Tax Rates Applicable to Property Restricted to the

Federal Low-Income Housing Tax Credit or with Deed Restrictions Involving Rental Caps. The tax rate for real property restricted to the federal lowincome housing tax credit (LIHTC) program, or real property with deed restrictions involving rental caps is computed according to the following Subsections.

(a)Notwithstanding any other provision of law, the assessed valuation of real property used for residential rental purposes wherein the land is restricted to requirements of the federal low-income housing tax credit (LIHTC) program, or the land contains deed restrictions subject to an agreement with a municipality, the state, the federal government, or an instrumentality thereof, which agreement restricts occupancy of those units to tenants who qualify in accordance with an income test, shall be determined using the income approach as applied to the actual net operating income, after deducting for reserves required by any federal, state or municipal programs.

(b)For the purposes of this § 24116, “net operating income” shall mean the actual or anticipated net income that remains after all operating expenses are deducted from effective gross income, but before mortgage debt service and book depreciation are deducted.

(c)The assessed valuation of real property used for such residential rental purposes shall be determined using the actual net operating income, and shall not include federal or local income tax credits, subsidized mortgage financing, or project grants, where such subsidies are used to offset the project development cost in order to provide for lower initial rents as determined by regulations promulgated by the Guam Housing and Urban Renewal Authority.

(1)To calculate appraised property values for tax purposes, the property’s net operating income shall be CH. 24 REAL PROPERTY TAX divided by a capitalization rate appropriate for tax credit properties.

(A)Initially this capitalization rate shall be 9.41%, but this rate may be adjusted from time to time by I Liheslaturan Guåhan based on demonstrable changes in actual market conditions.

(B)By way of example, if a property generates net operating income of $100,000, then that property would have a taxable value of ($100,000/.0941) = $1,062,699 x 70% (taxes are assessed at 70% of appraised value) = $743,889.

(C)Property taxes for this example property would be $743,889 times the applicable millage rate.

(2)For properties that have appealed prior year’s property taxes that are affected by this Section, the property tax expense used in calculating net operating income will be calculated using the above calculation and the applicable millage rate.

(d)The Director of the Department of Revenue and Taxation shall report, on an annual basis, to I Maga’låhen Guåhan and to the Speaker of I Liheslaturan Guåhan regarding the impact of this program, if any, on property tax collections in Guam.