Applications for exemption and miscellaneous determination requests are assigned to Exempt Organizations specialists for review. If additional information is necessary to make a determination, a specialist will contact the organization for the information. Here’s a list of questions that might be asked on this topic.
1. Submit copies of your organizational documents and agreements between you and the limited partners or other members which affect your rights, responsibilities or potential liabilities. Additionally, describe any other rights, responsibilities or potential liabilities with regard to the project(s) which are not fully reflected in the above documents.
Please note that the organizational documents for your partnership should specify (1) that the limited partnership (LP) or limited liability company (LLC) will operate housing that it owns in a manner that furthers charitable purposes by providing decent, safe, sanitary and affordable housing for low income persons and families (including the elderly or physically handicapped, where appropriate), and (2) that, in the event of a conflict between the obligations of you (in your capacity as general partner or managing member) to operate the LP or LLC in a manner consistent with such charitable purposes and any duty to maximize profits for the limited partners or other members, the charitable purposes set forth in the formative documents will prevail. If the organizational documents do not include these provisions, then in your capacity as general partner either amend the documents accordingly or submit a detailed statement explaining how you will ensure that these requirements will otherwise be satisfied.
2. Attach your adopted conflict of interest policy. A suggested sample conflict of interest policy is contained in the Instructions for Form 1023, or a similar conflict of interest policy, might be adopted.
3. If you have not obtained an Independent Phase 1 environmental report, you must provide a written statement that no amounts were paid or are expected to be paid by you for any environmental indemnification. If any amounts for environmental indemnification have been paid, or are expected to be paid, explain how such amounts were determined, the status of the property or properties to which such indemnification pertains, and how future liabilities, if any, will be paid.
4. If you did not enter into fixed-price construction or rehabilitation contracts with contractors that were bonded or that provided performance letters of credit or adequate personal guarantees, you must provide a statement that no amounts were paid or are expected to be paid by you for construction cost overruns. If amounts for construction cost overruns were paid or are expected to be paid by you, you must provide a statement explaining:
a. How such amounts were determined;
b. Whether you have or expect to have any future liabilities for similar payments; and
c. How any cost overruns are allocated in the capital accounts of the partnership.
5. If operating deficits have been incurred or are expected to be incurred, provide a statement explaining any amount paid or expected to be paid by you, the reasons for such payment(s), any future liabilities you have or expect to have for similar payments, and the date on which the project reached, or is expected to reach, break-even operations.
Note: “Break-even operations” means the date upon which the project achieves 95 percent occupancy and the revenues received from the normal operation of the project equal all accumulated operational costs of the project for a period of three consecutive months after completion of construction computed on a cash basis and in accordance with the project and loan documents.
6. If any amounts were paid or are expected to be paid by you for any reduction in the amount of tax credits received by any limited partner or other member, provide a statement explaining any amount paid or expected to be paid, the reasons for such payment(s), and any future liabilities you have or expect to have for similar payments.
7. If you have, or the partnership or limited liability company has, paid any amounts to any limited partner or other member to repurchase some part or all of the partner’s or member’s interests in the partnership or LLC, explain whether the repurchase price exceeded the amount of capital contributions made by the partner or member.
See the complete list of Applying for Exemption/Miscellaneous Determination Sample Questions by topic.