Hawaii Low-Income Housing Credit Disposition Bond

Low-Income Housing Credit Disposition Bond
Form N-585, 2004, Low-Income Housing Credit Disposition Bond
Clear Form
STATE OF HAWAII –– DEPARTMENT OF TAXATION

		
	

FORM

	

	 N-587	

LOW-INCOME HOUSING CREDIT DISPOSITION BOND

	
(REV. 2009)	
Name of taxpayer making disposition	

(For use by taxpayers posting bond under IRC section 42(j)(6))
Attach to your return after receiving Department of Taxation approval.

SSN/FEIN

	 PART I
BONDING
1  Address of building as shown on federal Form 8609 (do not use P.O. box)

2  Building identification number
3  Date the 15-year compliance period ends

4	

5	

Check the box that applies:
This is a  

 strengthening bond, or    superseding bond.

Date property	
interest disposed of

7a  Bond is given by	

6  Date bond issued

(     )	
Principal	

				

Telephone number (optional)

						
Address

				

as principal and			

  as surety or sureties.

Surety

				

						
Address

				

7b  As principal and surety, we are obligated to the State of Hawaii in the amount of $                 . We also
jointly and severally obligate our heirs, executors, administrators, successors, and assigns for the payment of this amount.
	 PART II
Signatures
I declare, under the penalties set forth in section 231-36, HRS, that I have examined this form and any accompanying statements, and
to the best of my knowledge and belief, they are true, correct, and complete.

Signature of principal	  Name (please print) 	  Date	

Signature of principal	  Name (please print) 	  Date	

Signature of surety	  Name and identifying number (please print)	  Date	

Signature of surety	  Name and identifying number (please print)	  Date	

	 PART III Certificate of Corporate Principal (corporations only)
I certify that the person above, who signed on behalf of the principal, was an authorized representative of the corporation.

Signature of secretary of the corporation	  Name (please print)	  Date	

	 PART IV

Approval by the Hawaii Department of Taxation (See instructions.)

Bond approved
Date 	

Department of Taxation Official

General Instructions
Section references are to the Internal Revenue
Code.

•	

Purpose of Form

•	

Use Form N-587 to post a bond under
section 42(j)(6), adopted by Hawaii, to avoid
recapture of the low-income housing credit
on dispositions before August 1, 2008.
The bond ensures payment of the
recapture tax imposed under section 42(j).
The conditions of the bond are that the
principal (i.e., taxpayer):

•	
•	

Does not attempt to defraud the State of
Hawaii of any tax under section 42(j);
Files all returns and statements as
required by law or regulations;
Pays all taxes including any penalties
and interest charges; and
Complies with all other requirements of
the law and regulations under section
42 as adopted by Hawaii.

		

Qualifying Sureties
The company acting as surety must hold a
Certificate of Authority from the Department
of the Treasury, Financial Management
Service. The companies are listed in
Treasury Circular 570. You may get a copy of
this circular by writing to the Department of
the Treasury, Financial Management Service,
Surety Bond Branch 3700 East West Hwy.,
Hyattsville, MD 20782, or by calling (202)

FORM N-587

PAGE 2		
		

874-6850 (not a toll-free number). The
circular is also available on the Internet at
www.fms.treas.gov/c570/c570.html.
A taxpayer may not be a surety for itself,
nor may a member of a firm or a partner
in a partnership be a surety for the firm or
partnership of which he or she is a member
or a partner.

Surety Termination
If a surety’s certificate of authority is
terminated, the surety may be relieved of
liability under the bond provided it notifies
the principal and the Hawaii Department
of Taxation by the date the termination
announcement is published in the Federal
Register. The notice must be sent by
certified mail and must state that the
principal has 60 days from the date the
termination announcement is published in
the Federal Register to get an adequate
strengthening or superseding bond with
another surety listed in Treasury circular
570. If notice is given, the principal’s rights
under the bond will end 60 days after the
date the termination announcement is
published in the Federal Register.
A qualified surety (or coinsuring surety)
may terminate its liability on a bond only if the
surety notifies the principal and the Hawaii
Department of Taxation at least 60 days
before the date the surety wants to terminate
its liability. The notice must state that the
principal has 60 days from the termination
date to obtain an adequate superseding or
strengthening bond from another qualified
surety (or coinsuring surety).
If the surety does not provide this notice,
it remains liable for the amount posted on
the bond. If the surety gives notice but does
not meet the 60-day notification requirement
or fails to include a termination date in the
notice, the surety’s liability will terminate 60
days after the postmark date on the notice.
Send the State of Hawaii copy of the
notice to the Hawaii Department of Taxation
at P.O. Box 259, Honolulu, HI 96809-0259.
If the principal fails to post a strengthening
or superseding bond within 60 days from the
date (a) the termination announcement is
published in the Federal Register or (b) on
which a surety’s liability on a bond terminates,
recapture under section 42(j) is required.

