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Presentation, discussion, and possible action regarding a waiver and extension of the 10% Test submission deadline in 10 TAC §10.401(a) and 10 TAC §11.2(a) for Cypress Creek Apartment Homes at Montfort Drive (HTC #22110/23806/24802)
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RECOMMENDED ACTION
recommendation
WHEREAS, Cypress Creek Apartment Homes at Montfort Drive (Development) received a 9% Housing Tax Credit (HTC) award in 2022 for the construction of 168 units, in Dallas, Dallas County, and was approved for reallocations of credits under Force Majeure in 2023 (HTC #23806) and in 2024 (HTC #24802);
WHEREAS, after the approval of the second Force Majeure, the Development was reissued a Carryover Allocation Agreement on June 11, 2024, that specifies that the 10% Test requirements identified in §11.2(a) of the 2024 Qualified Allocation Plan (QAP) and in §10.401(a) of the Post Award and Asset Management Requirements (AM Rules) must be met by July 1, 2025, or such later date as is specifically granted by the Department pursuant to a written extension;
WHEREAS, pursuant to §42(h)(1)(E)(ii) of the Internal Revenue Code (Code), the Owner’s basis in the Development as of the date which is one year after the date that the allocation was made must be more than 10% of the Owner’s reasonably expected basis in the Development;
WHEREAS, Cypress Creek Montfort Drive LP (Development Owner or Owner) submitted documentation to the Department on April 28, 2026, confirming that the Owner met the 10% expenditure threshold required by the Code by June 28, 2024, but the Owner did not meet the July 1, 2025, submission deadline requirements specified in the 2024 QAP and AM Rules;
WHEREAS, the Owner now requests approval for a waiver of the 10% Test Documentation Delivery Date specified in the 2024 QAP and AM Rules and to extend the submission deadline from July 1, 2025, to April 28, 2026;
WHEREAS, §11.9(f) of the QAP states that, for failure to meet a 10% Test deadline, staff may recommend that an Applicant or Affiliate should be found ineligible to compete in the following year’s competitive Application Round or that they should be assigned a penalty deduction in the following year’s competitive Application Round of no more than two points for each submitted Application; and
WHEREAS, the requested waiver does not negatively affect the Development, impact the viability of the transaction, impact Tex. Gov't Code §§2306.001, 2306.002, 2306.359, and 2306.6701, or affect the amount of the tax credits awarded;
NOW, therefore, it is hereby
RESOLVED, that the requested waiver of the 10% Test submission deadline in 10 TAC §10.401(a) and 10 TAC §11.2(a) and the extension of the deadline from July 1, 2025, to April 28, 2026, for Cypress Creek Apartment Homes at Montfort Drive are approved as presented at this meeting, with no point penalty to Applications submitted by the Owner or their Affiliates in the 2027 competitive Application Round, and the Executive Director and his designees are each hereby authorized, directed, and empowered to take all necessary action to effectuate the foregoing.
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BACKGROUND
Cypress Creek Apartment Homes at Monfort Drive received a 9% HTC award in 2022 and reallocations of credits under Force Majeure in 2023 and in 2024 for the construction of 168 multifamily housing units, out of which 116 are designated as low-income units, for the general population in Dallas, Dallas County. Construction of the Development has been completed, and in a letter dated April 24, 2026, Stuart Shaw, the representative for the Owner, requests a waiver of the 10% Test Documentation Delivery date identified in 10 TAC §11.2(a) of the 2024 Qualified Allocation Plan (QAP) and as specified in 10 TAC §10.401(a) of the Post Award and Asset Management Requirements (AM Rules). Mr. Shaw states that although the federal requirement had been met, the required 10% Test package was not submitted to the Department until April 28, 2026, due to human oversight. Consequently, the Owner did not meet the Department’s July 1, 2025, 10% Test Documentation Delivery Date. The letter from Mr. Shaw states that the 10% Test submitted to the Department substantiates the Owner met the 10% Test expenditure requirement and deadline under §42(h)(1)(E)(ii) of the Code.
Staff reviewed the Report of Independent Auditors issued April 23, 2026, that was submitted with the 10% Test package on April 28, 2026. The report confirms the basis incurred by the Owner as of June 28, 2024, was $5,500,000, representing 12.67% of the $43,416,270 total reasonably expected basis for the Development, which meets the Code requirements. The 10% Test package indicates that the site acquisition cost of $5.5MM, which is counted as part of the incurred basis for the 10% Test, was incurred on June 28, 2024. The report from the auditor was issued on June 27, 2025, and in a supplemental Report on Applying Agreed-Upon Procedures dated April 23, 2026, the CPA confirmed that no material changes have occurred to the scope, projected development costs, or financing structure since June 28, 2024, and that costs incurred to date as of March 31, 2026, total $44,451,048. The Development has been placed in service as of April 1, 2026. The non-upload of the 10% Test package was an administrative oversight; no substantive compliance failure occurred.
Mr. Shaw states that the Owner and its Affiliates are experienced operators in affordable housing in Texas and that this is the first time an oversight of this kind has occurred. He further states that the Owner has implemented safeguards for all their projects to avoid a recurrence of this incident. Therefore, as allowed under 10 TAC §11.207, the Owner requests a waiver of the QAP and AM Rules to allow the 10% Test Documentation Delivery Date submission deadline to be extended from July 1, 2025, to the date the Department received the complete 10% Test package, which is April 28, 2026. Mr. Shaw states that granting this waiver better serves the policies and purposes articulated in Tex. Gov't Code §§2306.001, 2306.002, 2306.359, and 2306.6701. Without the waiver, the Development would be jeopardized. Therefore, by granting the requested waiver, the Owner can continue to develop the project as the Owner represented in the Application.
Staff recommends approval of the waiver of the 10% Test submission deadline in 10 TAC §10.401(a) and 10 TAC §11.2(a) and the request to extend the 10% Test Documentation Delivery Date deadline from July 1, 2025, to April 28, 2026, as presented herein. Additionally, staff recommends assessing no point penalty to Applications submitted by the Owner or their Affiliates in the 2027 competitive Application Round as a result of this extension.