Virginia Passes Bill to Evaluate Single-Stair/Point Access Block for Multifamily Dwellings

On April 4, 2024, Virginia Governor Glenn Youngkin signed into law Senate Bill 195, which directs the Commonwealth’s Board of Housing and Community Development (the “Board”) to convene a stakeholder advisory group (the “Advisory Group”) to evaluate and recommend revisions to the Uniform Statewide Building Code (§36-97, et seq. of the Code of Virginia) to allow Single-Stair/Point Access Block multi-family dwellings, provided that the building isn’t higher than six-stories.  The Advisory Group must submit its findings to the Board, as well as the Chairmen of the State House Committee on General Laws and the Senate Committee on General Laws and Technology no later than December 1, 2024.

This new law reflects the efforts of policymakers across the country striving to modernize housing policy to increase access to affordable housing.  However, unlike many initiatives which touch a single regulatory issue, such as density, zoning, lot size or environmental impact, Single-Stair/Point Access Block dwellings simultaneously address two distinct barriers to increase access to housing: density and zoning.

Single-Stair/Point Access Block is an architectural design concept prioritizing a single stairway within multifamily dwelling structures such as apartments or condominiums. This approach involves consolidating stair access to a single point within a residential or commercial block, provided it complies with local fire and building codes.

In traditional multi-story dwellings, multiple staircases are commonly dispersed throughout the building, leading to a network of access points on different floors.  Traditional multifamily buildings may be larger to accommodate the multiple staircases, but will probably have smaller, more expensive units.  Most American apartment buildings over four stories are required to have at least two means of egress from each unit.

In contrast, Single-Stair/Point Access Block multifamily buildings consolidate all staircases into a centralized location which encircles or is adjacent to the building’s elevator.  More commonplace in European, North African and Asian multifamily buildings, this design maximizes useable square footage and can lead to buildings with larger units and increased density.  If implemented at a larger scale in the United States, Single-Stair/Point Access Block buildings could increase both affordability and inventory in the communities where they can be built.

For the Advisory Group established under the new Virginia law, the Board will appoint experts in the areas of fire, safety and building design to discuss and evaluate whether or not to multifamily dwellings up to six stories can be adequately and safely served by a Single-Stair/Point Access Block.  The Board’s discussions will most likely focus on whether multifamily buildings will be permitted under current zoning controls and if increasing the number of units in the Commonwealth’s multifamily buildings is worth potentially sacrificing multiple means of egress from a safety perspective.  Many affordable housing professionals are looking forward to the Advisory Group’s findings to be submitted by the end of this calendar year.

Maryland General Assembly Establishes a “Maryland Only” CDE

By N. Gordon Knox, Partner

On April 8th, the Maryland General Assembly enacted The Housing and Community Development Financing Act (the “Act”), creating a state Community Development Entity (“CDE”) to utilize federal New Markets Tax Credits (“NMTCs”).  The Act was part of Governor Wes Moore’s Legislative Housing Package which aims to, among other things, incentivize long-term financial investment in low-income communities in the State.

The Act established a CDE called the Maryland Community Investment Corporation (“MCIC”).  CDEs are domestic corporations which serve as intermediaries for the provision of loans or investments in low-income communities.  MCIC will be able to apply to the federal Community Development Financial Institutions (“CDFI”) Fund to receive an allocation of NMTCs to offer its investors in exchange for equity investments in the CDE.

Historically, low-income communities experience a lack of investment, as evidenced by vacant commercial properties, outdated manufacturing facilities, and inadequate access to education and healthcare service providers. The NMTC Program aims to break this cycle of disinvestment by attracting the private investment necessary to reinvigorate struggling local economies.

The U.S. Congress established the NMTC program at the beginning of this century.  Congress authorizes the amount of credit, which the U.S. Treasury Department then allocates to qualified applicants, such as MCIC.  From 2003 through 2023, the NMTC program has parceled out credits worth $40 billion (in 2023 dollars). The NMTC has supported more than 7,100 projects in all 50 states, the District of Columbia, and Puerto Rico through program year 2020. Some 43% of the U.S.’s roughly 74,000 census tracts qualify for NMTC investments; by 2020, approximately 4,300 had received NMTC projects. In recent years, all applicants have pledged to place at least 75% of their NMTC projects in “severely distressed” census tracts.

