Low-income housing credit
In general
For purposes of section 38, the amount of the low-income housing credit determined under this section for any taxable year in the credit period shall be an amount equal to—
the applicable percentage of
the qualified basis of each qualified low-income building.
Applicable percentage: 70 percent present value credit for certain new buildings; 30 percent present value credit for certain other buildings
Determination of applicable percentage
For purposes of this section—
In general
The term “applicable percentage” means, with respect to any building, the appropriate percentage prescribed by the Secretary for the earlier of—
the month in which such building is placed in service, or
at the election of the taxpayer—
the month in which the taxpayer and the housing credit agency enter into an agreement with respect to such building (which is binding on such agency, the taxpayer, and all successors in interest) as to the housing credit dollar amount to be allocated to such building, or
in the case of any building to which subsection (h)(4)(B) applies, the month in which the tax-exempt obligations are issued.
A month may be elected under clause (ii) only if the election is made not later than the 5th day after the close of such month. Such an election, once made, shall be irrevocable.
Method of prescribing percentages
The percentages prescribed by the Secretary for any month shall be percentages which will yield over a 10-year period amounts of credit under subsection (a) which have a present value equal to—
70 percent of the qualified basis of a new building which is not federally subsidized for the taxable year, and
30 percent of the qualified basis of a building not described in clause (i).
Method of discounting
The present value under subparagraph (B) shall be determined—
as of the last day of the 1st year of the 10-year period referred to in subparagraph (B),
by using a discount rate equal to 72 percent of the average of the annual Federal mid-term rate and the annual Federal long-term rate applicable under section 1274(d)(1) to the month applicable under clause (i) or (ii) of subparagraph (A) and compounded annually, and
by assuming that the credit allowable under this section for any year is received on the last day of such year.
Minimum credit rate for non-federally subsidized new buildings
In the case of any new building—
which is placed in service by the taxpayer after the date of the enactment of this paragraph, and
which is not federally subsidized for the taxable year,
the applicable percentage shall not be less than 9 percent.
Cross references
For treatment of certain rehabilitation expenditures as separate new buildings, see subsection (e).
For determination of applicable percentage for increases in qualified basis after the 1st year of the credit period, see subsection (f)(3).
For authority of housing credit agency to limit applicable percentage and qualified basis which may be taken into account under this section with respect to any building, see subsection (h)(7).
Qualified basis; qualified low-income building
For purposes of this section—
Qualified basis
Determination
The qualified basis of any qualified low-income building for any taxable year is an amount equal to—
the applicable fraction (determined as of the close of such taxable year) of
the eligible basis of such building (determined under subsection (d)(5)).
Applicable fraction
Unit fraction
For purposes of subparagraph (B), the term “unit fraction” means the fraction—
the numerator of which is the number of low-income units in the building, and
the denominator of which is the number of residential rental units (whether or not occupied) in such building.
Floor space fraction
For purposes of subparagraph (B), the term “floor space fraction” means the fraction—
the numerator of which is the total floor space of the low-income units in such building, and
the denominator of which is the total floor space of the residential rental units (whether or not occupied) in such building.
Qualified basis to include portion of building used to provide supportive services for homeless
In the case of a qualified low-income building described in subsection (i)(3)(B)(iii), the qualified basis of such building for any taxable year shall be increased by the lesser of—
so much of the eligible basis of such building as is used throughout the year to provide supportive services designed to assist tenants in locating and retaining permanent housing, or
20 percent of the qualified basis of such building (determined without regard to this subparagraph).
Qualified low-income building
The term “qualified low-income building” means any building—
which is part of a qualified low-income housing project at all times during the period—
beginning on the 1st day in the compliance period on which such building is part of such a project, and
ending on the last day of the compliance period with respect to such building, and
to which the amendments made by section 201(a) of the Tax Reform Act of 1986 apply.
Eligible basis
For purposes of this section—
New buildings
Existing buildings
In general
The eligible basis of an existing building is—
in the case of a building which meets the requirements of subparagraph (B), its adjusted basis as of the close of the 1st taxable year of the credit period, and
zero in any other case.
Requirements
A building meets the requirements of this subparagraph if—
the building is acquired by purchase (as defined in section 179(d)(2)),
there is a period of at least 10 years between the date of its acquisition by the taxpayer and the date the building was last placed in service,
the building was not previously placed in service by the taxpayer or by any person who was a related person with respect to the taxpayer as of the time previously placed in service, and
except as provided in subsection (f)(5), a credit is allowable under subsection (a) by reason of subsection (e) with respect to the building.
Adjusted basis
Special rules for subparagraph (B)
Special rules for certain transfers
For purposes of determining under subparagraph (B)(ii) when a building was last placed in service, there shall not be taken into account any placement in service—
in connection with the acquisition of the building in a transaction in which the basis of the building in the hands of the person acquiring it is determined in whole or in part by reference to the adjusted basis of such building in the hands of the person from whom acquired,
by a person whose basis in such building is determined under section 1014(a) (relating to property acquired from a decedent),
by any governmental unit or qualified nonprofit organization (as defined in subsection (h)(5)) if the requirements of subparagraph (B)(ii) are met with respect to the placement in service by such unit or organization and all the income from such property is exempt from Federal income taxation,
by any person who acquired such building by foreclosure (or by instrument in lieu of foreclosure) of any purchase-money security interest held by such person if the requirements of subparagraph (B)(ii) are met with respect to the placement in service by such person and such building is resold within 12 months after the date such building is placed in service by such person after such foreclosure, or
of a single-family residence by any individual who owned and used such residence for no other purpose than as his principal residence.
Related person
Eligible basis reduced where disproportionate standards for units
In general
Exception where taxpayer elects to exclude excess costs
In general
Subparagraph (A) shall not apply with respect to a residential rental unit in a building which is not a low-income unit if—
the excess described in clause (ii) with respect to such unit is not greater than 15 percent of the cost described in clause (ii)(II), and
the taxpayer elects to exclude from the eligible basis of such building the excess described in clause (ii) with respect to such unit.
Excess
The excess described in this clause with respect to any unit is the excess of—
the cost of such unit, over
the amount which would be the cost of such unit if the average cost per square foot of low-income units in the building were substituted for the cost per square foot of such unit.
