Lihtc Limited Partnership Agreement

A LIHTC Limited Partnership Agreement: Overview and Key Points

A Low-Income Housing Tax Credit (LIHTC) Limited Partnership Agreement is a legally binding contract between a general partner who is responsible for project management and financing, and a limited partner who contributes funding but does not participate in management. This agreement outlines the terms and conditions of the partnership and lays out the responsibilities, rights, and liabilities of each partner.

The LIHTC program, established by Congress in 1986, provides incentives for private developers to build affordable rental housing for low-income households. To participate in the program, a developer must apply for tax credits from their state housing finance agency and enter into a LIHTC Limited Partnership Agreement with an investor. The investor provides capital in exchange for tax credits over a 10-year period.

Here are some key points to keep in mind when reviewing a LIHTC Limited Partnership Agreement:

1. Capital contributions and allocations: The limited partner typically provides 99% of the capital and receives 99% of the tax credits, while the general partner contributes 1% of the capital and receives 1% of the tax credits. The agreement should specify the amount and timing of capital contributions, as well as the allocation of tax credits.

2. Management and control: The general partner has sole responsibility for managing and operating the project, while the limited partner has no management authority. The agreement should outline the general partner`s duties, decision-making authority, and reporting requirements, as well as the limited partner`s right to receive financial reports and audit the general partner`s performance.

3. Liability and indemnification: The general partner is responsible for any losses or liabilities incurred by the partnership, while the limited partner is usually shielded from liability. The agreement should specify the extent of each partner`s liability and the circumstances under which the limited partner may be held liable. The general partner should also provide indemnification to the limited partner for any losses or claims arising from the partnership.

4. Termination and dissolution: The agreement should set forth the conditions under which the partnership may be terminated or dissolved, including the general partner`s right to terminate the partnership if it becomes economically unfeasible. The agreement should also provide for the winding up and distribution of assets upon dissolution.

5. Compliance with LIHTC regulations: The LIHTC program has strict regulations governing the development and operation of affordable housing projects, and the agreement should ensure that the partnership complies with these regulations. This includes maintaining rent and income restrictions for eligible tenants and adhering to strict monitoring and reporting requirements.

In conclusion, reviewing a LIHTC Limited Partnership Agreement requires a careful examination of the terms and conditions of the partnership, as well as an understanding of the LIHTC program`s regulatory framework. Any changes to the agreement must be properly documented and approved by both partners to ensure compliance with program requirements.