"We got the reservation letter — what actually has to happen, and by when, before we can close and break ground without losing the credit?"
The RAC starts a 12-month clock that the 10% test cannot escape
WSHFC anticipates distributing the Credit Reservation and Carryover Allocation Contract (RAC) within 30 days of approving a project's Credit allocation. Before the Commission will execute it, the Applicant must pay at least 50% of the reservation fee and the Commission performs a feasibility and viability analysis that can reduce — but never increase — the carryover allocation below the amount requested. From the RAC's execution date, the Applicant has 12 months to satisfy every Chapter 7 requirement, and the Commission states plainly that this is not just a target: it will disqualify the project and cancel the Credit reservation and carryover allocation for any requirement not met by its deadline, returning the credit to the pool for other qualified projects.
The central requirement inside that 12 months is the 10% carryover test under IRC §42(h)(1)(E) and Treasury Regulation §1.42-6 — demonstrating that more than 10% of the project's reasonably expected basis has been incurred, supported by a CPA certification meeting Treas. Reg. §1.42-6(c)(2). If any developer or consultant fee is being counted toward that 10%, the certification needs an itemized breakdown of services and fees by provider, plus copies of the underlying contracts. The Commission commits to completing its own review within roughly 60 days of receiving a complete package. The balance of the reservation fee is also due within this same 12-month window, not just the initial 50% paid at RAC signing.
Extensions exist — but not for the one deadline that matters most
§7.5 draws a hard line: the 12-month deadline for the 10% basis test cannot be extended under any circumstances, because it's a Treasury Regulation requirement, not a Commission policy choice. Extensions are available for the other RAC-listed requirements, but only on request — submitted in writing at least 30 days before the specified RAC deadline — and only where the Applicant demonstrates a strong probability of fulfilling the requirement within the additional time. Even then, granting the extension is entirely at the Commission's discretion.
A separate carve-out applies to USDA Rural Development rehabilitation deals: because RD's own approval process runs on its own clock, the Applicant has 120 days from RAC execution to submit evidence that final financing approval has been received from the USDA National Office — after which, absent that evidence, the RAC expires and the credit is deemed automatically returned.
Equity closing and placed-in-service each carry their own lead-time requirements
The Applicant must give the Commission at least 30 days' notice of the scheduled equity closing, and — after general contractor bids are in hand but at least 10 days before closing — submit the final development budget, final sources of funds, and documentation substantiating the final credit pricing; Commission staff uses that package to set the final Developer Fee. The Regulatory Agreement and a Priority Agreement (drafted by the Applicant to keep the Commission's Regulatory Agreement in first lien position) must both be executed and recorded as part of closing, with the final title report and executed LP/LLC operating agreement following once closing is complete.
On the back end, all Placed-In-Service documentation — including the Independent CPA cost certification and certificates of occupancy for every building — is due at least 90 days before the project owner expects to receive Form 8609. The property management representative needs compliance training (a Commission workshop or equivalent, with certificates no more than 18 months old) by the earlier of 120 days before the first building's placed-in-service date or the start of initial rent-up. A title report confirming the Regulatory Agreement's first-lien position, an executed property management agreement, and — where applicable — a recorded long-term lease covenant round out the package, alongside the §8.7 proof of the local-housing donation (the $15,000/$25,000 commitment scored under §6.19 back at application) and confirmation that every Allocation Criteria commitment made in the application has actually been satisfied.
The 4%/Bond clock: tiers and an annual Bond Cap deadline, not a single RAC calendar
In King County, a project's tier placement is itself a readiness clock: Tier 1 projects — fully funded, permit-ready, and actively securing financing — are expected to close within six months of being placed on Tier 1, and a project that misses that window loses the allocation and drops back to Tier 2, with tier assignments re-evaluated every January and July. Balance-of-State projects instead have their readiness verified against criteria set at the time of application, under WAC 262-01-140(2)'s requirement that an applicant "demonstrate to the commission's satisfaction that it is ready to proceed with the financing of its project." Across the program, Bond Cap generally must be issued by December 15 of the calendar year it's awarded; unused cap converts to carryforward authority good for up to three additional years before it's lost.
Once a bond deal is moving toward closing, the Cost of Issuance Deposit (0.5% of the bond issue, capped at $75,000) is due at the Scoping Meeting — bond counsel isn't permitted to begin drafting documents until it's received — and the tax credit equity provider's minimum $50,000 contribution is due the morning of bond pre-closing, held by the trustee or escrow agent until the bonds actually close. Missing a Bond Cap Reservation Fee payment (where competitive) within five business days of the award notification results in the allocation being withdrawn outright.
Where this goes wrong
- Assuming the 12-month deadline for the 10% carryover test can be extended like other RAC requirements — §7.5 makes clear it cannot, because it tracks a Treasury Regulation, not Commission discretion.
- Underestimating what the CPA's 10% certification requires — an itemized services-and-fees breakdown with underlying contracts is mandatory the moment any developer or consultant fee is counted toward the 10% basis, and incomplete documentation can blow the timeline even when the actual spend is sufficient.
- Treating the balance of the reservation fee as a formality — it's a distinct payment due inside the same 12-month RAC window as the 10% test, not automatically resolved by paying the initial 50% at signing.
- Scheduling equity closing without the required 30-day advance notice to the Commission, or without the ≥10-day pre-closing final budget/pricing package (which can't be assembled until GC bids are received) — both have hard lead times that compress an already tight schedule.
- Waiting until near occupancy to assemble Placed-In-Service documentation — cost certification and certificates of occupancy are due at least 90 days before the expected Form 8609 issuance, and compliance training has its own separate 120-day-out deadline.
- Assuming a King County Bond Cap award is secure once made — Tier 1 status expires after six months without closing, and the project is bumped to Tier 2 rather than simply given more time by default.
- Missing the RAC's automatic-disqualification consequence — any Chapter 7 requirement not met by its deadline results in the Commission canceling the reservation and carryover allocation and returning the credit to the pool, not a warning or a renegotiation.
- On a USDA Rural Development rehab deal, missing the 120-day post-RAC deadline to prove final RD financing approval — after which the RAC expires and the credit is deemed automatically returned, independent of the general 12-month carryover clock.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies