Friday, January 25, 2008
This article discusses issues that should be considered in drafting the affordable housing entity's organizational documents, applying for tax-exempt status, and setting up its board and control structure. It assumes that the corporation is to be set up as a nonprofit corporation, with a true charitable purpose and not a profit motive, for the purpose of creating or enhancing affordable housing, either for sale or for rent. The corporation will need to qualify as tax-exempt under the Internal Revenue Code in order to attract the maximum amount of equity contributions. In the nonprofit context, corporations provide the advantages of liability protection to members, officers, and directors without the countervailing consideration that argues against using for-profit corporations in real estate projects: the taxation of both corporate-level income and personal income (on distributions to the members or shareholders) and capital gains at the corporate-level on appreciated real estate owned by the corporation.
For the entire article, see "Forming the Affordable Housing Nonprofit Developer," 22-FEB Prob. & Prop. 29in Probate and Property magazine (available at the American Bar Association website and on Westlaw).