of the Housing and Urban Development Act of 1968, as amended (12 USC

$1701u) Every project that receives a LIHTC reservation will have the drawings and Accessibility Standards checklists reviewed and validated by PRHFA's NAC. The NAC's findings and recommendations must be addressed and incorporated in the project's drawings prior to construction. During construction, the developer/owner must certify compliance with the Accessibility Standards on a monthly basis. A final certification of compliance regarding Accessibility Standards must be completed prior to project delivery. After construction/rehabilitation is completed, the developer/owner must provide: Proof of training certifications. The Project's Team staff shall complete, at a minimum, eight (8) hours of disability-related training annually. Proof of on-site accessibility survey conducted by NAC. Proof of NAC final verification and certification of compliance. Further, the Authority shall comply and cause all its employees, including contractors, sub-contractors, project owners, and management agents, to comply with PRHFA's Civil Rights and Fair Housing Compliance Policy and all applicable measures provided for in the VCA. 6. Issuance of Tax Credits 6.1. Reservation of Tax Credits Beyond Actual Allocation Year The Authority recognizes that the process to construct or rehabilitate housing projects in Puerto Rico may be arduous. Construction or rehabilitation of housing projects may occur over a longer period of time than they otherwise might have. The Authority also acknowledges that some projects, especially those participating in an extensive community undertaking might require a larger allocation of credits and placed-in-service dates may occur in different years. The Authority recognizes, as well, that investors require a level of comfort that such projects will be completed and placed in service in the scheduled timeframes. To take into account the unique facts and circumstances and concerns described above, and in order to assist with meeting the housing needs and goals of the public policy of Puerto Rico, while balancing the Authority's position with respect to any single large allocation of Tax Credits, the Authority may award a binding commitment in one year to make a carryover allocation for certain percentages of Tax Credits in following years under certain circumstances (Binding Commitment) (Annex E). Applicants may apply to reserve Tax Credits and sign a Binding Commitment with the Authority to allocate Tax Credits at a future date. To that end, the Authority may reserve Tax Credits or bind itself to allocate Tax Credits to a project during the taxable years following the year in which the application is made. Section 42(h)(1)(C) of the Code determines that a reservation or Binding Commitment to allocate Tax Credits in a future year has no effect on the state housing Tax Credit ceiling until the year in which the Authority makes the allocation. The Authority might also consider entering into a Binding Commitment with the owner of a project, even if the project fails to meet one of the above categories, if the circumstances of the project, per the Authority's sole discretion, are deemed to require it. Depending on the circumstances and in the Authority's sole discretion, projects with Binding Commitments may be required to file an application in the year the Tax Credits are committed and go through the Basic Threshold Qualification Process and comply with at least the Minimum Requirement of the Point Ranking System. In addition, the owner will not pay the Application Fee, but rather a Processing Fee equal to 0.50% of the annual Tax Credit requested should be included in the application. In order for the applicant to preserve a Binding Commitment for an allocation of Tax Credits, the applicant must provide an updated application the year of the credits reservation; confirm that any information provided in the application remains true, correct, and complete in all material respects; or provide specific details for any exceptions as well as any other information that the Authority may reasonably request. If there are any material exceptions, the Authority reserves the right to revoke the Binding Commitment. 6.1.1. Tax Credit dollar amount will be determined at: 6.1.1.1. Initial Reservation of Tax Credits 6.1.1.2. Carryover Allocation A development with a Binding Commitment that will not be placed in service by December 31st may be eligible for a LIHTC Carryover Allocation Agreement (Carryover Allocation). To sign the Carryover Allocation, the owner must provide: any changes in the circumstances of the project (budget, design, and/or permitting) an Owner's Certification, disclosing any federal, state, or local subsidies that the applicant has received, or expects to receive, for the development and operation of the project 6.1.1.3. Placed-in-Service. See Section 6.3 for details. The Authority reserves the right to disqualify any applicant if it determines that construction will not be ready to begin within three months after the signing of the Carryover Allocation Agreement. 