WSR 08-22-091



[ Filed November 5, 2008, 8:24 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 08-18 [08-18-075] and 08-19 [08-19-075].

Title of Rule and Other Identifying Information: Amendment to existing rules governing the allocation of federal low-income housing tax credits including provision for multiple allocation rounds, limiting the number of required allocation criteria and adjusting the criteria for carryover allocations.

Hearing Location(s): Washington State Housing Finance Commission, 1000 Second Avenue, 28th Floor, Seattle, WA 98104-1406, on December 18, 2008, at 1 p.m.

Date of Intended Adoption: December 18, 2008.

Submit Written Comments to: Steve Walker, 1000 Second Avenue, 28th Floor, Seattle, WA 98104-1406, e-mail, fax (206) 587-5113, by December 17, 2008.

Assistance for Persons with Disabilities: Contact Steve Walker by December 11, 2008, (206) 464-7139.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The proposed rules amend existing rules which govern the allocation of federal low-income housing tax credits. The changes will align the rules with federal law, streamline the allocation process to permit multiple allocation rounds, limit the number of required allocation criteria and adjust the criteria for carryover allocations.

Reasons Supporting Proposal: The proposed rule changes align the commission's tax credit program with federal tax law, provide clear direction regarding the allocation criteria to be used by the commission and update and streamline the allocation process for applicants.

Statutory Authority for Adoption: RCW 43.180.040(3).

Statute Being Implemented: RCW 43.180.050.

Rule is necessary because of federal law, Housing and Economic Recovery Act of 2008 (H.R. 3221), Section 3004.

Agency Comments or Recommendations, if any, as to Statutory Language, Implementation, Enforcement, and Fiscal Matters: As noted above, the rules establish the criteria and conditions a tax credit project must satisfy to be awarded federal low-income housing tax credits. The proposed rule change is intended to match federal tax law changes and to update and streamline the commission's allocation procedures.

Name of Proponent: Washington state housing finance commission, governmental.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Steve Walker, 1000 Second Avenue, Suite 2700, Seattle, WA 98104-1406, (206) 464-7139.

No small business economic impact statement has been prepared under chapter 19.85 RCW. Statement not required under RCW 19.85.030(1) because the proposed rule will not impose "more than minor costs on businesses in an industry."

A cost-benefit analysis is not required under RCW 34.05.328. Pursuant to RCW 34.05.328(5), the statute does not apply to this rule adoption because the Washington state housing finance commission is not an agency listed in subsection (5)(a)(i) nor has it voluntarily made the statute applicable to the agency as listed in subsection (5)(a)(ii).

November 5, 2008

Steve Walker, Director

Tax Credit Division


AMENDATORY SECTION(Amending WSR 01-11-034, filed 5/8/01, effective 6/8/01)

WAC 262-01-130   Tax credit program.   (1) Applicants for tax credit shall submit a completed application in the form prescribed by the commission and the required application fee by the deadline or deadlines set by the commission each year. The commission will not accept additional information or material changes to an application except as allowed during a prescribed correction period.

(2) As part of its application, each applicant shall submit, among other things:

(a) Its federal identification number or, if the applicant is an individual, its Social Security number;

(b) Evidence that it has control of all land necessary for completion of the project;

(c) A comprehensive market study of the housing needs of low-income individuals in the area to be served by the project;

(d) If applicable, a relocation plan for residents approved by the appropriate governmental authority;

(e) Evidence that the project is consistent with the applicable state or local consolidated plan;

(f) A written commitment to notify the relevant local public housing authority of the availability of units in the project;

(g) Evidence of the financial capacity and experience of the development team; and

(h) Evidence of the experience of the property management team.

(3)(a) The commission will rank projects proposed by tax credit applicants based upon the degree to which they meet the criteria set forth by the commission in subsection (5) of this section. The commission may decline to consider a project that fails to meet minimum standards established by the commission for such an evaluation.

(b) Notwithstanding applicant characterization, the commission may determine the scope of or otherwise define a "project" or "projects" for purposes of ranking applications and reserving and allocating tax credit.

(4) In order to qualify to receive tax credit, a project shall meet all of the requirements of section 42 of the code.

