LIHTC Financial Management & Tax Credit Allocation 3

Question 1

A LIHTC investor receives tax credits over how many years after the project is placed in service?

Accepted Answer

10 years

Answer

LIHTC investors claim the annual credit over a 10-year credit period beginning the year the project is placed in service (or the following year).

Question 2

Under California's TCAC regulations, which of the following costs is generally NOT included in eligible basis?

Accepted Answer

Land acquisition cost

Answer

Land acquisition costs are specifically excluded from eligible basis because land is not a depreciable asset.

Question 3

What is a 'pay-in schedule' in the context of LIHTC equity investments?

Accepted Answer

The timeline over which the investor contributes equity capital to the project

Answer

The pay-in schedule specifies when the investor delivers equity installments, typically tied to construction milestones and credit delivery events.

Question 4

A LIHTC project has 50 units restricted to 60% AMI and 10 market-rate units. Which minimum set-aside test does this project satisfy?

Accepted Answer

40-60 test only

Answer

With 83% of units at 60% AMI, the project satisfies the 40-60 test (at least 40% of units at 60% AMI) but not necessarily the 20-50 test.

Question 5

In LIHTC transactions, what does the term 'yield' refer to in the investor's underwriting?

Accepted Answer

The after-tax rate of return the investor expects on their equity investment

Answer

Investor yield is the internal rate of return (IRR) on their equity, driven by tax credits, losses, and any cash distributions.

(LIHTC) California Low-Income Housing Tax Credit Exam Practice Test