Interactive tool · 3 adjuster types
Syndication Adjusters
When delivered credits differ from underwriting, the LPA adjuster clause kicks in. Three flavors: credit adjusters (basis/applicable % shortfall), basis adjusters (final cost certification), and timing adjusters (placed-in-service date slips later than projected).
From the original deal model
After basis adjustments / IRS Form 8609
$ per credit at original close
1.0 = full clawback; some LPAs use scaled (1.0–2.0)
Statutory floors: 4% — bond-financed or non-§42(b)(2) buildings (§42(b)(3)); 9% new non-bond (§42(b)(2))
Month the building was underwritten to be placed in service (calendar-year taxpayer assumed)
Months past projected PIS date — whether the slip crosses Dec 31 changes the math
Annual discount rate applied to the credit stream
What adjusters are and why they exist
LIHTC syndication agreements include adjuster clauses protecting the investor (LP) when the deal delivers fewer credits than underwritten. Three triggers:
- Credit adjuster: Annual credits delivered are less than projected (after Form 8609 issuance).
- Basis adjuster: Final cost certification yields lower eligible basis than projected.
- Timing adjuster: Placed-in-service date slips. The effect depends on whether the slip crosses a taxable year. Within the same taxable year, the 10-year credit period stays put; only the Year-1 credit shrinks (prorated by full months in service under IRC §42(f)(2)(A)), and that shortfall is deferred to Year 11 under §42(f)(2)(B). Across a taxable-year boundary, the credit period itself starts a year later (§42(f)(1)), so all ten years of credits shift.
When triggered, the LP equity contribution is reduced by an adjuster amount = (credit shortfall) × credit price × adjuster ratio. The GP must make up the gap via reduced developer fee, deferred contributions, or other sources.
FAQ
What's a typical adjuster ratio?
Most LPAs use 1.0 (dollar-for-dollar). Some — especially in tight deals — include a scaled ratio (1.5×–2.0×) as a penalty for material shortfalls, encouraging the GP to underwrite conservatively.
When do basis adjusters get triggered?
At cost certification, typically 90 days after the final certificate of occupancy. The 8609 is issued based on certified eligible basis. If certified basis is less than 95% of projected (common LPA threshold), the adjuster fires.
Are timing adjusters statutory?
No — they're entirely LPA-negotiated. The statute provides for credits over 10 years starting at PIS, but doesn't mandate any IRR protection for LPs. Adjusters are private contracts between GP and LP.