Provides that the low income housing tax credits shall be treated as overpayments of the applicable tax, to be credited or refunded.
TITLE OF BILL: An act to amend the public housing law, in relation to federal low-income housing credits
PURPOSE: This bill would provide for the allocation of federal low income housing tax credits among owners pursuant to an executed agreement.
SUMMARY OF PROVISIONS: This bill would amend section 25 of the public housing law, relating to the co-ordination of federal low income housing tax credits with the state low income housing tax credit program to allow a pass through of the credit to persons designated, members, or owners pursuant to a written agreement among the persons designated as partners, members or owners, which agreement documents an alternative distribution method without regard to sharing of other tax or economic attributes of the entity, including how the federal low income housing tax credit is allocated to the partners, members, or owners.
JUSTIFICATION: Tax credit programs are widely seen as the primary mechanism for successfully producing and preserving affordable rental housing. As a result of the recent financial crisis, state and federal tax credit programs have been disrupted, as is the case in New York. The problem has been further exacerbated in New York where the state tax credit is not bifurcated, unlike the case in many other states.
New York's low income housing credit tax program was established in 2000 pursuant to Article 2-A of the Public Housing Law and was designed to encourage the development of low income housing. This bill would allow the bifurcation of state tax credits from federal tax credits and permit separate investors and permit separate investors to purchase the state and federal tax credits. It would not preclude any single investor from purchasing both the state and federal tax credits.
The proposed change would open up the existing market to a new class of investors including banks, corporations, and insurance companies and would, based upon research conducted in other states which allow bifurcation, create additional demand on the market for state tax credits. This demand would drive up pricing among investors as pricing as competition is increased. This would translate into greater private investment in affordable housing without any material cost to the state.
As an example, under the current program, a project awarded a $7.5 million allocation of state low income housing tax credit over a 10 year period would translate into a private equity investment of $3.75 million. It. is estimated that if enacted, this change would allow the same $3.75 million to be sold to private equity investors for $4.125 million, or 10% more. The additional investment will help
finance more units, increase affordability, and create more jobs in New York.
This change will increase demand for and leveraging ability of a program that has been in existence in New York since 2000, while not requiring any increase in funding. The proposed changes are anticipated to generate a substantial (estimated 10%) increase in equity raised from the state tax credit program and will greatly enhance its effectiveness in creating and fostering investment in affordable housing throughout the state.
LEGISLATIVE HISTORY: New Bill.
FISCAL IMPLICATIONS: Minimal.
EFFECTIVE DATE: This act shall take effect immediately.
STATE OF NEW YORK ________________________________________________________________________ 4758 2011-2012 Regular Sessions IN SENATE April 20, 2011 ___________Introduced by Sen. YOUNG -- read twice and ordered printed, and when printed to be committed to the Committee on Housing, Construction and Community Development AN ACT to amend the public housing law, in relation to federal low-in- come housing credits THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 25 of the public housing law is amended by adding a new subdivision 3 to read as follows: 3. ON AND AFTER JUNE FIRST, TWO THOUSAND ELEVEN, THE CREDITS ALLOWED TO A PARTNERSHIP, LIMITED LIABILITY COMPANY TAXED AS A PARTNERSHIP OR MULTIPLE OWNERS OF PROPERTY SHALL BE PASSED THROUGH TO THE PERSONS DESIGNATED, MEMBERS OR OWNERS PURSUANT TO AN EXECUTED AGREEMENT AMONG THE PERSONS DESIGNATED AS PARTNERS, MEMBERS OR OWNERS DOCUMENTING AN ALTERNATIVE DISTRIBUTION METHOD WITHOUT REGARD TO THEIR SHARING OF OTHER TAX OR ECONOMIC ATTRIBUTES OF THE ENTITY, INCLUDING BUT NOT LIMITED TO HOW THE FEDERAL LOW-INCOME HOUSING TAX CREDIT WITH RESPECT TO A PROJECT IS ALLOCATED TO THE PARTNERS, MEMBERS OR OWNERS. S 2. This act shall take effect immediately.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD10736-01-1