Senate Bill S6168

                                 BILL NUMBER:  S6168A

 TITLE OF BILL :
An act to amend the tax law, in relation to conveyances involving real
property financed with federal low-income housing tax credits


 PURPOSE :
In order to facilitate the preservation of affordability on
not-for-profit sponsored housing projects developed with Low Income
Housing Tax Credits. As the housing projects reach an end to their 15
year IRS Compliance period, the City and its community partners are
implementing a plan to allow for the exit of the limited partner
investors through a sale of the project or partnership interests to a
not-for-profit organization.

 SUMMARY OF PROVISIONS :
Conveyances involving real property financed with federal low income
housing tax credits and subject to a housing credit agency's
regulatory agreement for a minimum period of 15 years, from the date
of conveyance to a not-for-profit corporation. No part of the net
earnings of said not-for-profit shall inure to the benefit of any
person.

 JUSTIFICATION :
The Low Income Housing Tax Credit (LIHTC) is a 23 year old federal
              

program that accounts for nearly 90 percent of all affordable rental
housing created in the U.S. today. Preservation of this portfolio and
continued investment through this program is critical if we are to
make a dent in the ever increasing need to house low income people.
The first projects that utilized the LIHTC have reached the end of
their 15 year compliance period. These initial projects were developed
by community based organizations committed to providing housing for
the poor and working families in neighborhoods devastated by blight
and abandonment.  The City and the State were committed partners and
provided flexible financing, up to and including interest only
mortgages to enable projects to serve the lowest income possible while
maximizing resources to rehabilitate and build decent housing.

Many community based developers of these early projects are now
exercising their right to acquire these projects and transfer the
ownership from Limited Partnerships structured to take advantage of
the equity from syndicating credits into the hands of 501 c(3)s
structured to benefit from real estate tax exemptions and abatements
and ensuring longer term affordability. However, because they were
initially created as for profit entities to access the tax benefits,
upon transfer from the Limited Partnerships to 501 c(3)s, these
projects will be subject to NYS Mortgage Transfer Tax. The application
of the NYS Mortgage Transfer Tax threatens the long-term affordability
of these homes, as all resources in these projects are devoted to
operations and capital needs necessary to sustain the building for the
next 15 years. As the ultimate owner of the buildings, nonprofit
organizations - many of which are already stressed due to the current
economic crisis - do not have the organizational resources to meet
this tax. As a result, these properties can not be acquired and
recapitalized as resources to the community. At a larger scope,
further obstacles to move these properties through the transfer from
Limited Partnerships to nonprofit ownership present an unattractive
risk to future investors in the LIHTC program. The contraction of the
banking sector and other financial institutions has already eroded the
traditional investor base for this critical program.  The impact of
this is particularly evident in upstate New York, where affordable
housing projects are stalled because they can not find investors. To
attract new and continued investors to affordable housing in New York,
current projects need to demonstrate that the investor can exit at the
projected transfer time. The City has exempted these transfers from
their mortgage recording tax should the new ownership entity be a 501
c(3). This legislation would extend the exemption to the State
Mortgage Transfer Tax greatly assisting in maintaining the continued
affordability of these projects.

 LEGISLATIVE HISTORY :
New Bill.

 FISCAL IMPLICATIONS :
None to the State.

 EFFECTIVE DATE :
Immediately.