The Secretary may by regulation provide for the determination of the excess under this clause on a basis other than square foot costs.
Special rules relating to determination of adjusted basis
For purposes of this subsection—
In general
Basis of property in common areas, etc., included
Inclusion of basis of property used to provide services for certain nontenants
In general
Limitation
The increase in the adjusted basis of any building which is taken into account by reason of clause (i) shall not exceed the sum of—
25 percent of so much of the eligible basis of the qualified low-income housing project of which it is a part as does not exceed $15,000,000, plus
10 percent of so much of the eligible basis of such project as is not taken into account under subclause (I).
For purposes of the preceding sentence, all community service facilities which are part of the same qualified low-income housing project shall be treated as one facility.
Community service facility
No reduction for depreciation
Special rules for determining eligible basis
Federal grants not taken into account in determining eligible basis
Increase in credit for buildings in high cost areas
In general
In the case of any building located in a qualified census tract or difficult development area which is designated for purposes of this subparagraph—
in the case of a new building, the eligible basis of such building shall be 130 percent of such basis determined without regard to this subparagraph, and
in the case of an existing building, the rehabilitation expenditures taken into account under subsection (e) shall be 130 percent of such expenditures determined without regard to this subparagraph.
Qualified census tract
In general
Limit on MSA’s designated
Determination of areas
Difficult development areas
In general
Limit on areas designated
Special rules and definitions
For purposes of this subparagraph—
population shall be determined on the basis of the most recent decennial census for which data are available,
area median gross income shall be determined in accordance with subsection (g)(4),
the term “metropolitan statistical area” has the same meaning as when used in section 143(k)(2)(B), and
the term “nonmetropolitan area” means any county (or portion thereof) which is not within a metropolitan statistical area.
Buildings designated by State housing credit agency
Credit allowable for certain buildings acquired during 10-year period described in paragraph (2)(B)(ii)
In general
Buildings acquired from insured depository institutions in default
Federally- or State-assisted building
For purposes of this paragraph—
Federally-assisted building
State-assisted building
Acquisition of building before end of prior compliance period
In general
Under regulations prescribed by the Secretary, in the case of a building described in subparagraph (B) (or interest therein) which is acquired by the taxpayer—
paragraph (2)(B) shall not apply, but
the credit allowable by reason of subsection (a) to the taxpayer for any period after such acquisition shall be equal to the amount of credit which would have been allowable under subsection (a) for such period to the prior owner referred to in subparagraph (B) had such owner not disposed of the building.
Description of building
A building is described in this subparagraph if—
a credit was allowed by reason of subsection (a) to any prior owner of such building, and
the taxpayer acquired such building before the end of the compliance period for such building with respect to such prior owner (determined without regard to any disposition by such prior owner).
Rehabilitation expenditures treated as separate new building
In general
Rehabilitation expenditures
For purposes of paragraph (1)—
In general
Cost of acquisition, etc., not included
Minimum expenditures to qualify
In general
Paragraph (1) shall apply to rehabilitation expenditures with respect to any building only if—
the expenditures are allocable to 1 or more low-income units or substantially benefit such units, and
the amount of such expenditures during any 24-month period meets the requirements of whichever of the following subclauses requires the greater amount of such expenditures:
The requirement of this subclause is met if such amount is not less than 20 percent of the adjusted basis of the building (determined as of the 1st day of such period and without regard to paragraphs (2) and (3) of section 1016(a)).
The requirement of this subclause is met if the qualified basis attributable to such amount, when divided by the number of low-income units in the building, is $6,000 or more.
Exception from 10 percent rehabilitation
Date of determination
Inflation adjustment
In the case of any expenditures which are treated under paragraph (4) as placed in service during any calendar year after 2009, the $6,000 amount in subparagraph (A)(ii)(II) shall be increased by an amount equal to—
such dollar amount, multiplied by
the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting “calendar year 2008” for “calendar year 2016” in subparagraph (A)(ii) thereof.
Any increase under the preceding sentence which is not a multiple of $100 shall be rounded to the nearest multiple of $100.
Special rules
For purposes of applying this section with respect to expenditures which are treated as a separate building by reason of this subsection—
such expenditures shall be treated as placed in service at the close of the 24-month period referred to in paragraph (3)(A), and
the applicable fraction under subsection (c)(1) shall be the applicable fraction for the building (without regard to paragraph (1)) with respect to which the expenditures were incurred.
Nothing in subsection (d)(2) shall prevent a credit from being allowed by reason of this subsection.
No double counting
Regulations to apply subsection with respect to group of units in building
Definition and special rules relating to credit period
Credit period defined
For purposes of this section, the term “credit period” means, with respect to any building, the period of 10 taxable years beginning with—
the taxable year in which the building is placed in service, or
at the election of the taxpayer, the succeeding taxable year,
but only if the building is a qualified low-income building as of the close of the 1st year of such period. The election under subparagraph (B), once made, shall be irrevocable.
Special rule for 1st year of credit period
In general
The credit allowable under subsection (a) with respect to any building for the 1st taxable year of the credit period shall be determined by substituting for the applicable fraction under subsection (c)(1) the fraction—
the numerator of which is the sum of the applicable fractions determined under subsection (c)(1) as of the close of each full month of such year during which such building was in service, and
the denominator of which is 12.
Disallowed 1st year credit allowed in 11th year
Determination of applicable percentage with respect to increases in qualified basis after 1st year of credit period
In general
In the case of any building which was a qualified low-income building as of the close of the 1st year of the credit period, if—
as of the close of any taxable year in the compliance period (after the 1st year of the credit period) the qualified basis of such building exceeds
the qualified basis of such building as of the close of the 1st year of the credit period,
the applicable percentage which shall apply under subsection (a) for the taxable year to such excess shall be the percentage equal to ⅔ of the applicable percentage which (after the application of subsection (h)) would but for this paragraph apply to such basis.
