HUD Expands TCAP Eligible Costs in Revised Program Notice

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Tax Credit Advisor, September 2009: The U.S. Department of Housing and Urban Development (HUD) has expanded the types of costs that can be funded with assistance received under the Tax Credit Assistance Program (TCAP), in an updated TCAP program notice released on 7/27/09.

The updated notice (CPD-09-03) includes changes and additions made to the original May 4th notice. Authorized by the economic stimulus act, TCAP provides federal grants to state housing credit agencies (HCAs) for award to stalled low-income housing tax credit (LIHTC) projects to enable them to move forward.

Beyond the standard prohibition against use of stimulus act funds for swimming pools, the original notice limited use of TCAP dollars to tax credit project costs that can be included in LIHTC eligible basis. The revised notice expands this to allow TCAP funds to be spent on costs for land acquisition, on-site demolition costs, and hazardous material remediation.

Related new language stipulates that a grantee (i.e. state HCA) must repay TCAP funds that are used for any ineligible costs, or if a project isn’t completed or fails to be an LIHTC project. The TCAP grantee must enforce the applicable LIHTC requirements (e.g., tenant income and rent limits) by seeking specific performance.

The revised notice says all TCAP projects must have housing credits in them, but doesn’t say how much or set a minimum amount. It says the state agency may reduce the credit amount to a project from the original award “based on current market conditions,” and bars the return to the HCA of the entire credit allocation amount.

The revised notice also:

  • Extends eligibility for TCAP assistance, in accordance with a recent statutory change, to projects that receive GO Zone or Midwestern disaster area housing credits between 10/1/06 and 9/30/09.
  • Clarifies that TCAP program income doesn’t include any fees charged by HCAs to developers for housing credit awards, but does include any incremental amounts added to such fees for TCAP projects. Program income also doesn’t include income received by a TCAP project owner, or fees charged by an HCA for asset management of TCAP projects.
  • Adds details on reporting requirements for state HCAs that weren’t in the original notice, and references to other HUD guidance released since May 4th.

(Updated notice: http://www.hud.gov/recovery. Select Programs, then Tax Credit Assistance Program.)