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Riseboro Cmty. P'ship v. SunAmerica Hous. Fund No. 682

United States District Court for the Eastern District of New York

August 7, 2019, Decided; August 7, 2019, Filed

18-CV-7261 (RJD) (VMS)

Opinion

 [*369]  MEMORANDUM & ORDER

DEARIE, District Judge

Plaintiff Riseboro Community Partnership Inc. brings an action against Defendants SunAmerica Housing Fund No. 682 ("SunAmerica"), SLP Housing I, LLC ("SLP") and 420 Stockholm Street Associates L.P., ("the Partnership") seeking declaratory relief and asserting breach of contract claims relating to Plaintiffs efforts to exercise a contractual right of first refusal to purchase an affordable housing project developed with the benefit of Low-Income Housing Tax Credits pursuant to Section 42 of the Internal Revenue Code, 26 U.S.C. § 42. Plaintiff first brought this action in Kings County Supreme Court, and Defendants SunAmerica and SLP timely removed the case based on federal-question [**2]  and diversity jurisdiction, arguing that Plaintiff's claims present a federal question about the correct construction of federal tax law and that the non-diverse citizenship of the Partnership should be disregarded for jurisdictional purposes because it is a nominal party to this action. Plaintiff now moves to remand the case to state court, arguing that it has asserted state-law claims that merely involve a federal tax credit framework and that the Partnership must be considered for the purpose of diversity jurisdiction because it is ,a real defendant in this action. For the reasons stated below, Plaintiff's motion is denied.

BACKGROUND

This case concerns the interpretation of a contractual right of first refusal ("ROFR") in the amended partnership agreement of the Partnership, formed to own and operate a low-income housing project located at 420 Stockholm Street in Brooklyn ("the Apartment Complex") under the federal Low-Income Housing Tax Credit ("LIHTC") program, codified as 26 U.S.C. § 42. Defendants SunAmerica and SLP are limited investor partners of the Partnership and Plaintiff is the not-for-profit sponsor of the redevelopment of the Apartment Complex. Compl. ¶ l0.

 [*370]  The LIHTC program creates [**3]  federally allocated tax credits awarded to real estate developers in exchange for the developer's creation and maintenance of low-income housing. Id. at ¶¶ 14-15. Developers typically fund their projects by entering into limited partnerships with private investors who have significant tax liabilities and contribute the capital for the project in exchange for having the tax credits allocated to them. Id. at ¶¶ 16-19. Investors can claim the credits annually over a period of ten years as long as the project complies with rent affordability restrictions for a period of fifteen years ("the Compliance Period"). Id. at ¶ 18. According to the Complaint, in order to ensure that these projects remain low-income housing after the tax credits are exhausted and the Compliance Period is over, 26 U.S.C. § 42 specifically contemplates and incentivizes a not-for-profit organization's purchase of the LIHTC project by expressly allowing these organizations to have a statutory right of first refusal to buy the projects at a statutorily prescribed minimum price. 26 U.S.C. § 42(i)(7)(A)1 .

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401 F. Supp. 3d 367 *; 2019 U.S. Dist. LEXIS 133728 **; 2019 WL 3753795

RISEBORO COMMUNITY PARTNERSHIP INC, formerly known as RIDGEWOOD BUSHWICK SENIOR CITIZENS COUNCIL, INC., Plaintiff, - against - SUNAMERICA HOUSING FUND NO. 682, SLP HOUSING I, LLC, 420 STOCKHOLM STREET ASSOCIATES, L.P., Defendants.

CORE TERMS

Partnership, tax credit, federal jurisdiction, federal issue, federal law, Compliance, state court, low-income, Housing, federal question, restrictions, federal court, common law, federal-question, obligations, disputed, alleges, first refusal, federal tax, diversity, state-law, projects, parties, cases