1st year computation applies
Dispositions of property
Credit period for existing buildings not to begin before rehabilitation credit allowed
In general
Acquisition credit allowed for certain buildings not allowed a rehabilitation credit
In general
In the case of a building described in clause (ii)—
subsection (d)(2)(B)(iv) shall not apply, and
the credit period for such building shall not begin before the taxable year which would be the 1st taxable year of the credit period for rehabilitation expenditures with respect to the building under the modifications described in clause (ii)(II).
Building described
A building is described in this clause if—
a waiver is granted under subsection (d)(6)(B) with respect to the acquisition of the building, and
a credit would be allowed for rehabilitation expenditures with respect to such building if subsection (e)(3)(A)(ii)(I) did not apply and if the dollar amount in effect under subsection (e)(3)(A)(ii)(II) were two-thirds of such amount.
Qualified low-income housing project
For purposes of this section—
In general
The term “qualified low-income housing project” means any project for residential rental property if the project meets the requirements of subparagraph (A), (B), or (C) whichever is elected by the taxpayer:
20–50 test
40–60 test
Average income test
In general
Special rules relating to income limitation
For purposes of clause (i)—
Designation
Average test
10-percent increments
Any election under this paragraph, once made, shall be irrevocable. For purposes of this paragraph, any property shall not be treated as failing to be residential rental property merely because part of the building in which such property is located is used for purposes other than residential rental purposes.
Rent-restricted units
In general
Gross rent
For purposes of subparagraph (A), gross rent—
does not include any payment under section 8 of the United States Housing Act of 1937 or any comparable rental assistance program (with respect to such unit or occupants thereof),
includes any utility allowance determined by the Secretary after taking into account such determinations under section 8 of the United States Housing Act of 1937,
does not include any fee for a supportive service which is paid to the owner of the unit (on the basis of the low-income status of the tenant of the unit) by any governmental program of assistance (or by an organization described in section 501(c)(3) and exempt from tax under section 501(a)) if such program (or organization) provides assistance for rent and the amount of assistance provided for rent is not separable from the amount of assistance provided for supportive services, and
does not include any rental payment to the owner of the unit to the extent such owner pays an equivalent amount to the Farmers’ Home Administration under section 515 of the Housing Act of 1949.
For purposes of clause (iii), the term “supportive service” means any service provided under a planned program of services designed to enable residents of a residential rental property to remain independent and avoid placement in a hospital, nursing home, or intermediate care facility for the mentally or physically handicapped. In the case of a single-room occupancy unit or a building described in subsection (i)(3)(B)(iii), such term includes any service provided to assist tenants in locating and retaining permanent housing.
Imputed income limitation applicable to unit
For purposes of this paragraph, the imputed income limitation applicable to a unit is the income limitation which would apply under paragraph (1) to individuals occupying the unit if the number of individuals occupying the unit were as follows:
In the case of a unit which does not have a separate bedroom, 1 individual.
In the case of a unit which has 1 or more separate bedrooms, 1.5 individuals for each separate bedroom.
In the case of a project with respect to which a credit is allowable by reason of this section and for which financing is provided by a bond described in section 142(a)(7), the imputed income limitation shall apply in lieu of the otherwise applicable income limitation for purposes of applying section 142(d)(4)(B)(ii).
Treatment of units occupied by individuals whose incomes rise above limit
In general
Rental of next available unit in case of 20–50 or 40–60 test
Rental of next available unit in case of average income test
In the case of a project with respect to which the taxpayer elects the requirements of subparagraph (C) of paragraph (1), if the income of the occupants of the unit increases above 140 percent of the greater of—
60 percent of area median gross income, or
the imputed income limitation designated with respect to the unit under paragraph (1)(C)(ii)(I),
clause (i) shall cease to apply to any such unit if any residential rental unit in the building (of a size comparable to, or smaller than, such unit) is occupied by a new resident whose income exceeds the limitation described in clause (v).
Deep rent skewed projects
In the case of a project described in section 142(d)(4)(B), clause (ii) or (iii), whichever is applicable, shall be applied by substituting “170 percent” for “140 percent”, and—
in the case of clause (ii), by substituting “any low-income unit in the building is occupied by a new resident whose income exceeds 40 percent of area median gross income” for “any residential rental unit” and all that follows in such clause, and
in the case of clause (iii), by substituting “any low-income unit in the building is occupied by a new resident whose income exceeds the lesser of 40 percent of area median gross income or the imputed income limitation designated with respect to such unit under paragraph (1)(C)(ii)(I)” for “any residential rental unit” and all that follows in such clause.
Limitation described
For purposes of clause (iii), the limitation described in this clause with respect to any unit is—
the imputed income limitation designated with respect to such unit under paragraph (1)(C)(ii)(I), in the case of a unit which was taken into account as a low-income unit prior to becoming vacant, and
the imputed income limitation which would have to be designated with respect to such unit under such paragraph in order for the project to continue to meet the requirements of paragraph (1)(C)(ii)(II), in the case of any other unit.
Units where Federal rental assistance is reduced as tenant’s income increases
If the gross rent with respect to a residential unit exceeds the limitation under subparagraph (A) by reason of the fact that the income of the occupants thereof exceeds the income limitation applicable under paragraph (1), such unit shall, nevertheless, be treated as a rent-restricted unit for purposes of paragraph (1) if—
a Federal rental assistance payment described in subparagraph (B)(i) is made with respect to such unit or its occupants, and
the sum of such payment and the gross rent with respect to such unit does not exceed the sum of the amount of such payment which would be made and the gross rent which would be payable with respect to such unit if—
the income of the occupants thereof did not exceed the income limitation applicable under paragraph (1), and
such units were rent-restricted within the meaning of subparagraph (A).
The preceding sentence shall apply to any unit only if the result described in clause (ii) is required by Federal statute as of the date of the enactment of this subparagraph and as of the date the Federal rental assistance payment is made.
Date for meeting requirements
In general
Buildings which rely on later buildings for qualification
In general
Treatment of elected buildings
Date prior building is treated as placed in service
Special rule
A building—
other than the 1st building placed in service as part of a project, and
other than a building which is placed in service during the 12-month period described in subparagraph (A) with respect to a prior building which becomes a qualified low-income building,
shall in no event be treated as a qualified low-income building unless the project is a qualified low-income housing project (without regard to such building) on the date such building is placed in service.
