Year 15 LIHTC exit options: buyout, sale, refinance, resyndication

When the 15-year compliance period ends, the investor partner has claimed every credit it bought and recapture can no longer reach it. The property still owes at least 15 more years of affordability under the extended use agreement. Every Year 15 path sits between those two facts.

1. The general partner buys out the investor

The most direct exit: the general partner or its affiliate buys the investor’s interest, usually under an option in the partnership agreement. The price comes from that agreement, not the tax code. The property stays under its extended use agreement, so the buyer is paying for a restricted asset, and the debt it can raise is sized on restricted rents. The refinance calculator shows what those rents support.

2. A right of first refusal is exercised

If the partnership agreement gives a qualified nonprofit, the tenants or a government agency a right of first refusal, section 42(i)(7) protects the investor’s tax benefits as long as the price is at least the statutory minimum: the debt secured by the building (leaving out debt taken on in the five years before the sale) plus the taxes the sale triggers. That floor ignores the investor’s equity, which is why the terms of these rights get litigated. See how the minimum price works.

3. The property is sold

A sale to a third party carries the extended use agreement with it. Buyers price the restricted rents and the remaining years of restriction, and many plan a rehab that may bring a new allocation of credits.

4. A qualified contract request

After year 14 of the compliance period, an owner whose agreement and state law allow it can ask the agency to find a buyer at the qualified contract price. If the agency can’t present one within a year, extended use ends, subject to three years of protection for existing tenants (42(h)(6)(E)). Some states require owners to waive this right when credits are allocated. How the price is set.

5. Resyndication

Acquisition and rehab with new 4% credits and tax-exempt bonds can recapitalize an aging property and reset the clock. For buildings placed in service in taxable years beginning after 2025, the bond test can be met at 25% of aggregate basis when at least one bond comes from an issue dated after 2025 (42(h)(4)(B), as amended by Public Law 119-21), which makes bond-financed resyndications easier to size.

Before you pick one

Get the dates right first: the compliance timeline gives the end of the compliance period, the qualified contract window and the minimum extended-use date from the placed-in-service year. Then compare the right of first refusal price, the qualified contract price and the refinance loan side by side.