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In addition to the basic requirement for a property to meet the 40/60 test or the 20/50 test and keep rents at this level for at least 15 years, the LURA agreements also include an extended utility period, often 15 years, but sometimes longer or shorter depending on the country. It is important to recognize that when an owner sells a property and the LURA is still active, the new purchaser must always follow all its rules. LIHTC Tax Credits In exchange for submission to land use restrictions, LIHTC`s multi-family real estate owner receives a number of tax credits that allow dollar reductions for every dollar on their federal income taxes. LIHTC real estate receives tax credits each year for the first 10 years of the contract. Tax credits are paid to the owner only because of his property on eligible property. Tax credits cannot be separated individually from the property, i.e.: You cannot sell tax credits. Since the tax credits remain on the property, an interest in the property can be sold, which results in the buyer receiving the tax credits. Once the construction, occupancy and lease agreements are concluded in accordance with the agreement, the developer files Form 8608 along with construction certificates, permits and loan documents to obtain the tax credits. The restrictions imposed by the LRA can be defined by the period of compliance and the extension of the period of use. For example, the compliance period is 15 years and 15 years for the extended use period. The initial 15-year compliance period is imposed by IRS, HUD or other housing authorities, and any additional life extension is imposed by the actions taken by each national housing agency in which the apartment building is located. Termination of the LURA under LIHTC During the restriction period of the LIHTC program, land use restrictions are maintained, limiting the operation of apartment buildings.
The specific length of time for which the restrictions are maintained is indicated in the LURA. The LURA restrictions end in one of three ways: 1) the qualified termination process; 2) by enforcement procedures; 3) by the natural course of the period (30 years or more). Multi-family real estate with a LURA contract or other regulatory contract (HAP contract) that limits rents and/or income is underwritten and treated differently from traditional market real estate. In addition, the terms, costs and interest rates of loans may differ from those of a market-rate property. Most multi-family lenders deal with real estate with a restrictive agreement under an affordable housing program, in which a special team of professionals specially trained in affordable housing depreciates, processes and enters into loans. All LRAs contain standard LIHTC rental restrictions that contain an owner who sets aside at least 40% of project units for residents earning less than 60% of median surface income (AMI) or at least 20% of project units for residents earning less than 50% of median surface income.