Projects with more than 1 building must be identified
Certain rules made applicable
Election to treat building after compliance period as not part of a project
Special rule where de minimis equity contribution
Property shall not be treated as failing to be residential rental property for purposes of this section merely because the occupant of a residential unit in the project pays (on a voluntary basis) to the lessor a de minimis amount to be held toward the purchase by such occupant of a residential unit in such project if—
all amounts so paid are refunded to the occupant on the cessation of his occupancy of a unit in the project, and
the purchase of the unit is not permitted until after the close of the compliance period with respect to the building in which the unit is located.
Any amount paid to the lessor as described in the preceding sentence shall be included in gross rent under paragraph (2) for purposes of determining whether the unit is rent-restricted.
Scattered site projects
Waiver of certain de minimis errors and recertifications
On application by the taxpayer, the Secretary may waive—
any recapture under subsection (j) in the case of any de minimis error in complying with paragraph (1), or
any annual recertification of tenant income for purposes of this subsection, if the entire building is occupied by low-income tenants.
Clarification of general public use requirement
A project does not fail to meet the general public use requirement solely because of occupancy restrictions or preferences that favor tenants—
with special needs,
who are members of a specified group under a Federal program or State program or policy that supports housing for such a specified group, or
who are involved in artistic or literary activities.
Limitation on aggregate credit allowable with respect to projects located in a State
Credit may not exceed credit amount allocated to building
In general
Time for making allocation
Exception where binding commitment
Exception where increase in qualified basis
In general
Limitation
The limitation under this clause is the amount of credit allowable under this section (without regard to this subsection) for a taxable year with respect to an increase in the qualified basis of the building equal to the excess of—
the qualified basis of such building as of the close of the 1st taxable year to which such allocation will apply, over
the qualified basis of such building as of the close of the 1st taxable year to which the most recent prior housing credit allocation with respect to such building applied.
Housing credit dollar amount reduced by full allocation
Exception where 10 percent of cost incurred
In general
Qualified building
Allocation of credit on a project basis
In general
In the case of a project which includes (or will include) more than 1 building, an allocation meets the requirements of this subparagraph if—
the allocation is made to the project for a calendar year during the project period,
the allocation only applies to buildings placed in service during or after the calendar year for which the allocation is made, and
the portion of such allocation which is allocated to any building in such project is specified not later than the close of the calendar year in which the building is placed in service.
Project period
For purposes of clause (i), the term “project period” means the period—
beginning with the 1st calendar year for which an allocation may be made for the 1st building placed in service as part of such project, and
ending with the calendar year the last building is placed in service as part of such project.
Allocated credit amount to apply to all taxable years ending during or after credit allocation year
Any housing credit dollar amount allocated to any building for any calendar year—
shall apply to such building for all taxable years in the compliance period ending during or after such calendar year, and
shall reduce the aggregate housing credit dollar amount of the allocating agency only for such calendar year.
Housing credit dollar amount for agencies
In general
State ceiling initially allocated to State housing credit agencies
State housing credit ceiling
The State housing credit ceiling applicable to any State for any calendar year shall be an amount equal to the sum of—
the unused State housing credit ceiling (if any) of such State for the preceding calendar year,
the greater of—
$1.75 multiplied by the State population, or
$2,000,000,
the amount of State housing credit ceiling returned in the calendar year, plus
the amount (if any) allocated under subparagraph (D) to such State by the Secretary.
For purposes of clause (i), the unused State housing credit ceiling for any calendar year is the excess (if any) of the sum of the amounts described in clauses (ii) through (iv) over the aggregate housing credit dollar amount allocated for such year. For purposes of clause (iii), the amount of State housing credit ceiling returned in the calendar year equals the housing credit dollar amount previously allocated within the State to any project which fails to meet the 10 percent test under paragraph (1)(E)(ii) on a date after the close of the calendar year in which the allocation was made or which does not become a qualified low-income housing project within the period required by this section or the terms of the allocation or to any project with respect to which an allocation is cancelled by mutual consent of the housing credit agency and the allocation recipient.
Unused housing credit carryovers allocated among certain States
In general
Unused housing credit carryover
For purposes of this subparagraph, the unused housing credit carryover of a State for any calendar year is the excess (if any) of—
the unused State housing credit ceiling for the year preceding such year, over
the aggregate housing credit dollar amount allocated for such year.
Formula for allocation of unused housing credit carryovers among qualified States
Qualified State
For purposes of this subparagraph, the term “qualified State” means, with respect to a calendar year, any State—
which allocated its entire State housing credit ceiling for the preceding calendar year, and
for which a request is made (not later than May 1 of the calendar year) to receive an allocation under clause (iii).
Special rule for States with constitutional home rule cities
For purposes of this subsection—
In general
The aggregate housing credit dollar amount for any constitutional home rule city for any calendar year shall be an amount which bears the same ratio to the State housing credit ceiling for such calendar year as—
the population of such city, bears to
the population of the entire State.
Coordination with other allocations
Constitutional home rule city
State may provide for different allocation
Population
Cost-of-living adjustment
In general
In the case of a calendar year after 2002, the $2,000,000 and $1.75 amounts in subparagraph (C) shall each be increased by an amount equal to—
such dollar amount, multiplied by
the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting “calendar year 2001” for “calendar year 2016” in subparagraph (A)(ii) thereof.
Rounding
In the case of the $2,000,000 amount, any increase under clause (i) which is not a multiple of $5,000 shall be rounded to the next lowest multiple of $5,000.
In the case of the $1.75 amount, any increase under clause (i) which is not a multiple of 5 cents shall be rounded to the next lowest multiple of 5 cents.
Increase in State housing credit ceiling for 2018, 2019, 2020, and 2021
Credit for buildings financed by tax-exempt bonds subject to volume cap not taken into account
In general
Paragraph (1) shall not apply to the portion of any credit allowable under subsection (a) which is attributable to eligible basis financed by any obligation the interest on which is exempt from tax under section 103 if—
such obligation is taken into account under section 146, and
principal payments on such financing are applied within a reasonable period to redeem obligations the proceeds of which were used to provide such financing or such financing is refunded as described in section 146(i)(6).
