The Georgia Low-Income Housing Tax Credit was initially created in 2000 and was modified in August 2001 O.C.G.A. 48-7-29.6. AEP has been involved in Georgia since the initial introduction of the state tax credit and was instrumental in formulating the revisions to the statutes in 2001. These revisions simplified the program and made it more accessible to developers and investors alike.

What is the incentive for developers?

Each year Georgia allocates both federal and Georgia tax credits to affordable housing developments in Georgia which can then be sold to investors.

• Credits Provide Needed Equity. Once a developer is awarded tax credits, these credits may be sold to tax credit syndicators (like AEP). The proceeds from the sale of these credits are then used by the developer to help pay for construction costs. This allows for a relatively small mortgage on the property, which in turn allows the developer to charge reduced rent to the tenants.
  
  Additionally, the Georgia credits may be separated from the federal credits and then transferred to investors who utilize the credits to reduce their state tax liability. To be entitled to the Georgia tax credits, an investor must have de minimus ownership interest (.01 percent) in the housing complex to be entitled to 100 percent of the tax credits.

Who would be an eligible applicant?

As set forth in Section 33-1-18 et seq., a Georgia taxpayer that owns an interest in a qualified low-income housing development is allowed a state tax credit for a portion of his investment. That tax credit can then be sold to an investor.

• Generation of credits. An apartment complex that has been allocated tax credits begins generating credits once construction is complete and the units are leased to qualified tenants.
  
• Income and rent restrictions. To qualify for the credits, the apartment units must be rented to residents whose incomes are below certain levels. These income levels are based upon the median income of the area in which the project is located. In addition, the rents charged must be below certain levels.
  
  A resident’s income may increase after initial occupancy and still remain eligible for the credit and continued occupancy.
  

Which developments qualify?

Acquisition - To qualify for the acquisition credit, the building must have been last placed in service at least 10 years prior to application (certain exceptions apply) and must involve rehabilitation.

Rehabilitation - To qualify for the rehabilitation credit, rehabilitation expenditures chargeable to capital account must equal the greater of 10 percent of the building's adjusted basis or average at least $10,000 per low-income unit.

New construction - Properties can be for general occupancy or for senior living occupancy. AEP can help you evaluate whether or not your development qualifies for credits according to the specific rules for each development type.

What are the potential risks?

AEP has been involved in tax credits for more than 18 years, with over 300 tax credit developments, and zero tax credits lost. We seek, in all ways, to continue our success and work with the best developers on the best properties. We will work tirelessly to ensure that your applications, financing, construction, and management meet the highest standards. And AEP will virtually eliminate any existing risk by guaranteeing that the investor will receive substantially all of the tax credits purchased.

There are, however, three primary ways an affordable housing complex may not generate as many tax credits as initially projected.

1. The complex leases up more slowly than anticipated.
2. The units, although leased, are not leased to tax credit-qualified tenants.
3. The complex is not able to meet its debt payments and the mortgage holder forecloses on the property.

AEP takes substantial steps to minimize these risks and to protect the investor’s investment.

• Lease-Up. Tax credits become available as the units are leased to tax credit-qualified tenants. AEP provides projections to the investor setting forth the estimated timing of construction completion and lease-up (and thus the estimated timing of the credits). If the development leases up slower than anticipated (due to a delay in construction from weather, slow market conditions, etc.), the timing of the first year’s tax credits to the investor could be delayed, thus reducing the investor’s rate of return.
  
  To reduce this possibility, AEP closely monitors the construction and lease-up of its developments to make sure that they meet the projected construction and lease-up schedules. Prior to construction, AEP requires a third party market study to confirm that an adequate market exists for the development. AEP is in continual contact with the builder and developer of the project. AEP’s affiliate company, Fairway Construction Company, has constructed more than 100 affordable housing developments in five states and can assist with or take over a development’s completion if problems should occur.
  
• Compliance. Tax credits are available only for those apartment units that are leased to tax credit qualified tenants. Each apartment complex owner involved with the tax credit program is required to record a deed with the property forbidding the property owner or future owners from leasing an apartment unit to an unqualified tenant. In addition, both the Georgia Department of Community Affairs and AEP approve of the management agent for each complex. The IRS also allows for mistakes to be corrected within a reasonable time period.
  
  AEP takes considerable steps to make sure that the management agents stay well-trained in the tax credit program and collect necessary information from tenants to ensure that the apartment units are being leased to tax credit-qualified tenants.
  
  To ensure tax credit compliance, AEP employs in-house and paid consultants that perform routine field audits of the developments. AEP also sponsors annual compliance training for all of its developers and management agents as well as officials of the Georgia Department of Community Affairs. At this annual week-long seminar, intense training and testing is conducted to ensure that the management agents comply with the tax credit rules and regulations.
  
  AEP also has an affiliate management company, Fairway Management Company which has extensive tax credit management experience. Fairway Management Company can assist a management agent with compliance issues and, if necessary, take over management of the apartment complex to prevent any potential loss of tax credits.
  
  
• Foreclosure. AEP’s developments have very low foreclosure risks. The equity provided to the developments through the sale of the state and federal tax credits allows for extremely low debt/equity ratios (approximately 30 to 70 percent).

Where do I go from here?

AEP can help you through the process of applying for Georgia low-income housing tax credits. All applications will be evaluated in accordance with the minimum threshold requirements and selection criteria as described in the allocation plan.

Considerations include, but are not limited to, market and financial feasibility, income and rent restrictions, site and location characteristics, proposed development characteristics and compliance history.

For an investor, contact Will Markel, Monica Swoboda, or Dan Torgerson  at 573.443.2021

What else should I know?

When you rely on AEP’s knowledgeable team, you can rest assured that we will make sure your project meets all requirements. Here are some considerations:

• Available credits. The number of tax credits available each year is based on federal tax credits allocated annually to the state. The amount of federal tax credits allocated to each state is based on a calculation of $1.50 ($1.75 as of 2003) per person in the state.
• Credit period. The credits are taken each year for ten years, with an additional five-year compliance period. The first year's credit is based on the number of months that the development is in service during that year, with the remainder of the first year's credits taken in year 11. The program now requires that buildings remain in low-income use for at least 30 years, although it is still possible to convert to market rents after 15 years. At the end of this period, which may be extended if mutually agreed to at the time the credits are awarded, the property remains fully under the control of the owners who may manage them in any way they choose.
• Reporting. Accurate annual reporting is a requirement for state credit investors. AEP’s Asset Management Team automatically notifies the investor of the amount of tax credits that can be taken against tax liability each year. AEP asset management also allows investors to monitor their investments on a continuous basis. For more information, see Asset Management.

For a more detailed summary of the Georgia LIHTC program, please check out this memo from Leslie K. Sha, Esq.

Below are links to the various Georgia statutes relating to the Georgia LIHTC.
O.C.G.A. 48-7-29.6