6.2. Additional Tax Credits The Tax Credit amount will not automatically be increased above the initial reservation request or allocation amount. If the owner of a project that received a Carryover Allocation of Tax Credits determines that additional credits are necessary to make the project financially feasible, the owner must apply for additional Tax Credits in a subsequent year or cycle. The owner will need to submit a complete package and a full fee. For projects financed with volume-cap tax-exempt obligations, the Authority reserves the right, based upon pertinent circumstances, to reduce or waive the required fee for additional Tax Credits or the requirement of a complete package. All restrictions and requirements of the original Carryover Allocation shall remain in full force and effect for the additional Tax Credits. 6.3. Placed-in-Service Each project is required to achieve its placed-in-service date by the 31st of December of the second year after signing the LIHTC Carryover Allocation Agreement; if not, the Developer may lose the LIHTC. After Placed-in Service is reached, the Developer has one (1) year to certify full occupancy of the project; if not, the LIHTC will be prorated by the number of occupied units and the portion of vacant units may result in lost LIHTC. The Authority will issue IRS Form 8609-Low-Income Housing Credit Allocation and Certification (Form 8609) after the placed-in-service date, and receipt and review of: Use Permit (Permiso de Uso). Independent CPA Final Cost Certification of project development (Annex M). Designer's Certification of Completion of Construction (Annex N). Updated operating budget and 30-year pro forma cash flows. Owner's Certification of any federal, state, or local subsidies received, or expected to be received, to develop and operate the project. Authority's independent consultant physical inspection and cost certification review. Any other document the Authority may determine as necessary. The amount of Tax Credits allocated as set forth in Form 8609 may be different from the amount requested in the application, the amount specified in the Initial Reservation Letter or Binding Commitment, or the amount in a Carryover Allocation. 6.4. Changes in Actual Development Costs or Other Circumstances The Authority reserves the right, in its sole discretion, to reserve or allocate fewer Tax Credits than requested in the application based on the information submitted by the applicant or any independent consultant and Section 42 requirements. 6.5. Calendar Requirements The Code requires more than 10% of the project's reasonable expected basis be incurred by the close of: The carryover allocation calendar year, if Carryover Allocation is made before July 1st; or The year after the date of the Carryover Allocation Agreement, if made after June 30th. After the reservation process is final, the owner and the Authority must sign a Carryover Agreement allowing the carryover of Tax Credits. At the time of the Carryover Agreement, owners must have the title to the property, or acquire such title within the next six months, and approval from all the corresponding governmental agencies to develop the project. The Authority requires expenditure of and cost certification of 10% of the costs to be submitted to the Authority within 1 year of the date of the Carryover Allocation (Annex L). All fees due to the Authority must be paid by that date. 6.6. Placed-in-Service Date With respect to Carryover Allocations, the building must be placed in service within 2 years after the end of the carryover allocation calendar year. 6.6.1. For new construction and existing buildings Placed-in-service usually means the date the building receives a Certificate of Occupancy (Permiso de Uso). 6.6.2. For substantial rehabilitation: Placed-in-service means the last day of the 24-month period (or shorter period if the rehabilitation is complete if the owner elects) for aggregating rehabilitation costs. 7. Other Procedural Requirements The Authority will notify Mayors of the municipalities in which a selected LIHTC projects will be located and request their comments on such project. We will provide them a reasonable opportunity to provide comments This procedure will be performed at the time of the Tax Credits' reservation. 8. Time Frame Tax Credit applications will abide by the following reservation/allocation cycles. Additional cycles may be available if there are Tax Credits after the Authority exhausted its reservation/allocation process. The interested party may contact the Authority to ask for additional cycles, if any. As directed by the public policy of Puerto Rico to leverage project funding from multiple sources, with underwriting criteria that will result in projects meeting their priorities, the Authority will release a NOFA to request Tax Credit Applications. Any and all amendments to the application schedule, prior to the release of the NOFA, and any changes thereafter to the schedule, will be made known to the public through the Authority's website. If any of the due dates for application or reservation fall on a non-working day or on an official holiday, it will be moved to the following working day. Notwithstanding any information that may be contained in the RFP and amendments thereto, respondents are responsible for obtaining all information required, thus enabling them to submit timely and complete responses to the requirements of the NOFA. Failure to obtain clarifications and/or addenda from the Authority will not relieve the respondent from being bound by any additional terms and/or conditions in the clarification and/or addenda. The Authority will not be responsible for respondent's failure to consider additional Information contained therein in preparing the proposal. 