[Code of Federal Regulations]
[Title 26, Volume 1]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.42-17]

[Page 178-179]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.42-17  Qualified allocation plan.

    (a) Requirements--(1) In general. [Reserved]
    (2) Selection criteria. [Reserved]
    (3) Agency evaluation. Section 42(m)(2)(A) requires that the housing 
credit dollar amount allocated to a project is not to exceed the amount 
the Agency determines is necessary for the financial feasibility of the 
project and its viability as a qualified low-income housing project 
throughout the credit period. In making this determination, the Agency 
must consider--
    (i) The sources and uses of funds and the total financing planned 
for the project. The taxpayer must certify to the Agency the full extent 
of all federal, state, and local subsidies that apply (or which the 
taxpayer expects to apply) to the project. The taxpayer must also 
certify to the Agency all other sources of funds and all development 
costs for the project. The taxpayer's certification should be 
sufficiently detailed to enable the Agency to ascertain the nature of 
the costs that will make up the total financing package, including 
subsidies and the anticipated syndication or placement proceeds to be 
raised. Development cost information, whether or not includible in 
eligible basis under section 42(d), that should be provided to the 
Agency includes, but is not limited to, site acquisition costs, 
construction contingency, general contractor's overhead and profit, 
architect's and engineer's fees, permit and survey fees, insurance 
premiums, real estate taxes during construction, title and recording 
fees, construction period interest, financing fees, organizational 
costs, rent-up and marketing costs, accounting and auditing costs, 
working capital and operating deficit reserves, syndication and legal 
fees, and developer fees;
    (ii) Any proceeds or receipts expected to be generated by reason of 
tax benefits;
    (iii) The percentage of the housing credit dollar amount used for 
project costs other than the costs of intermediaries. This requirement 
should not be applied so as to impede the development of projects in 
hard-to-develop areas under section 42(d)(5)(C); and
    (iv) The reasonableness of the developmental and operational costs 
of the project.
    (4) Timing of Agency evaluation--(i) In general. The financial 
determinations and certifications required under paragraph (a)(3) of 
this section must be made as of the following times--
    (A) The time of the application for the housing credit dollar 
amount;
    (B) The time of the allocation of the housing credit dollar amount; 
and
    (C) The date the building is placed in service.
    (ii) Time limit for placed-in-service evaluation. For purposes of 
paragraph (a)(4)(i)(C) of this section, the evaluation for when a 
building is placed in service must be made not later than the date the 
Agency issues the Form 8609, ``Low-Income Housing Credit Allocation 
Certification.'' The Agency must evaluate all sources and uses of funds 
under paragraph (a)(3)(i) of this section paid, incurred, or committed 
by the taxpayer for the project up until date the Agency issues the Form 
8609.
    (5) Special rule for final determinations and certifications. For 
the Agency's evaluation under paragraph (a)(4)(i)(C) of this section, 
the taxpayer must submit a schedule of project costs. Such schedule is 
to be prepared on the method of accounting used by the taxpayer for 
federal income tax purposes, and must detail the project's total costs 
as well as those costs that may qualify for inclusion in eligible basis 
under section 42(d). For projects with more than 10 units, the schedule 
of project costs must be accompanied by a Certified Public Accountant's 
audit report on the schedule (an Agency may require

[[Page 179]]

an audited schedule of project costs for projects with fewer than 11 
units). The CPA's audit must be conducted in accordance with generally 
accepted auditing standards. The auditor's report must be unqualified.
    (6) Bond-financed projects. A project qualifying under section 
42(h)(4) is not entitled to any credit unless the governmental unit that 
issued the bonds (or on behalf of which the bonds were issued), or the 
Agency responsible for issuing the Form(s) 8609 to the project, makes 
determinations under rules similar to the rules in paragraphs (a) (3), 
(4), and (5) of this section.
    (b) Effective date. This section is effective on January 1, 2001.

[T.D. 8859, 65 FR 2329, Jan. 14, 2000]