While the IRS no longer requires a disposition bond (IRS form 8693) to avoid tax credit recapture in the event of ownership disposition in a Low Income Housing Tax Credit Section 42 project, the tax credit recapture exposure still exists.
Many institutional investors refuse to dispose of ownership before the 15 year federal compliance period is up or require some type of collateral to protect them from tax credit recapture.
CMR Risk & Insurance Services, Inc. has developed an exclusive surety product to protect against tax credit recapture and interest penalties due to any non-compliance that they may arise after disposition. This product is provided by an A+ “superior” rated insurance company and covers the entire compliance and audit discovery period.
CMR utilizes a unique financial benchmarking planning analysis process to increase bonding capacity and reduce indemnity while securing a competitive rate. CMR has partnered with three surety companies creating a collaborative financial analysis planning tool to accomplish these goals.
In addition, CMR also has an express $500,000/$500,000 and $1,000,000/$1,000,000 program. The $500M/$500M program is an application and credit driven program, no financial statements needed and short form indemnity agreement. For single bonds and aggregate work programs greater than $500,000 and up to $1MM we will need the most recent corporate financial year-end statement, interim statement (in-house statements will suffice) and personal financials of all owners. Our program includes: Backlog management – We will run off liability. This means no more waiting for a job to be completed before you have the capacity again to place another bond; Service contractors and multi-year service contracts with the use of an annually renewable bond form.