NMTC investors provide capital to CDEs, and in exchange are awarded credits against their federal tax obligations. Investors can claim their allotted tax credits in as little as seven years—5 percent of the investment for each of the first three years and 6 percent of the project for the remaining four years—for a total of 39% of the NMTC project. A CDE can be its own investor or find an outside investor. Investors are primarily corporate entities—often large international banks or other regulated financial institutions—but any entity or person is eligible to claim NMTCs.

There are a number of CDEs in Maryland but they are not required to make loans or investments in Maryland.  MCIC is unique in that its statutory purpose is to facilitate qualified equity investments exclusively in Maryland.  Now that MCIC has been established, it can apply for allocations of NMTCs and solicit investors interested in making meaningful investments in low-income communities in The Old Line State.

Gordon Knox is a partner, resident in the Baltimore office, and a member of the firm’s Affordable Housing & Community Development Group.  Admitted to the bars of Maryland, the District of Columbia and Virginia, Mr. Knox’s practice focuses on new markets tax credits, tax-exempt municipal bonds and commercial real estate. 

Opportunity Knocks – Treasury releases 2nd set of Opportunity Zone Regulations – Duane Morris LLP

On April 17th the Department of Treasury released a second set of proposed regulations for the Opportunity Zone legislation (the first set of regulations was released in October, 2018) which is intended to encourage economic growth and investment in designated distressed communities (qualified opportunity zones) by providing Federal income tax benefits to taxpayers who invest new capital in businesses located within qualified opportunity zones through a Qualified Opportunity Fund.

The 169 pages of proposed new regulations provide much needed guidance to encourage the future use of the opportunity zone tax benefit and specifically provide guidance for opportunity zone businesses. The following are the highlights of the proposed regulations:

1. Reinvestment of Proceeds from a sale or disposition. A qualified opportunity fund (“QOF”) has 12 months from the time of the sale or disposition of qualified opportunity zone property or the return of capital from investments in qualified opportunity zone stock or qualified opportunity zone partnership interests to reinvest the proceeds in other qualified opportunity zone property before the proceeds would not be considered qualified opportunity zone property with regards to the 90-percent asset test.

2. Real Property straddling an Opportunity Zone and a Non-Opportunity Zone. A business that purchases real property straddling multiple census tracts, where not all of the tracts are designated as a qualified opportunity zones may satisfy the opportunity zone business requirements if the unadjusted cost of the real property inside a qualified opportunity zone is greater than the unadjusted cost of real property outside of the qualified opportunity zone.

3. Safe Harbors for the Fifty Percent (50%) Income Test for Qualified Opportunity Zone Businesses (“QOZBs”). The proposed regulations provide three safe harbors and a facts and circumstances test for determining whether sufficient income is derived from a trade or business in a qualified opportunity zone for purposes of the 50-percent test.

a. The first safe harbor requires that at least fifty percent (50%) of the services performed (based on hours) for such business by its employees and independent contractors (and employees of independent contractors) are performed within the qualified opportunity zone.

b. The second safe harbor provides that if at least fifty percent (50%) of the services performed for the business by its employees and independent contractors (and employees of independent contractors) are performed in the qualified opportunity zone, based on amounts paid for the services performed, the business meets the fifty percent (50%) gross income test.

c. The third safe harbor provides that a trade or business may satisfy the fifty percent (50%) gross income requirement if: (1) the tangible property of the business that is in a qualified opportunity zone and (2) the management or operational functions performed for the business in the qualified opportunity zone are each necessary to generate fifty percent (50%) of the gross income of the trade or business.

d. Finally, taxpayers not meeting any of the other safe harbor tests may meet the 50-percent requirement based on a facts and circumstances test if, based on all the facts and circumstances, at least fifty percent (50%) of the gross income of a trade or business is derived from the active conduct of a trade or business in the qualified opportunity zone.

Note that the seventy percent (70%) tangible property test that requires that seventy percent (70%) of the tangible property of the QOZB be located within the Opportunity Zone continues to be operative for QOZBs.

4. Working Capital Plans – the 31 Month Test. The following two changes were made to the safe harbor for working capital.

a. First, the written designation for planned use of working capital now includes the development of a trade or business in the qualified opportunity zone as well as acquisition, construction, and/or substantial improvement of tangible property.

b. Second, exceeding the 31-month period does not violate the safe harbor if the delay is attributable to waiting for government action the application for which is completed during the 31-month period.