(5) For the purposes of ranking projects and allocating credit dollar amounts, the commission will give preference to projects that serve the lowest income tenants, that are obligated to serve low-income tenants for the longest periods, and that are located in qualified census tracts and the development of which will contribute to a concerted community revitalization plan. In determining housing priorities, the commission will consider sponsor and project characteristics. The commission will give weight to those projects which, among other things:

(a) Are located in areas of special need as demonstrated by location, population, income levels, availability of affordable housing and public housing waiting lists;

(b) Set aside units for special needs populations, such as large households, the elderly, the homeless and/or the disabled;

(c) Preserve federally assisted projects as low-income housing units;

(d) Rehabilitate buildings for residential use;

(e) Include the use of existing housing as part of a community revitalization plan;

(f) ((Are smaller projects;

(g))) Have received written authorization to proceed as a United States Department of Agriculture - Rural Housing Service multifamily new construction project approved by the commission;

(((h))) (g) Are historic properties;

(((i))) (h) Are located in targeted areas;

(((j))) (i) Leverage public resources;

(((k))) (j) Maximize the use of credits;

(((l))) (k) Demonstrate a readiness to proceed;

(((m))) (l) Serve tenant populations of individuals with children; ((and

(n))) (m) Are intended for eventual tenant ownership; and

(n) Promote energy efficiency.

(6)(a) The commission will reserve at least ten percent of the state housing credit ceiling for a calendar year for projects in which qualified nonprofit organizations have an ownership interest and materially participate in the development and operation of the projects throughout the compliance period, all as described in the code. A qualified nonprofit organization is an organization described in section 501 (c)(3) or (4) of the code, which is determined by the commission not to be affiliated with or controlled by a for-profit organization and one of whose exempt purposes includes the fostering of low-income housing.

(b) The commission may also reserve a portion or portions of its state housing credit ceiling for other types of projects or sponsors.

(7) The commission will determine the amount of tax credit necessary for the project's financial feasibility and viability as a qualified low-income housing project. The commission will not allocate or award to a project more than the minimum amount of tax credit required to ensure a project's financial feasibility and viability.

(8) The commission may:

(a) Restrict the maximum amount of development costs on a per unit basis;

(b) Limit the maximum rehabilitation contingency and the maximum construction contingency;

(c) Restrict the maximum annual amount of tax credit for each low-income housing unit;

(d) Establish a maximum amount of credit an applicant may receive;

(e) Establish a maximum amount of tax credit a project may receive;

(f) Establish maximum developer fees and consultant fees; and

(g) Limit the amount of contractor's profit and overhead.

The commission may also limit the amount of credit received or establish other limits for other reasons.

(9)(a) As a condition of receiving tax credit, an applicant shall enter into agreements with the commission, in forms acceptable to the commission, which contain the terms under which the commission reserves credit for a project and, if applicable, provides a carryover allocation for a project.

(b) As a condition to receiving tax credit, an owner shall enter into an extended use agreement with the commission, in a form acceptable to the commission, which restricts the use of the project for a minimum of thirty years and which describes the applicable commitments and covenants made by the owner. The extended use agreement shall be recorded in a first lien position as a restrictive covenant running with the land.

(10) In order to qualify for a carryover allocation, an applicant shall demonstrate, among other things, that((:

(a) The applicant has either acquired the land or has a long term lease on the land;

(b))) the applicant's basis in the project is more than ten percent of the applicant's reasonably expected basis in the project((; and

(c) The applicant has received a conditional commitment for financing)).

(11) An applicant that has received a carryover allocation of tax credit shall demonstrate to the commission's satisfaction that the applicant has made substantial progress towards completion of the project.

(12) An applicant shall demonstrate to the commission's satisfaction substantial compliance with all contractual obligations to the commission before the commission issues an Internal Revenue Service low-income housing credit certificate.

(13) Unless the commission makes an exception, a transfer of an interest in a project shall require the prior approval of the commission. A transfer or assignment without the commission's prior approval may result in a cancellation of tax credit for a project.

(14) To participate in the tax credit program, an applicant shall pay all required commission fees and comply with all applicable requirements and deadlines. Failure to do so may result in disqualification or cancellation of the project, application or tax credit reservation, allocation or award.

(15) For purposes of awarding tax credit, certain rules in this section do not apply to tax credit projects financed with tax-exempt bonds.

(16)(a) The commission may perform on-site inspections of projects, interview residents, review residents' applications and financial information, and review an applicant's or an owner's books and records. The applicant or owner shall provide the commission with all requested documentation, including periodic reports and certificates; shall provide the commission access to the project; and shall retain records as required by the code and the extended use agreement.

(b) The commission will monitor compliance of the projects receiving credit with the code and with contractual commitments to the commission. The commission will notify the Internal Revenue Service when instances of noncompliance come to its attention.

[Statutory Authority: RCW 43.180.040(3). 01-11-034, 262-01-130, filed 5/8/01, effective 6/8/01; 97-20-086, 262-01-130, filed 9/29/97, effective 10/30/97.]

Washington State Code Reviser's Office