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Presentation, discussion, and possible action on a request for return and reallocation of tax credits under 10 TAC §11.6(5) related to Credit Returns Resulting from Force Majeure Events for FishPond at Walker
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RECOMMENDED ACTION
recommendation
WHEREAS, FishPond at Walker was awarded 9% housing tax credits during the 2022 Competitive Housing Tax Credit cycle, and was then approved for force majeure treatment by the Board in 2023 and 2024, resulting in a current deadline to place in service of December 31, 2026;
WHEREAS, the Applicant applied for a $3,500,000 loan of HOME funds from the Department’s 2024-2 Notice of Funding Availability (NOFA) in April 2024, and those funds were approved by the Board in February 2025;
WHEREAS, the Development Owner has requested an extension to the placement in service deadline under 10 TAC §11.6(5), related to Credit Returns Resulting from Force Majeure Events;
WHEREAS, the Department lacks authority to extend federal placement in service deadlines and may only reset such deadlines by requiring the credits to be returned and immediately reallocated to the Development, as permitted solely under the force majeure provision of the Qualified Allocation Plan (QAP); and
WHEREAS, the Development Owner has submitted documentation demonstrating that a qualifying force majeure event has occurred;
NOW, therefore, it is hereby
RESOLVED, that the request to treat the matter under the force majeure provisions of 10 TAC §11.6(5) is approved, and that the 2022 Qualified Allocation Plan, Uniform Multifamily Rules, and the 2025 Program Calendar shall be applicable to the Development, except for the deadline to Place in Service, which shall be June 30, 2027.
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BACKGROUND
|
Development |
FishPond at Walker |
|
Target Population |
Elderly |
|
HTC Award |
$900,000 |
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City |
Huntsville |
|
Total Units |
48 |
|
HTC Units |
48 |
|
Initial Year of Award |
2022 |
|
Extension Requested |
Six months |
FishPond at Walker is a 48-unit development located in Hunstville, Walker County. The development received an award of 9% Housing Tax Credits in 2022, and has since been granted force majeure treatment in 2023 and 2024. As a result, the current deadline to place in service is December 31, 2026.
To date, the Developer has invested $910,000 in pre-development costs, including land acquisition, engineering, TDHCA fees, and third-party reports. Due to a financial gap, the Developer applied for a $3,500,000 loan of HOME funds under the Department’s 2024-2 NOFA in April 2024. That loan was approved by the Board in February 2025, and is currently in the closing process; however, the investor requires at least a six-month extension of the current deadline to place in service, as the currently anticipated construction completion date of December 2026 leaves no room for construction delays.
APPLICABLE RULE
Under 10 TAC §11.6(5), a Development Owner may return credits and receive a reallocation outside the standard allocation process if the return is the result of a qualifying force majeure event occurring prior to issuance of IRS Form(s) 8609. Pursuant to 10 TAC §11.6(5), the Department’s Governing Board may approve execution of a Carryover Allocation Agreement for the current program year with the Development Owner that returned the credits, but only if the following conditions are met:
(A) The credits were returned as a result of "Force Majeure" events that occurred before issuance of Forms 8609. Force Majeure events are the following sudden and unforeseen circumstances outside the control of the Development Owner: acts of God such as fire, tornado, flooding, significant and unusual rainfall or subfreezing temperatures, or loss of access to necessary water or utilities as a direct result of significant weather events; explosion; vandalism; orders or acts of military authority; unrelated party litigation; changes in law, rules, or regulations; national emergency or insurrection; riot; acts of terrorism; supplier failures; or materials or labor shortages. If a Force Majeure event is also a presidentially declared disaster, the Department may treat the matter under the applicable federal provisions. Force Majeure events must make construction activity impossible or materially impede its progress.
Staff has reviewed this request and determined that the financial gap and resulting project delays constitute a force majeure event under the rules.
IMPACT OF BOARD DECISION
If the Board approves the request:
• The credits will be returned and reallocated, with the 2022 Qualified Allocation Plan, Uniform Multifamily Rules, and the 2025 Program Calendar applicable to the Development.
• A new Carryover Allocation Agreement will be executed.
• The new 10% Test deadline will be July 1, 2026.
• The new placed in service deadline will be June 30, 2027.
If the Board denies the request:
• The current placed in service deadline of December 31, 2026, remains in place.
• The Development Owner may either meet the existing deadline, return the credits, or have the award terminated for failing to meet the deadline.
• Returned credits will first be reallocated within the original subregion in accordance with 10 TAC §11.6(2). If no pending applications are eligible within the subregion, the credits will be added to the statewide collapse for reallocation.
This request has no impact on any funding source other than the Low Income Housing Tax Credit program, and does not impact the HOME deadlines.
RECOMMENDATION
Staff recommends approval of the request to return and reallocate tax credits for FishPond at Walker under the force majeure provisions of 10 TAC §11.6(5).