Special rule where 50 percent or more of building is financed with tax-exempt bonds subject to volume cap
Portion of State ceiling set-aside for certain projects involving qualified nonprofit organizations
In general
Projects involving qualified nonprofit organizations
Qualified nonprofit organization
For purposes of this paragraph, the term “qualified nonprofit organization” means any organization if—
such organization is described in paragraph (3) or (4) of section 501(c) and is exempt from tax under section 501(a),
such organization is determined by the State housing credit agency not to be affiliated with or controlled by a for-profit organization, and
1 of the exempt purposes of such organization includes the fostering of low-income housing.
Treatment of certain subsidiaries
In general
Qualified corporation
State may not override set-aside
Buildings eligible for credit only if minimum long-term commitment to low-income housing
In general
Extended low-income housing commitment
For purposes of this paragraph, the term “extended low-income housing commitment” means any agreement between the taxpayer and the housing credit agency—
which requires that the applicable fraction (as defined in subsection (c)(1)) for the building for each taxable year in the extended use period will not be less than the applicable fraction specified in such agreement and which prohibits the actions described in subclauses (I) and (II) of subparagraph (E)(ii),
which allows individuals who meet the income limitation applicable to the building under subsection (g) (whether prospective, present, or former occupants of the building) the right to enforce in any State court the requirement and prohibitions of clause (i),
which prohibits the disposition to any person of any portion of the building to which such agreement applies unless all of the building to which such agreement applies is disposed of to such person,
which prohibits the refusal to lease to a holder of a voucher or certificate of eligibility under section 8 of the United States Housing Act of 1937 because of the status of the prospective tenant as such a holder,
which is binding on all successors of the taxpayer, and
which, with respect to the property, is recorded pursuant to State law as a restrictive covenant.
Allocation of credit may not exceed amount necessary to support commitment
In general
Buildings financed by tax-exempt bonds
Extended use period
For purposes of this paragraph, the term “extended use period” means the period—
beginning on the 1st day in the compliance period on which such building is part of a qualified low-income housing project, and
ending on the later of—
the date specified by such agency in such agreement, or
the date which is 15 years after the close of the compliance period.
Exceptions if foreclosure or if no buyer willing to maintain low-income status
In general
The extended use period for any building shall terminate—
on the date the building is acquired by foreclosure (or instrument in lieu of foreclosure) unless the Secretary determines that such acquisition is part of an arrangement with the taxpayer a purpose of which is to terminate such period, or
on the last day of the period specified in subparagraph (I) if the housing credit agency is unable to present during such period a qualified contract for the acquisition of the low-income portion of the building by any person who will continue to operate such portion as a qualified low-income building.
Subclause (II) shall not apply to the extent more stringent requirements are provided in the agreement or in State law.
Eviction, etc. of existing low-income tenants not permitted
The termination of an extended use period under clause (i) shall not be construed to permit before the close of the 3-year period following such termination—
the eviction or the termination of tenancy (other than for good cause) of an existing tenant of any low-income unit, or
any increase in the gross rent with respect to such unit not otherwise permitted under this section.
Qualified contract
For purposes of subparagraph (E), the term “qualified contract” means a bona fide contract to acquire (within a reasonable period after the contract is entered into) the nonlow-income portion of the building for fair market value and the low-income portion of the building for an amount not less than the applicable fraction (specified in the extended low-income housing commitment) of—
the sum of—
the outstanding indebtedness secured by, or with respect to, the building,
the adjusted investor equity in the building, plus
other capital contributions not reflected in the amounts described in subclause (I) or (II), reduced by
cash distributions from (or available for distribution from) the project.
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out this paragraph, including regulations to prevent the manipulation of the amount determined under the preceding sentence.
Adjusted investor equity
In general
For purposes of subparagraph (E), the term “adjusted investor equity” means, with respect to any calendar year, the aggregate amount of cash taxpayers invested with respect to the project increased by the amount equal to—
such amount, multiplied by
the cost-of-living adjustment for such calendar year, determined under section 1(f)(3) by substituting the base calendar year for “calendar year 2016” in subparagraph (A)(ii) thereof.
An amount shall be taken into account as an investment in the project only to the extent there was an obligation to invest such amount as of the beginning of the credit period and to the extent such amount is reflected in the adjusted basis of the project.
Cost-of-living increases in excess of 5 percent not taken into account
Base calendar year
Low-income portion
Period for finding buyer
Effect of noncompliance
Projects which consist of more than 1 building
Special rules
Building must be located within jurisdiction of credit agency
Agency allocations in excess of limit
Credit reduced if allocated credit dollar amount is less than credit which would be allowable without regard to placed in service convention, etc.
In general
Determination of percentage
For purposes of clause (i), the clause (ii) percentage with respect to any building is the percentage which—
the housing credit dollar amount allocated to such building bears to
the credit amount determined in accordance with clause (iii).
Determination of credit amount
The credit amount determined in accordance with this clause is the amount of the credit which would (but for this subparagraph) be determined under this section with respect to the building if—
this section were applied without regard to paragraphs (2)(A) and (3)(B) of subsection (f), and
subsection (f)(3)(A) were applied without regard to “the percentage equal to ⅔ of”.
Housing credit agency to specify applicable percentage and maximum qualified basis
Other definitions
For purposes of this subsection—
Housing credit agency
Possessions treated as States
Definitions and special rules
For purposes of this section—
Compliance period
Determination of whether building is federally subsidized
In general
Election to reduce eligible basis by proceeds of obligations
Special rule for subsidized construction financing
Subparagraph (A) shall not apply to any tax-exempt obligation used to provide construction financing for any building if—
such obligation (when issued) identified the building for which the proceeds of such obligation would be used, and
such obligation is redeemed before such building is placed in service.
Low-income unit
In general
The term “low-income unit” means any unit in a building if—
such unit is rent-restricted (as defined in subsection (g)(2)), and
the individuals occupying such unit meet the income limitation applicable under subsection (g)(1) to the project of which such building is a part.
