title
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 Pinehurst Villas
end
RECOMMENDED ACTION
recommendation
WHEREAS, Pinehurst Villas was awarded 9% housing tax credits during the 2022 Competitive Housing Tax Credit cycle;
WHEREAS, the Development Owner executed a Carryover Allocation Agreement that included certifications stating each building receiving an allocation would be placed in service by December 31, 2024;
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);
WHEREAS, the Development Owner has submitted documentation demonstrating that a qualifying force majeure event has occurred; and
WHEREAS, the Development Owner has National Housing Trust Funds that have a federal expenditure and a federal Project Completion deadline;
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, with a Placed in Service deadline of May 30, 2026.
end
BACKGROUND
|
Development |
Pinehurst Villas |
|
Target Population |
Elderly |
|
HTC Award |
$1,048,571 |
|
City |
Pinehurst |
|
Total Units |
60 |
|
HTC Units |
60 |
|
Initial Year of Award |
2022 |
|
Extension Requested |
Seven Months |
Pinehurst Villas is a 60-unit development located in Pinehurst, Orange County. The development received an award of 9% Housing Tax Credits in 2022 and was approved for force majeure treatment in 2023. As a result, the current deadline to place in service in December 31, 2025.
The Development began construction in February 2024, with substantial completion originally planned for July 2025. Since construction started, there have been a total of 139 weather days. Due to this, the general contractor submitted a change order requesting that the construction completion date be extended to December 3, 2025, shortly before the current deadline. The Development is nearing the point where it needs to be electrified, but the owner has incurred substantial delays with the energy provider, Entergy, significant enough to cause the owner to file a grievance with the Public Utility Commission of Texas. The process is now moving forward, but they are still unable to fully estimate Entergy’s timeline. Once the buildings are electrified, the owner must order and install the elevator, which will take a minimum of six additional weeks. To account for these delays, the owner has requested a seven-month extension, establishing a new placed-in-service deadline of July 31, 2026.
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 weather delays and utility issues constitute a force majeure event under the rules, but has also reviewed the requirements for the National Housing Trust funds allocated to this Development and thus recommends a placed in service date of May 30, 2026.
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 placed-in-service deadline will be May 30, 2026.
If the Board denies the request:
• The current placed-in-service deadline of December 31, 2025, 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.
The Development Owner must separately request an extension to the Development Period for the National Housing Trust Fund. In addition, the Department will require that the final draw documents inclusive of the items required under 10 TAC §13.11 be summitted to the Department by June 30, 2026. This is necessary to meet the expenditure deadline for the HTF funds of July 30, 2026.
RECOMMENDATION
Staff recommends approval of the request to return and reallocate tax credits for Pinehurst Villas under the force majeure provisions of 10 TAC §11.6(5).