Period of Bond
The liability stated on the bond must be for
the period of years remaining in the 15year compliance period of the building plus
an additional 58 months. The compliance
period begins with the tax year the building
was placed in service or the succeeding tax
year if the election under section 42(f)(1) is
made.

Recordkeeping
Keep a copy of all forms relating to the LowIncome Housing Credit for 58 months after
the 15-year compliance period ends.

Who Must File
Taxpayers who claimed a low-income
housing credit on a residential rental building
and later (in a tax year during the 15-year
compliance period) disposed of the building
or an ownership interest in it before August
1, 2008 must file this form to avoid recapture
of the credit claimed. A de minimis rule may
apply to certain dispositions of interest in
partnerships that own buildings in which a
credit was claimed. See Rev. Rul. 90-60,
1990-2 C.B. 3, for additional information.

Partnerships
Section 42(j)(5) partnerships. –– Any
person holding a power of attorney in a section
42(j)(5) partnership (a partnership with 35 or
more partners that has not elected out of the
section 42(j)(5) provisions) may post bond
as principal on behalf of the partnership. A
bond posted on behalf of a partnership must
be posted in the partnership’s name, with
the name of the authorized representative of
the partnership posting the bond appearing
immediately below the partnership’s name.
Partnerships that elected out of the
section 42(j)(5) provisions or have fewer than
35 partners. –– If partners in partnerships to
which section 42(j)(5) does not apply want
to post bond, the partners must post bond in
their individual capacity as principals.

When and Where to File
Submit the original and one copy of Form
N-587 to the Hawaii Department of Taxation
at P.O. Box 259, Honolulu, HI 96809-0259,
within 60 days after the date the termination
announcement is published in the Federal
Register. The completed form may be
submitted by either the taxpayer or the
surety. When the IRS returns a copy of the
approved Form 8693, submit a copy to the
Hawaii Department of Taxation at the above
address.

FORM N-587
(REV. 2009)

When the Department of Taxation returns
a copy of the approved form, attach a copy
of it to your income tax return for the year in
which the disposition occurred.

Specific Instructions
Line 2. Building Identification Number
(BIN). –– This is the number assigned to
the building by the housing credit agency
on Part I, item E of federal Form 8609,
Low-Income Housing Credit Allocation
Certification.
Line 7b. Amount of Bond. –– Use the
worksheet below to calculate the bond
amount. See Rev. Rul. 90-60 for additional
information on the methodology for
determining the bond amount.
If the amount is not an even multiple of
$100, increase the bond amount to the next
higher multiple of $100.
Part III. Certificate of Corporate Principal.
–– If the principal is a corporation, the
authority of the person posting the bond
must be certified by the secretary of the
corporation by completing Part III. Or the
corporation may attach copies of records
that will show the authority of the officer
signing if the copies are certified by the
secretary to be true copies.
Part IV. Approval by the Hawaii Department
of Taxation. –– The Department of Taxation
will notify you of the approval or rejection of
the bond. If approved, the Department will
send a copy of the approved Form N-587
to the principal shown in Part I. If rejected,
the owner must recapture the allowed lowincome housing credit using Part III of Form
N-586.

Worksheet for Computing Bond Amount
1.	

2.	
3.	
4.	
5.	

Total Hawaii credits taken by you in previous years and any additional
Hawaii credits you anticipate claiming for any year or portion thereof
preceding the date of disposition.............................................................. $	
Bond factor amount. ................................................................................ 	
Line 1 multiplied by line 2......................................................................... $	
Percentage of taxpayer’s total interest in the qualified low-income
building disposed of.................................................................................. 	
Bond amount required to be posted (line 3 X line 4). Enter
here and on line 7b................................................................................... $	

Instructions for Worksheet
Line 1. –– Enter the total amount of the credits
claimed on the building. See Part II of Forms
N-586 you have filed. Include any additional credits
you anticipate claiming for any period preceding the
date of disposition. Do not include credit amounts
previously recaptured, credit amounts for which a
bond was previously posted, or credits claimed on
additions to qualified basis as determined under
section 42(f)(3).

		

%

%

Line 2. Bond Factor Amount. –– Enter the
bond factor amount corresponding to the month
in the compliance period in which the disposition
occurred and the first year of the building’s credit
period. The IRS announces the monthly bond
factor amounts quarterly in a revenue ruling
published in the Internal Revenue Bulletin.
Line 4. –– Enter the ownership interest in
the qualified low-income building that you have
disposed of. Include ownership interests held both
directly and indirectly (e.g., through a partnership).
FORM N-587