Exceptions
In general
Suitability for occupancy
Transitional housing for homeless
For purposes of clause (i), a unit shall be considered to be used other than on a transient basis if the unit contains sleeping accommodations and kitchen and bathroom facilities and is located in a building—
which is used exclusively to facilitate the transition of homeless individuals (within the meaning of section 103 of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11302), as in effect on the date of the enactment of this clause) to independent living within 24 months, and
in which a governmental entity or qualified nonprofit organization (as defined in subsection (h)(5)) provides such individuals with temporary housing and supportive services designed to assist such individuals in locating and retaining permanent housing.
Single-room occupancy units
Special rule for buildings having 4 or fewer units
In the case of any building which has 4 or fewer residential rental units, no unit in such building shall be treated as a low-income unit if the units in such building are owned by—
any individual who occupies a residential unit in such building, or
any person who is related (as defined in subsection (d)(2)(D)(iii)) to such individual.
Certain students not to disqualify unit
A unit shall not fail to be treated as a low-income unit merely because it is occupied—
by an individual who is—
a student and receiving assistance under title IV of the Social Security Act,
a student who was previously under the care and placement responsibility of the State agency responsible for administering a plan under part B or part E of title IV of the Social Security Act, or
enrolled in a job training program receiving assistance under the Job Training Partnership Act or under other similar Federal, State, or local laws, or
entirely by full-time students if such students are—
single parents and their children and such parents are not dependents (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of another individual and such children are not dependents (as so defined) of another individual other than a parent of such children, or
married and file a joint return.
Owner-occupied buildings having 4 or fewer units eligible for credit where development plan
In general
Limitation on credit
Certain unrented units treated as owner-occupied
New building
Existing building
Application to estates and trusts
Impact of tenant’s right of 1st refusal to acquire property
In general
Minimum purchase price
For purposes of subparagraph (A), the minimum purchase price under this subparagraph is an amount equal to the sum of—
the principal amount of outstanding indebtedness secured by the building (other than indebtedness incurred within the 5-year period ending on the date of the sale to the tenants), and
all Federal, State, and local taxes attributable to such sale.
Except in the case of Federal income taxes, there shall not be taken into account under clause (ii) any additional tax attributable to the application of clause (ii).
Treatment of rural projects
Coordination with low-income housing grants
Reduction in State housing credit ceiling for low-income housing grants received in 2009
Special rule for basis
Recapture of credit
In general
If—
as of the close of any taxable year in the compliance period, the amount of the qualified basis of any building with respect to the taxpayer is less than
the amount of such basis as of the close of the preceding taxable year,
then the taxpayer’s tax under this chapter for the taxable year shall be increased by the credit recapture amount.
Credit recapture amount
For purposes of paragraph (1), the credit recapture amount is an amount equal to the sum of—
the aggregate decrease in the credits allowed to the taxpayer under section 38 for all prior taxable years which would have resulted if the accelerated portion of the credit allowable by reason of this section were not allowed for all prior taxable years with respect to the excess of the amount described in paragraph (1)(B) over the amount described in paragraph (1)(A), plus
interest at the overpayment rate established under section 6621 on the amount determined under subparagraph (A) for each prior taxable year for the period beginning on the due date for filing the return for the prior taxable year involved.
No deduction shall be allowed under this chapter for interest described in subparagraph (B).
Accelerated portion of credit
For purposes of paragraph (2), the accelerated portion of the credit for the prior taxable years with respect to any amount of basis is the excess of—
the aggregate credit allowed by reason of this section (without regard to this subsection) for such years with respect to such basis, over
the aggregate credit which would be allowable by reason of this section for such years with respect to such basis if the aggregate credit which would (but for this subsection) have been allowable for the entire compliance period were allowable ratably over 15 years.
Special rules
Tax benefit rule
Only basis for which credit allowed taken into account
No recapture of additional credit allowable by reason of subsection (f)(3)
No credits against tax
No recapture by reason of casualty loss
No recapture where de minimis changes in floor space
The Secretary may provide that the increase in tax under this subsection shall not apply with respect to any building if—
such increase results from a de minimis change in the floor space fraction under subsection (c)(1), and
the building is a qualified low-income building after such change.
Certain partnerships treated as the taxpayer
In general
For purposes of applying this subsection to a partnership to which this paragraph applies—
such partnership shall be treated as the taxpayer to which the credit allowable under subsection (a) was allowed,
the amount of such credit allowed shall be treated as the amount which would have been allowed to the partnership were such credit allowable to such partnership,
paragraph (4)(A) shall not apply, and
the amount of the increase in tax under this subsection for any taxable year shall be allocated among the partners of such partnership in the same manner as such partnership’s taxable income for such year is allocated among such partners.
Partnerships to which paragraph applies
Special rules
Husband and wife treated as 1 partner
Election irrevocable
No recapture on disposition of building which continues in qualified use
In general
Statute of limitations
If a building (or an interest therein) is disposed of during any taxable year and there is any reduction in the qualified basis of such building which results in an increase in tax under this subsection for such taxable or any subsequent taxable year, then—
the statutory period for the assessment of any deficiency with respect to such increase in tax shall not expire before the expiration of 3 years from the date the Secretary is notified by the taxpayer (in such manner as the Secretary may prescribe) of such reduction in qualified basis, and
such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
Application of at-risk rules
For purposes of this section—
In general
Special rules for determining qualified person
For purposes of paragraph (1)—
In general
If the requirements of subparagraphs (B), (C), and (D) are met with respect to any financing borrowed from a qualified nonprofit organization (as defined in subsection (h)(5)), the determination of whether such financing is qualified commercial financing with respect to any qualified low-income building shall be made without regard to whether such organization—
is actively and regularly engaged in the business of lending money, or
is a person described in section 49(a)(1)(D)(iv)(II).
Financing secured by property
The requirements of this subparagraph are met with respect to any financing if such financing is secured by the qualified low-income building, except that this subparagraph shall not apply in the case of a federally assisted building described in subsection (d)(6)(C) if—
a security interest in such building is not permitted by a Federal agency holding or insuring the mortgage secured by such building, and
the proceeds from the financing (if any) are applied to acquire or improve such building.
Portion of building attributable to financing
Repayment of principal and interest
The requirements of this subparagraph are met with respect to any financing if such financing is fully repaid on or before the earliest of—
the date on which such financing matures,
the 90th day after the close of the compliance period with respect to the qualified low-income building, or
the date of its refinancing or the sale of the building to which such financing relates.
