| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
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| #12360 | Closed | public | Multifamily | Les Sparks |
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Hi, I have a nonprofit entity that I audit. It was in the Section 202 Program until September 2014, when it closed on a refinance under Section 221(d)(4). The language of the new regulatory agreement does not indicate that it is required to move surplus cash to residual receipts at year end (copy attached). However, that requirement is inherent in nonprofit entities. There is now over $500k in surplus cash! Can the Board spend it on the property or is it required to be deposited in the residual receipts (ultimately offsetting future HAP requests)? Any guidance you could provide on what the actual requirement is would be greatly appreciated! Gina Citrola, CPA, Partner Marks Paneth LLP 516-992-5796 |
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Gina, it is not unusual for a Section 202 direct loan to refi into a newer 221(d)(4) and remove the residual receipts requirement. The 2014 agreement that came into being a little later in the calendar year actually had a statement on the front page to indicate the applicability of residual receipts. Given what I read in your attachment, I would believe that residual receipt requirement has been removed.
The only item that would change my mind would be the contents of the project’s HAP contract. If it is silent, then they can take distributions. Now the Agreement lists the following definition:
s. “Non-Profit Borrower” means a Borrower that is treated under the Firm Commitment issued by HUD to Lender as a corporation or association organized for purposes other than profit or gain for itself or persons identified therewith, pursuant to 501(c)(3) or other applicable provisions of the Internal Revenue Code. The entity may not make Distributions to any individual member or shareholder. The definition of “Non-Profit Borrower” does not include a non-profit borrower who is treated under the Firm Commitment as a for profit borrower.
Does this paragraph actually apply to restrict the distribution? I do not believe so as I read the actual sections you highlighted, we can see that we are not in one of the specific programs mentioned.
Les Sparks AHACPA (801) 547-0809
From: AHACPA Support <support@ahacpa.org> |