5. Measurement Periods. To help startup businesses the proposed regulations allow a qualified opportunity fund to satisfy the ninety percent (90%) without taking into account any investments received in the preceding 6 months provided those new assets being held in cash, cash equivalents, or debt instruments with term 18 months or less. This flexibility is intended to alleviate concerns with a QOF receiving additional capital gain funds right before a testing period and not being able to deploy the funds prior to the testing period.

6. Exclusion Elections. A taxpayer that is the holder of a direct qualified opportunity fund partnership interest or qualifying qualified stock of a qualified opportunity fund S corporation may make an election to exclude from gross income some or all of the capital gain from the disposition of qualified opportunity zone property reported on Schedule K-1 of such entity, provided the disposition occurs after the taxpayer’s 10-year holding period.

7. Continued OZ treatment after Death. Neither a transfer of the qualifying opportunity fund investment to the deceased owner’s estate nor the distribution by the estate to the decedent’s legatee or heir would result in the loss of the opportunity fund investment benefit.

8. Vacant Property. Where a building or other structure has been vacant for at least five (5) years prior to being purchased by a qualified opportunity zone business or qualified opportunity zone business, the purchased building or structure will satisfy the original use requirement.

9. Leased Property – QOZBs; Original Use; Related Party Permissions; Anti-Abuse Rules. Leased property may be treated a qualified opportunity zone business property if the following two general criteria are satisfied.

a. First, leased tangible property must be acquired under a lease entered into after December 31, 2017.

b. Second, substantially all of the use of the leased tangible property must be in a qualified opportunity zone during substantially all of the period for which the business leases the property.

The proposed regulations, however, do not impose an original use requirement with respect to leased tangible property and do not require leased tangible property to be acquired from a lessor that is unrelated. However, the proposed regulations provide one limitation as an alternative to imposing a related person rule or a substantial improvement rule and two further limitations that apply when the lessor and lessee are related.

a. First, the proposed regulations require in all cases, that the lease under which a qualified opportunity fund or qualified opportunity zone business acquires rights with respect to any leased tangible property must be a “market rate lease.”

b. Second, if the lessor and lessee are related, a qualified opportunity fund or qualified opportunity zone business at any time make not make a prepayment to the lessor relating to a period of use of the leased tangible property that exceeds 12 months.

c. Third, the proposed regulations do not permit leased tangible personal property to be treated as qualified opportunity zone business property unless the lessee becomes the owner of tangible property that is qualified opportunity zone business property and that has a value not less than the value of the leased personal property. This acquisition of this property must occur during a period that begins on the date that the lessee receives possession of the property under the lease and ends on the earlier of the last day of the lease or the end of the 30-month period beginning on the date that the lessee receives possession of the property under the lease.

d. Finally, the proposed regulations include an anti-abuse rule to prevent the use of leases to circumvent the substantial improvement requirement for purchases of real property (other than unimproved land). In the case of real property (other than unimproved land) that is leased by a qualified opportunity fund, if, at the time the lease is entered into, there was a plan, intent, or expectation for the real property to be purchased by the QOF for an amount of consideration other than the fair market value.

It is also worth noting that improvements made by a lessee to leased property satisfy the original use requirement and are considered purchased property. Thus, a tenant in a building can also satisfy the QOZB tests noted under the OZ Act.

10. Intangible Assets. For purposes of determining whether a substantial portion of intangible property of a qualified opportunity zone is used in the active conduct of a trade or business, the term “substantial portion” means at least 40 percent.

11. Unimproved Land. Unimproved land that is within a qualified opportunity zone and acquired by purchase is not required to be substantially improved if it is used in a trade or business of the QOF or the QOZB.

12. Investments Held by Funds. Funds have been provided with additional flexibility to hold more than one investment within a fund if they are structured appropriately.

13. Inventory. Inventory in transit to a QOZB within an OZ will be treated as tangible property that counts for purposes of the seventy percent (70%) test for QOZBs even if it is not within the OZ so long as it is on the way.

14. Debt Financed Distributions. Guidance has been provided under the new regulations regarding refinancing and distributions to partners/members which would permit appreciated portions of the property that have been refinanced to be distributed to the partners or members of the QOF on a tax free basis so long as the distribution is not in excess of the investors basis.