8.1. Schedule of Application for 2025 Cycle Event Date 2025-QAP Draft Available for Public Comments August 15, 2025 2025-QAP Public Hearing August 29, 2025 2025-QAP Written Comments Deadline September 5, 2025 Application Opening Date October 31, 2025 (after Governor's Approval and NOFA Release) Advance Section 106 Review Submission Deadline December 22, 2025 Application Closing Date January 30, 2026 10% Cost Certification TBD The Authority requires expenditure of and cost certification of 10% of the costs to be submitted to the Authority within 1 year of the date of the Carryover Allocation (Annex L). Cost Certifications for projects receiving allocations to be placed in service are due during the same calendar year of the application and 10% certification for projects receiving a carryover allocation. (Annexes L and M) 9. Projects Financed with Tax-Exempt Obligations To the extent projects are financed with the proceeds of tax-exempt obligations subject to the annual volume cap limitation under Section 146 of the Code, such projects may receive an allocation of 4% Credits. These projects are not subject to the Annual Tax Credit Volume Cap. If: -For obligations made before December 31, 2025: fifty percent (50%), or more of the aggregate basis of a project (including land) is financed with the proceeds of such tax-exempt obligations, -For obligations made after December 31, 2025 and before January 1, 2030: twenty-five percent (25%) of the aggregate basis of a project (including land) is financed with the proceeds of such taxexempt obligations. The entire project may be eligible for 4% LIHTC based on its qualified basis. If less than the abovementioned percentages of costs are financed with the proceeds of tax-exempt obligations, the projects may be eligible to receive 4% LIHTC only for the portion of the qualified basis financed with tax-exempt obligations. These projects will be subject to the evaluation of housing priorities, minimum thresholds discussed in Section 5.1 above, and the fees described in Section 11. They will not be subject to the Tax Credit allocation process but must score a minimum of 30 points in the Point Ranking System. Applicants must include a letter from the lender stating the tax-exempt status of the obligations issued to finance the project and a certification from a tax attorney or CPA certifying that this requirement Is met. If the Authority is the lender, such a letter will not be required. The issuance of all 42(M) letters (42(M) Letter or Initial Determination Letter) (Annex R) by the Authority for 4% Credit allocations shall be subject to a determination by the Authority that the proposed project complies with the Basic Threshold Qualification Requirements and is otherwise consistent with this Plan, such consistency being determined by the following: Application Criteria. Tax-exempt obligation-financed projects must comply with the Basic Threshold Qualification Requirements, the Point Ranking System minimum requirement of 30 points, and other requirements for allocation under this 2025-QAP pursuant to Section 42(h)(4) of the Code. Issuance Criteria. Tax-exempt obligation-financed projects must also meet the issuance criteria adopted by the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF, by its Spanish acronym) as the Authority's fiscal agent in order to assure compliance in the issuance of obligations by the Authority, including but not limited to compliance with the PAB approved for the Authority. Credit Limitation. 4% Credits available to tax-exempt obligation-financed projects are also limited to an amount necessary for the financial feasibility of the project, as set forth in Section 42(m)(2)(A) of the Code. Debt Sizing. In accordance with the Section 42(m)(2)(A) of the Code, all tax-exempt obligationfinanced projects shall include proposed financing terms that deploy 4% Credits effectively and minimally relative to other proposed sources of funds in a proposed development as determined by the Authority in its discretion. Instead of a Carryover Allocation Agreement, the Authority will issue the 42(M) Letter (Annex R) stating the estimated amount of Tax Credits that the project is eligible for just prior to the closing of the issuance of the tax-exempt obligations, assuming all other LIHTC Program requirements have been or will be met. After the development is completed and placed in service, the Owner must request the issuance of the project's IRS Form 8609 following the indications of Section 6.3 of this 2025-QAP. 10. Compliance, Fees, and Penalties 10.1. Procedure for Notification to IRS of Noncompliance Federal legislation requires that the 2025-QAP include a procedure that the Authority will follow to notify the IRS of noncompliance with the program. The Authority will require owners to furnish annual certifications of qualified low-income tenants, including tenant income and rents charged, the number of qualifying low-income units, as well as any other information pertinent to determine compliance. The specific requirements of the Authority to implement this mandate are covered in the Compliance Monitoring Plan, which is hereby incorporated and made a part of this 2025-QAP (Annex O). In making the application for Tax Credits, the owner agrees that the Authority and its designees will have access to any project