On December 12, 2012, Judge Haines issued a memorandum decision in In re Sunnyslope Housing Limited Partnership, 2012 Bankr. LEXIS 5726 (Bankr. D. Ariz. 2012) concerning the value of Low Income Housing Tax Credits. The court had previously found the value of a secured creditor’s interest in its collateral for purposes of section 506(a) of the Bankruptcy Code, which provides that a creditor has a secured claim up to the value of the collateral and an unsecured claim to the extent the debt exceeds the value of the collateral. In determining the value of the collateral, the court did not include the value of Low Income Housing Tax Credits (“LIHTCs”) to which the debtor was entitled. On appeal, the District Court affirmed in part, but reversed and remanded for a determination of the value of the LHITCs to be included as part of the value of the collateral under section 506(a).
The bank’s expert placed the value of the LIHTCs at $2.96 million, while the debtor’s expert placed the value at $26,144. The court found that, while neither expert’s ultimate determination of value was persuasive, the best evidence of the value was $1.3 million, using the debtor’s expert’s discounted cash flow analysis.For more information about Low Income Housing Tax Credits, click here.