In the case of a qualified nonprofit organization which is not described in section 49(a)(1)(D)(iv)(II) with respect to a building, clause (ii) of this subparagraph shall be applied as if the date described therein were the 90th day after the earlier of the date the building ceases to be a qualified low-income building or the date which is 15 years after the close of a compliance period with respect thereto.
Present value of financing
Failure to fully repay
In general
To the extent that the requirements of paragraph (2)(D) are not met, then the taxpayer’s tax under this chapter for the taxable year in which such failure occurs shall be increased by an amount equal to the applicable portion of the credit under this section with respect to such building, increased by an amount of interest for the period—
beginning with the due date for the filing of the return of tax imposed by chapter 1 for the 1st taxable year for which such credit was allowable, and
ending with the due date for the taxable year in which such failure occurs,
determined by using the underpayment rate and method under section 6621.
Applicable portion
Certain rules to apply
Certifications and other reports to Secretary
Certification with respect to 1st year of credit period
Following the close of the 1st taxable year in the credit period with respect to any qualified low-income building, the taxpayer shall certify to the Secretary (at such time and in such form and in such manner as the Secretary prescribes)—
the taxable year, and calendar year, in which such building was placed in service,
the adjusted basis and eligible basis of such building as of the close of the 1st year of the credit period,
the maximum applicable percentage and qualified basis permitted to be taken into account by the appropriate housing credit agency under subsection (h),
the election made under subsection (g) with respect to the qualified low-income housing project of which such building is a part, and
such other information as the Secretary may require.
In the case of a failure to make the certification required by the preceding sentence on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, no credit shall be allowable by reason of subsection (a) with respect to such building for any taxable year ending before such certification is made.
Annual reports to the Secretary
The Secretary may require taxpayers to submit an information return (at such time and in such form and manner as the Secretary prescribes) for each taxable year setting forth—
the qualified basis for the taxable year of each qualified low-income building of the taxpayer,
the information described in paragraph (1)(C) for the taxable year, and
such other information as the Secretary may require.
The penalty under section 6652(j) shall apply to any failure to submit the return required by the Secretary under the preceding sentence on the date prescribed therefor.
Annual reports from housing credit agencies
Each agency which allocates any housing credit amount to any building for any calendar year shall submit to the Secretary (at such time and in such manner as the Secretary shall prescribe) an annual report specifying—
the amount of housing credit amount allocated to each building for such year,
sufficient information to identify each such building and the taxpayer with respect thereto, and
such other information as the Secretary may require.
The penalty under section 6652(j) shall apply to any failure to submit the report required by the preceding sentence on the date prescribed therefor.
Responsibilities of housing credit agencies
Plans for allocation of credit among projects
In general
Notwithstanding any other provision of this section, the housing credit dollar amount with respect to any building shall be zero unless—
such amount was allocated pursuant to a qualified allocation plan of the housing credit agency which is approved by the governmental unit (in accordance with rules similar to the rules of section 147(f)(2) (other than subparagraph (B)(ii) thereof)) of which such agency is a part,
such agency notifies the chief executive officer (or the equivalent) of the local jurisdiction within which the building is located of such project and provides such individual a reasonable opportunity to comment on the project,
a comprehensive market study of the housing needs of low-income individuals in the area to be served by the project is conducted before the credit allocation is made and at the developer’s expense by a disinterested party who is approved by such agency, and
a written explanation is available to the general public for any allocation of a housing credit dollar amount which is not made in accordance with established priorities and selection criteria of the housing credit agency.
Qualified allocation plan
For purposes of this paragraph, the term “qualified allocation plan” means any plan—
which sets forth selection criteria to be used to determine housing priorities of the housing credit agency which are appropriate to local conditions,
which also gives preference in allocating housing credit dollar amounts among selected projects to—
projects serving the lowest income tenants,
projects obligated to serve qualified tenants for the longest periods, and
projects which are located in qualified census tracts (as defined in subsection (d)(5)(B)(ii)) and the development of which contributes to a concerted community revitalization plan, and
which provides a procedure that the agency (or an agent or other private contractor of such agency) will follow in monitoring for noncompliance with the provisions of this section and in notifying the Internal Revenue Service of such noncompliance which such agency becomes aware of and in monitoring for noncompliance with habitability standards through regular site visits.
Certain selection criteria must be used
The selection criteria set forth in a qualified allocation plan must include
project location,
housing needs characteristics,
project characteristics, including whether the project includes the use of existing housing as part of a community revitalization plan,
sponsor characteristics,
tenant populations with special housing needs,
public housing waiting lists,
tenant populations of individuals with children,
projects intended for eventual tenant ownership,
the energy efficiency of the project, and
the historic nature of the project.
Application to bond financed projects
Credit allocated to building not to exceed amount necessary to assure project feasibility
In general
Agency evaluation
In making the determination under subparagraph (A), the housing credit agency shall consider—
the sources and uses of funds and the total financing planned for the project,
any proceeds or receipts expected to be generated by reason of tax benefits,
the percentage of the housing credit dollar amount used for project costs other than the cost of intermediaries, and
the reasonableness of the developmental and operational costs of the project.
Clause (iii) shall not be applied so as to impede the development of projects in hard-to-develop areas. Such a determination shall not be construed to be a representation or warranty as to the feasibility or viability of the project.
Determination made when credit amount applied for and when building placed in service
In general
A determination under subparagraph (A) shall be made as of each of the following times:
The application for the housing credit dollar amount.
The allocation of the housing credit dollar amount.
The date the building is placed in service.
Certification as to amount of other subsidies
Application to bond financed projects
Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations—
dealing with—
projects which include more than 1 building or only a portion of a building,
buildings which are placed in service in portions,
providing for the application of this section to short taxable years,
preventing the avoidance of the rules of this section, and
providing the opportunity for housing credit agencies to correct administrative errors and omissions with respect to allocations and record keeping within a reasonable period after their discovery, taking into account the availability of regulations and other administrative guidance from the Secretary.