We will continue to review the new regulations and intend to issue additional commentary on it. In the interim, feel free to contact us to discuss any questions you have or transactions you are considering in this space.

Brad A. Molotsky and Art Momjian, Co-Heads, The Opportunity Zone Team – Duane Morris LLP

CDFI Fund Announces Historic NMTC Awards

On November 17th the CDFI Fund awarded a record $7 billion in New Markets Tax Credit allocation to 120 community development entities throughout the Country.  Based on the conditions of the awards it is anticipated that approximately $5 billion of allocation will be deployed to support businesses in low income communities and $2 billion will be deployed for the development of real estate projects in low income communities.  Also a priority is the deployment of New Markets Tax Credit authority in underserved states which in this round include Arkansas, Florida, Georgia, Idaho, Kansas, Nevada, Tennessee, Texas, West Virginia, Wyoming, Puerto Rico, American Samoa, Guam, Northern Mariana Islands, and U.S. Virgin Islands.

Duane Morris and 5 Stone Green Capital Presentation on Combining Private Equity with Tax Credits

Art Momjian, Chair of the Duane Morris Affordable Housing, Community Development, and Syndication Practice Group and Victor Brown Managing Partner at 5 Stone Green Capital, a social impact private equity firm will lead a discussion on the opportunities to combine private equity with the Federal New Markets and Federal Historic Tax Credit programs.  The presentation is timely with the historic $7 billion of New Markets Tax Credit allocation to be awarded by the Treasury in November.  This presentation will be at the Philadelphia Office of Duane Morris from noon to 1 pm  on Wednesday November 9, 2016.  For further information and to register please contact Art Momjian at


CDFI Fund Releases Draft Allocation Agreement

The CDFI Fund has released a draft of the proposed allocation agreement for the 2015-2016 New Markets Tax Credit allocation round.  A new section added to the allocation agreement provides a limitation on QLICI proceeds which are used to repay or refinance documented reasonable expenditures.  This section ties into the guidance provided in the December 2015 FAQs which imposes on CDEs in the next round of allocation the responsibility to include covenants in financing documents imposing the restriction, confirm the reasonableness of expenses, trace the use of QLICI proceeds both and after closing  and maintain documentation to trace the use of QLICI proceeds for inspection by the CDFI Fund.

Art Momjian to Speak at NMTC Forum

Duane Morris Partner Art Momjian will be a speaker at the New Markets Tax Credit Forum sponsored by the Community First Fund on Tuesday September 13, 2016 from 7:30 am to 11:30 am at The Double Tree Hotel in Reading, PA.  The program is designed for community leaders, developers, commercial realtors, commercial lenders, attorneys, CPAs and economic and community development professionals.  Speakers will discuss the impact of the Federal New Markets Tax Credit program on  commercial development in low income communities.

CDFI Fund to Award $7 Billion of NMTC Allocation

The CDFI Fund will award $7 billion of New Markets Tax Credit allocation in the next round to be announced by the end of 2016.  As a result of the 5 year extension of the New Markets Tax Credit the CDFI Fund has elected to combine two $3.5 billion allocation rounds to create a historic $7 billion allocation of New Markets Tax Credit allocation.  The round of awards to be announced by the CDFI Fund later this year will be effected by the December 2015 Certification, Compliance, Monitoring and Evaluation Frequently asked Questions issued by the CDFI Fund last year.  Frequently Asked Question 44 eliminates the commonly used “one day loan” for this and future rounds of New Markets Tax Credit allocation awards.

New Markets Tax Credits Extended

In December the President signed into law the Tax Increase Prevention Act of 2014.  One of the provisions of the Act is to extend the Federal New Markets Tax Credit program one additional year at the current authorization of $3.5 billion.

Duane Morris Closes Historic Tax Credit Investment for Parke Bank

A Duane Morris team of lawyers including Art Momjian, Chris Winter, and Chris Bender represented South Jersey based Parke Bank in its investment in the Federal historic tax credits to be generated by the historic rehabilitation of 1831-1833 Chestnut Street in Philadelphia Pennsyvania. The property is formerly an office building being converted into residential rental apartments. The City of Philadelphia is replete with historic properties which are undergoing adaptive reuse and the Federal historic tax credit program is an important component of the capital stack to fund development costs.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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