  1 st day of taxpayer’s taxable year, or  Acquisition date.

43. Example

44.  Assumptions:

45. Example  Assumptions:  One building project (for convenience).

46. Example  Assumptions:  One building project (for convenience).  Calendar year taxpayer.

47. Example  Assumptions:  One building project (for convenience).  Calendar year taxpayer.  Property acquired July 15, 2006.

48. Example  Assumptions:  Placed in service October, 2006:

49. Example  Assumptions:  Placed in service October, 2006: Aggregation of costs through December 31, 2006. Capitalization of construction interest through October, 2006 at the latest (generally). Credit percentage for month of October, 2006 used. Credits may commence as early as August, 2006.

50. Example  Assumptions:  Placed in service October, 2007: Aggregation of costs through December 31, 2007. Capitalization of construction interest through October, 2007 at the latest (generally) Credit percentage for month of October, 2007 used. Credits may commence as early as January, 2007.

51. Example  Assumptions:  Placed in service October, 2008: Aggregation of costs through December 31, 2008 except that costs incurred from July, 2006 through October, 2006 may not be included. Capitalization of construction interest through October, 2008 at the latest (generally). Credit percentage for month of October, 2008 used. Credits may commence as early as January, 2008.

52. Tenant Qualification

53.  Qualification may predate PISD.

54. Tenant Qualification  Qualification may predate PISD.  Qualification may predate “look back”.

55. Tenant Qualification  Qualification may predate PISD.  Qualification may predate “look back”.  Qualification may NOT predate acquisition date.

56. Tenant Qualification  Qualification may predate PISD.  Qualification may predate “look back”.  Qualification may NOT predate acquisition date.  Recertification at PISD or “look back” date is NOT required.

57. Rev. Proc. 2003-82  Is a safe harbor provision.  Assumes tenant occupancy in advance of PISD or “Look back” date.  Is NOT a requirement.

58. Rev. Proc. 2003-82  Is designed to insure compliance with Next Available Unit Rule.  Relevant on mixed- income properties with buildings which have applicable fractions under 100%.  NOT applicable on 100% tax credit properties where ALL units are always rented to qualified households.  NOT relevant on buildings in mixed- income properties which have 100% applicable fractions.

59. Rev. Proc. 2003-82  Safe harbor provided if management “tests” eligibility of existing residents.  Test may be retroactive as long as retroactive compliance with NAU can be demonstrated.  Does NOT require that existing residents have incomes below either move- in or recertification limits.  Does NOT require that “test” be a fully documented recertification. Standard may be substantially less.

60. Placed-in-Service Dates Other Considerations:

61. Placed-in-Service Dates Two Types of Developments:  Investor in ownership

62. Placed-in-Service Dates Two Types of Developments:  Investor in ownership  Syndicator secondary sale completed