information. This includes physical access to the project, financial records, and tenant information for any monitoring that may be deemed necessary to determine compliance with the Code. Owners are advised that the Authority is required to do compliance monitoring and to notify the IRS and the owner of any discovered noncompliance with Tax Credit law and regulations, whether corrected or uncorrected. In addition, the Authority has implemented asset management oversight during the compliance period (first 15 years) to contribute to the success of the program. Among the procedures put into practice, the Authority will assess risk of noncompliance and evaluate financial performance. To facilitate these functions, management agents will periodically provide projects' trial balances and agree to maintain the standard HUD Chart of Accounts in their accounting systems (Annex B). Finally, the Authority will require annual audited financial statements. To assist the auditors in reporting on audits of housing projects, the Authority will prefer them prepared in accordance with HUD Consolidated Audit Guide (HUD Guide) and at a minimum include an Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards. Excerpts from the HUD Guide are included in Annex B for reference. 11. Fees The application package costs $100 and includes the 2025-QAP, Compliance Monitoring Plan, Procedural Steps, and Instructions. The Authority will also charge the following fees: 11.1. Application-Related Fees 11.1.1. Tax Credit-Filing Fee One thousand-dollar ($1,000) filing fee. This is a non-refundable and non-transferable payment, which shall be submitted along with the application, regardless of the result of the Authority's evaluation and determination. 11.1.2. Tax Credit-Application Fee 1.50% of annual Tax Credit amount requested application fee. This is a non-transferable fee, which shall be submitted along with the application. Nonprofit participants might pay 1% at submission of application and the balance within 60 days of the initial submission. The application fee will be waived, up to the amount previously paid, to previous participants that are re-applying for the same project that did not receive a LIHTC reservation during the previous NOFA. Upon written request, the Authority may return of half of the fee paid if the project passed the Basic Threshold Review and Point Ranking but was not awarded a reservation of credits. 11.1.3. Tax Credit-Reservation Fee 0.50% the annual Tax Credit reservation should be paid upon acceptance of the Reservation Award. This fee will not be adjusted if the final Tax Credit amount is reduced or the Tax Credits are returned or unused. 11.1.4. Projects with Binding Commitments These projects will be charged a processing fee of one-half of 1% (0.50%) of the annual Tax Credit requested. 11.1.5. Projects Using Tax-Exempt Obligations to Acquire 4% LIHTC Origination Issuer Fee. 25 basis points of the amount of debt issued (upfront). Annual Issuer Fee. 12.5 basis points of outstanding tax-exempt obligations (in arrears). Atypical transactions (under the Authority's discretion) will double amounts above, to 50 basis points and 25 basis points, respectively. 11.2. Allocation Fee 1.75% of the total ten-year allocated amount. The allocation fee will be paid within twelve months of the date of the allocation and should be made through certified or manager's check. Allocation fees are neither refundable nor transferable. 11.3. Monitoring/Asset Management Fee If a credit allocation is made, the Authority will charge ninety dollars ($90) ($40 for monitoring plus $50 for Asset Management) per LIHTC unit during the compliance period (first 15 years). During the extended period, the Authority will charge thirty-five dollars ($35) for monitoring per LIHTC unit. This amount will be due and payable by January 31st of each year. The Authority may revise the above fees as necessary to ensure they cover the Authority's processing expenses and compliance monitoring. 12. Penalties and Other Fees If a Sponsor, Owner, Developer, or Consultant has a past due fee (regardless of the type) for a previous project, the Authority will not reserve credits for the new project until the account is paid in full. In any litigation, arbitration, or other proceeding arising from, as a result of, or pursuant to this 2025- QAP and/or the resulting Tax Credit allocation cycle, selection process, or award determination under any participating program, or any other proceeding arising from or as a result of or pursuant to any noncompliance during the construction and/or operation of a project, when the Authority appears as a party, intervener, or amicus curiae, the sponsor and/or owner and/or developer shall reimburse the Authority reasonable attorney's fees, costs, and expenses incurred, regardless of which party initiated the litigation, arbitration, or other proceeding. 13. Recordkeeping and Retention For each qualified low-income building in the project, owners must maintain records that provide specific information for each year of the compliance period. The failure to maintain these records or otherwise comply with the requirements of the Compliance Monitoring Plan may result in the issuance of IRS Form 8823 and the eventual recapture of Tax Credits. All applicants are urged to review the Plan and require that project managers have a thorough knowledge of these requirements under