Year 15 exit and refinance calculator
Three figures set the range for a Year 15 deal: the lowest price a right of first refusal can carry, the price a qualified contract would require, and the loan the restricted rents support. Work each from your own figures.
Rules: IRC 42(i)(7) and 42(h)(6)(E)-(I) (Cornell LII text, current through Pub. L. 119-21); 26 CFR 1.42-18 (T.D. 9587, May 3, 2012). The refinance LTV and DSCR are inputs, not a lender's terms; enter the ones you've been quoted. Defaults are a sample property. Not tax or legal advice.
Reading the three numbers together
The right of first refusal price is often the lowest, because it ignores investor equity entirely: on the sample it's the $6,200,000 of debt plus $450,000 of exit taxes, $6,650,000. A qualified contract price adds back the investors' cash, grown by inflation, so it often lands well above what the restricted rents can support. That gap matters: a qualified contract request asks the agency to find a buyer at a price the rents may not support, and if it can't, extended use can end early. That's why the statute lets the extended use agreement or state law rule the request out, and why a state can make owners waive it when credits are allocated.
The refinance loan tells you what a buyer, or the general partner buying out the investor, can actually fund. If it's below the debt you need to retire plus the investor buyout, the difference has to come from new equity, soft money or a resyndication with new credits.
What this leaves out
Exit taxes depend on the partners' capital accounts and depreciation history, which only your accountant has. Treasury regulation 1.42-18 limits which debt counts toward the qualified contract price and how reserves are treated; read it with your adviser before you rely on the estimate. Your partnership agreement may also set its own purchase price formula for the general partner's option.
Questions people ask
What is the minimum purchase price under a LIHTC right of first refusal?
Under IRC 42(i)(7)(B), the principal of debt secured by the building, other than debt taken on in the 5 years before the sale, plus all federal, state and local taxes the sale causes. The partnership agreement can set a higher price; the statute sets the floor that keeps the right from costing the investor its tax benefits.
How is a qualified contract price calculated?
Fair market value for the market-rate portion, plus at least the applicable fraction times the sum of outstanding debt, adjusted investor equity and other capital contributions, minus cash distributions (IRC 42(h)(6)(F)). Treasury regulation 1.42-18 sets the detailed rules, including which debt counts and how reserves are treated.
Can a LIHTC property be refinanced before Year 15?
It can, subject to the partnership agreement and the agency's extended use agreement. A refinance does not trigger recapture by itself; during the compliance period, a drop in qualified basis or certain dispositions can.