Instructions For Form Dtf-627.1 - Low-Income Housing Credit Collateral Security
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1
2New York State Department of Taxation and Finance
DTF-627.1- I
Instructions for Form DTF-627.1
(9/04)
Low-Income Housing Credit Collateral Security
Additionally, bank passbooks and certificates of deposit offered
General information
must be:
Use Form DTF-627.1, Low-Income Housing Credit - Collateral
• registered or maintained in the name of the taxpayer;
Security , to post collateral security under Tax Law section 18(b)(7)
• accompanied by a signed, undated withdrawal slip; and
to avoid recapture of the low-income housing credit.
• accompanied by a letter prepared on the letterhead of the
The collateral security ensures payment of the recapture amount
financial institution and signed by an officer, identifying the
imposed under Tax Law section 18(b). The conditions of the bond
passbooks or certificates of deposit by account number, and
are that the principal (taxpayer):
confirming that withdrawal of principal from the passbook or
• does not attempt to defraud the state of New York of any tax
certificate of deposit offered as collateral will not be permitted
under section 18;
without written consent from the Tax Department, and stating
• files all returns and statements as required by law or regulation;
that any right of setoff that the financial institution may possess
against the taxpayer shall be subordinate to the interest of the
• pays all taxes including any penalties and interest charges; and
Tax Department in the passbook or certificate of deposit offered
• complies with all other requirements of the law and regulations
as collateral.
under section 18.
Note: Any interest accruing on bonds, passbooks, or certificates of
deposit belongs to the taxpayer and can be withdrawn.
Collateral security
In place of Form DTF-627, Low-Income Housing Credit Surety
Standby letters of credit offered as collateral must:
Bond , you may file collateral security acceptable to the Tax
• be irrevocable for a period of time determined by the Tax
Department. If you decide to file collateral security, it must be
Department;
accompanied by a properly executed collateral agreement on
• be made payable to the New York State Department of
Form DTF-627.1, in duplicate. Both the collateral security and
Taxation and Finance ;
Form DTF-627.1 (in duplicate) should be filed within 60 days after
• be written for the recapture amount rounded up to the next
the date of disposition of the building or interest therein. The
higher thousand dollars;
following kinds of security will be accepted as collateral security:
• be issued or confirmed by a bank approved by the Tax
• certified United States Treasury Bonds;
Department; and
• certified bonds of New York State;
• contain other payment terms acceptable to the Tax Department.
• certified bonds of any political subdivision of New York State
Period of the collateral security
having general governmental powers in connection with which
the credit of the political subdivision is pledged for the payment
The liability stated on the collateral security must be for the period
of the interest and principal on the bonds;
of years remaining in the 15-year compliance period of the building
plus an additional 58 months. The compliance period begins with
• bank passbooks and certificates of deposit; and
the tax year the building was placed in service or the succeeding
• irrevocable standby letters of credit made payable to the
tax year if an election is made under New York State Public
New York State Department of Taxation and Finance.
Housing Law, Article 2-A, section 21(3)(b).
Bonds offered as collateral security must be certificated and may
Who must file
be in either bearer or registered form. They must have maturity
Taxpayers who claimed a low-income housing credit on a
dates at least five years after the date of filing with the
residential building and disposed of the building or an ownership
Tax Department.
interest in it in a tax year during the 15-year compliance period
If they are of the coupon type, the interest coupons must be
must file this form or Form DTF-627 to avoid recapture of the credit
attached. (However, since any interest accruing on the bonds
claimed. A de minimis rule may apply to certain dispositions of
belongs to the taxpayer, the coupons will be detached and returned
interests in partnerships that own buildings in which a credit was
as they become due.) The dollar amount of the bonds must be at
claimed. See Federal Rev. Rul. 90-60 1990-2 C.B. 3, for additional
least 1½ times the amount of the recapture amount, based on the
information.
fair market value on the date of filing with the Tax Department. Fair
Partnerships
market value of the bonds greater than the face value on the bond
will not be recognized for this purpose. If registered United States
Internal Revenue Code (IRC) section 42(j)(5) partnerships
Treasury bonds are offered as collateral, the taxpayer must submit
Any person holding a power of attorney in an IRC section 42(j)(5)
to the Tax Department a properly completed United States Treasury
partnership (a partnership with 35 or more partners that has not
Department Form PD 1832, Special Form of Detached Assignment
elected out of the section 42(j)(5) provisions) may post collateral
for United States Registered Securities . If a registered New York
security as principal on behalf of the partnership. Collateral security
State security or security of any subdivision of New York State is
posted on behalf of a partnership must be posted in the
offered as collateral, the taxpayer must submit to the
partnership’s name, with the name of the authorized representative
Tax Department a properly completed New York State
of the partnership posting the collateral security appearing
Form AU-217, Assignment Separate from Bond .
immediately below the partnership’s name.
Bank passbooks and certificates of deposit offered as collateral
Partnerships that elected out of the IRC section 42(j)(5)
must be in an amount not less than the recapture amount and must
provisions or have fewer than 35 partners — If partners in
represent money on deposit with a financial institution approved by
partnerships to which IRC section 42(j)(5) does not apply want to
the department. Certificates of deposit must have a maturity date at
post collateral security, the partners must post collateral security in
least one year after the date of filing with the Tax Department.
their individual capacity as principals.
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