The Low-Income Housing Tax Credit (LIHTC) provides a
federal tax credit to investors in affordable housing. The LIHTC can be
used each year for 10 years and is allocated to the owner of an
affordable housing development. Investors take an ownership interest in
the development to utilize the tax credits, thereby generating equity to
construct or acquire and rehabilitate the development. The Internal
Revenue Service (IRS) allocates LIHTC to each state in an amount equal
to the greater of (i) $2.8125 times its population, or (ii)
$3,245,625.
The LIHTC is limited to a percentage of the Qualified
Basis, based on depreciable basis and the percentage of affordable units
in the development. The minimum number of units a development must have
to qualify for LIHTC is:
1) 40
percent of the total number of units affordable to persons at 60 percent
of the area median income; or
2)
20 percent
of the total number of units affordable to persons at 50 percent of the
area median income; or
3)
40 percent
of the total number of units affordable to persons from a range of 20
percent to 80 percent of the area median income, so long as the average
unit designation averages no higher than 60 percent of the area median
income.
Each year, MHDC prepares a Qualified Allocation Plan (QAP)
which sets forth the process MHDC will use to administer both the
federal and state LIHTC. The most current QAP is available
here.
Congress has delegated the administration of the LIHTC to
state agencies to ensure good, quality housing is available where it is
most needed. MHDC is charged not only with the allocation of credit but
also with assuring compliance with all LIHTC statutes and regulations.
This includes, but is not limited to, the performance of physical
inspections of all affordable developments and reviews of management and
occupancy procedures during the Compliance Period (as such term is
defined in Section 42 of the Internal Revenue Code) and the extended use
period. The Tax Credit Compliance Manual is
available here.
Type of Assistance
Federal and state housing tax credit, which can be sold to investors to generate equity for the proposed development.
Eligibility Requirements
Developers (for-profit and not-for-profit) are eligible to apply for the LIHTC. Applicants must demonstrate prior, successful housing experience and engage the services of housing professionals such as architects, appraisers, attorneys, accountants, contractors, and property managers with demonstrable LIHTC and housing experience. Developers must have the financial capacity to successfully complete and operate the proposed housing development.
Proposed housing
developments must: