Building the capital stack and closing the gap — Montana

What happens, and in what order

The 4% deal's core stack: bonds, credits, and a ratio that doesn't self-reconcile

As Phase 4 covered, MBOH caps private activity bonds at 60% of Total Project Cost per Project — its own overlay, distinct from the federal 50%/25% aggregate-basis "financed-by" test in 26 U.S.C. Section 42(h)(4)(B), which runs against depreciable basis plus land, not Total Project Cost. The two ratios don't move together: sizing bonds to clear MBOH's 60% TPC cap does not automatically clear the federal 25% path, and the QAP itself gives the federal test only a single sentence of acknowledgment. Independent bond counsel needs to run both ratios before an equity investor prices off the resulting 4% credit amount.

MBOH's own gap-sizing test already accounts for how grants interact with basis: in determining the Credit amount a Project needs, MBOH considers "grants made with federal funds directly to a Project, which will reduce basis" (2027 QAP Section III.I). A CDBG Housing or National Housing Trust Fund grant in the stack lowers eligible basis — and therefore the Credit amount — dollar for dollar on the grant portion; a loan, whether a conduit bond or a Coal Trust/GO Housing loan, does not work the same way.

Two "Housing Montana Fund" programs, and a legislative increase that didn't happen

MBOH has administered a Housing Montana Fund / Multifamily Loan Program since the 1999 legislative session — a revolving fund, not annually appropriated, restricted to new construction or acquisition/rehabilitation. Separately, the 2023 Legislature's House Bill 819 raised an existing coal-trust-funded loan pool from $15 million to $65 million, creating what MBOH's own materials call the Coal Trust Multifamily Homes (CTMH) Program. Both carry similar names and both fund multifamily rental deals; they are not the same program.

In the 2025 legislative session, House Bill 878 proposed raising this same pool from $65 million to $115 million effective July 1, 2025 — but the bill died in process on May 20, 2025, the same day Montana's own state LIHTC proposal (HB 21) died. The $65 million figure remains the one codified in statute: Mont. Code Ann. Section 90-6-137 directs "the board of housing" to administer "$65 million or more" from a "Montana housing trust" nested within the newer "Montana growth and opportunity trust" — a statute originally enacted in 2019 and most recently amended by the 2025 Legislature. Don't size a deal to the $115 million figure if it surfaces in a bill tracker or secondary source; it never took effect.

CDBG Housing: the local government is the applicant, not the developer

The Montana Department of Commerce's CDBG Housing program grants up to $750,000 per project on an annual cycle, with a deadline that has run around September 15 in recent years. Eligible applicants are limited to general-purpose local governments — counties, incorporated cities and towns, and consolidated city-county governments. Billings, Great Falls, and Missoula are excluded because they receive their own direct federal CDBG entitlement allocation as larger jurisdictions.

The practical consequence: a developer cannot file this application directly. It has to be lined up months in advance through a subrecipient or pass-through agreement with the city or county where the Project sits — a structural dependency the QAP's own MBOH-facing threshold checklist doesn't surface anywhere, because CDBG Housing isn't an MBOH program at all.

Federal HOME and the National Housing Trust Fund sit outside MBOH entirely

Both the HOME Investment Partnerships Program and the federal National Housing Trust Fund (referred to in Montana Department of Commerce materials as the "Housing Trust Fund" or "HTF" — the federal HUD program, not the state "Montana housing trust" created by Mont. Code Ann. Section 90-6-137) are administered by the Department of Commerce's Community Development / Infrastructure Planning Division, a different division from MBOH's Housing Division that runs the Credit program and the Coal Trust loans.

That separation has a real consequence for a developer's workplan: layering HOME or NHTF money onto a Housing Credit deal means running two parallel applications, two parallel calendars, and — per Phase 6 — a labor-standards obligation (Davis-Bacon under 24 CFR Section 92.354(a) for HOME, once 12 or more HOME-assisted units are involved; a comparable obligation under 24 CFR Part 93 for NHTF) that the Housing Credit process itself never mentions.

The property tax exemption: real, but gated to a narrow ownership structure

Mont. Code Ann. Section 15-6-221 exempts the affordable portion of a qualifying rental project from property taxation. It is not available to a standard for-profit-GP LIHTC structure as-is: the property must be owned and operated by an entity — including a limited partnership or LLC — whose general partner (or managing member) is either a 501(c)(3) nonprofit incorporated under the Montana Nonprofit Corporation Act or a housing authority, materially and actively participating in the deal in the sense contemplated by IRC Section 469(i)'s passive-activity participation standard.

The exemption also requires a recorded deed restriction or comparable binding instrument keeping the designated units available to lower-income households for the LIHTC compliance period, contemplates the eventual transfer mechanics of IRC Section 42(i)(7), and — distinctively — requires the local government where the Project sits to give public notice and hold a hearing on whether the Project meets a community housing need before the LIHTC allocation itself is made.

The QAP ties directly into this: Full-Application threshold item 34 requires a narrative of intent to request the exemption if the Applicant plans to pursue it. Skip that narrative and MBOH underwrites the Project as if no exemption will ever be received (2027 QAP Section VI.A.2, item 34) — which can materially understate available cash flow in the Phase 5 operating pro forma if the exemption is later actually obtained, and just as easily overstate it if an Applicant assumed the exemption without confirming the ownership structure actually qualifies.

What MBOH's own threshold checklist doesn't resolve

Montana's Full-Application asks for a Preliminary Financing Letter — a lender's statement of proposed terms and formal interest — and an Equity Letter with an anticipated price based on the market at the time of Application. Neither is a firm commitment (2027 QAP Section VI.A.2, items 7-8). Unlike states that force a point-scored or firmly-sequenced financing-commitment ladder before an Award, Montana's process lets a developer reach Award on letters of interest alone.

That's the same structural gap this library's Alaska guide flagged for its own state: a competitive score built on preliminary numbers doesn't bind the lender or syndicator who actually underwrites the deal once it's real. In Montana, that gap sits at the Preliminary Financing Letter and Equity Letter stage — the real capital-stack risk is what happens between that letter and the closing table, not anything the QAP's threshold checklist tests for.