Construction & Lease-UpTimely completion of construction is one of the key aspects to ensure delivery of projected tax credits. The general partner is ultimately responsible for ensuring that the project is constructed or rehabilitated and placed in service in accordance with the timelines and basis amounts set forth in the limited partnership agreement (LPA) and associated projections. Enterprise Community Asset Management monitors progress through reports received during construction, and is available for consultation as needed. When construction is complete, Enterprise reviews the cost certification, 8609s and other key documentation prior to finalization.
Processing Capital RequestsAs each operating partnership submits their required capital payment draw request, Enterprise reviews the package to ensure it is complete and has appropriate support, that sources and uses are reasonable, and that construction progress is proceeding as expected. Information generally provided in a draw request package includes the following:
- AIA forms (G702-703)
- Lien waiver from the general contractor
- A calculation of projected and actual completion
- Independent inspection report
- Soft cost invoices (for all amounts over $10,000 unless otherwise required by the Investor)
- Unified draw schedule showing sources and uses, amounts funded to date by each funder, and amount of the requested draw to be funded by each funder
- Other items as required per the LPA
Cost CertificationThe cost certification should be completed by an independent certified public accountant and details total development costs and eligible basis. It is used by the allocating state agency to determine the amount of credits which will be reflected on the 8609s. Enterprise reviews the draft certifications prior to submission to the state agency. The following information should be included:
- Total project costs
- Detail of permanent sources to equal total project costs
- Calculation of eligible basis: for acquisition, new/rehabilitation, historic tax credits, and state credits if applicable
- Calculation of credits – by credit type
- If financed by tax exempt bonds, the 50-percent test must be included
8609sOnce the cost certification has been approved and the allocating state agency issued forms 8609 have been received (signed by the state agency), Enterprise Community Asset Management reviews the full 8609 (including the completed part II) prior to filing with the IRS. Any errors in the completion of the forms 8609 are difficult, costly and time consuming to correct and could have a serious impact on the project’s achievement of tax credits. Therefore, it is essential that all parties are in agreement on the cost certification, application and completion of the 8609s to avoid any issues.
Lease-UpThe general partner is responsible for ensuring that tenants in tax credit units meet certain income eligibility requirements. A tenant’s income must be certified and verified prior to signing a lease for tax credit units. In order to facilitate the lease up process, ensure tax credit compliance and confirm unit qualification dates, Enterprise requires copies of the initial tenant files for every unit in the project. Complete files should include:
- Tenant income certification or eligibility certification
- Income questionnaire or rental ability application (REA) for head of household (HOH)
- All support and back up to document income of HOH which includes everything listed on income questionnaire
- Questionnaire or REA for household member 2, etc.
- All support and back up to document income of household member 2
- Pages of lease that show the lease term, rent amount and signature page for tenant and management (typically the first and last page of lease)
- Lease addendums