Source
(Added Pub. L. 99–514, title II, § 252(a),Notes
Inflation Adjusted Items for Certain Years
References in Text
Prior Provisions
Amendments
Effective Date of 2018 Amendment
Effective Date of 2017 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
Effective Date of 2008 Amendment
In general.—
Except as otherwise provided in paragraph (2), the amendments made by this subsection [probably means this section, amending this section] shall apply to buildings placed in service after the date of the enactment of this Act [
Rehabilitation requirements.—
In general.—
The amendments made by subsection (b) [amending this section] shall apply to buildings with respect to which housing credit dollar amounts are allocated after the date of the enactment of this Act [
Buildings not subject to allocation limits.—
To the extent paragraph (1) of section 42(h) of the Internal Revenue Code of 1986 does not apply to any building by reason of paragraph (4) thereof, the amendments made by subsection (b) [amending this section] shall apply [to] buildings financed with bonds issued pursuant to allocations made after the date of the enactment of this Act [
In general.—
Except as otherwise provided in this subsection, the amendments made by this section [amending this section] shall apply to buildings placed in service after the date of the enactment of this Act [
Repeal of bonding requirement on disposition of building.—
The amendment made by subsection (c) [amending this section] shall apply to—
interests in buildings disposed [of] after the date of the enactment of this Act [
interests in buildings disposed of on or before such date if—
it is reasonably expected that such building will continue to be operated as a qualified low-income building (within the meaning of section 42 of the Internal Revenue Code of 1986) for the remaining compliance period (within the meaning of such section) with respect to such building, and
the taxpayer elects the application of this subparagraph with respect to such disposition.
Energy efficiency and historic nature taken into account in making allocations.—
The amendments made by subsection (d) [amending this section] shall apply to allocations made after
Continued eligibility for students who received foster care assistance.—
The amendments made by subsection (e) [amending this section] shall apply to determinations made after the date of the enactment of this Act [
Treatment of rural projects.—
The amendment made by subsection (f) [amending this section] shall apply to determinations made after the date of the enactment of this Act [
Clarification of general public use requirement.—
The amendment made by subsection (g) [amending this section] shall apply to buildings placed in service before, on, or after the date of the enactment of this Act [
Effective Date of 2007 Amendment
housing credit amounts allocated before, on, or after the date of the enactment of this Act [
buildings placed in service before, on, or after such date to the extent paragraph (1) of section 42(h) of the Internal Revenue Code of 1986 does not apply to any building by reason of paragraph (4) thereof.”
Effective Date of 2004 Amendment
Effective Date of 2000 Amendment
housing credit dollar amounts allocated after
buildings placed in service after such date to the extent paragraph (1) of section 42(h) of the Internal Revenue Code of 1986 does not apply to any building by reason of paragraph (4) thereof, but only with respect to bonds issued after such date.”
Effective Date of 1998 Amendment
Effective Date of 1993 Amendment
In general.—
Except as provided in subparagraphs (B) and (C), the amendments made by this subsection [amending this section] shall apply to—
determinations under section 42 of the Internal Revenue Code of 1986 with respect to housing credit dollar amounts allocated from State housing credit ceilings after
buildings placed in service after
Full-time students, waiver authority, and prohibited discrimination.—
The amendments made by paragraphs (2), (3), and (4) [amending this section] shall take effect on the date of the enactment of this Act [
HOME assistance.—
The amendment made by paragraph (5) [amending this section] shall apply to periods after the date of the enactment of this Act.”
Effective Date of 1991 Amendment
Effective Date of 1990 Amendment
In general.—
Except as otherwise provided in this paragraph, the amendments made by this subsection [amending this section] shall apply to—
determinations under section 42 of the Internal Revenue Code of 1986 with respect to housing credit dollar amounts allocated from State housing credit ceilings for calendar years after 1990, or
buildings placed in service after
Tenant rights, etc.—
The amendments made by paragraphs (1), (6), (8), and (9) [amending this section] shall take effect on the date of the enactment of this Act [
Monitoring.—
The amendment made by paragraph (2) [amending this section] shall take effect on
Study.—
The Inspector General of the Department of Housing and Urban Development and the Secretary of the Treasury shall jointly conduct a study of the effectiveness of the amendment made by paragraph (5) [amending this section] in carrying out the purposes of section 42 of the Internal Revenue Code of 1986. The report of such study shall be submitted not later than
determinations of qualified basis for taxable years beginning after the date of the enactment of this Act [
determinations of qualified basis for taxable years beginning on or before such date except that determinations for such taxable years shall be made without regard to any reduction in gross rent after
In general.—
Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 56, 167, 168, 312, 381, 404, 460, 642, 1016, 1250, and 7701 of this title] shall apply to property placed in service after the date of the enactment of this Act [
Exception.—
The amendments made by this section shall not apply to any property to which section 168 of the Internal Revenue Code of 1986 does not apply by reason of subsection (f)(5) thereof.
Exception for previously grandfather expenditures.—
The amendments made by this section shall not apply to rehabilitation expenditures described in section 252(f)(5) of the Tax Reform Act of 1986 [Pub. L. 99–514] (as added by section 1002(l)(31) of the Technical and Miscellaneous Revenue Act of 1988 [see Transitional Rules note below]).”
Effective Date of 1989 Amendment
In general.—
Except as otherwise provided in this subsection, the amendments made by this section [amending this section and section 142 of this title] shall apply to determinations under section 42 of the Internal Revenue Code of 1986 with respect to housing credit dollar amounts allocated from State housing credit ceilings for calendar years after 1989.
Buildings not subject to allocation limits.—
Except as otherwise provided in this subsection, to the extent paragraph (1) of section 42(h) of such Code does not apply to any building by reason of paragraph (4) thereof, the amendments made by this section shall apply to buildings placed in service after
One-year carryover of unused credit authority, etc.—
The amendments made by subsection (b) [amending this section] shall apply to calendar years after 1989, but clauses (ii), (iii), and (iv) of section 42(h)(3)(C) of such Code (as added by this section) shall be applied without regard to allocations for 1989 or any preceding year.
Additional buildings eligible for waiver of 10-year rule.—
The amendments made by subsection (f) [amending this section] shall take effect on the date of the enactment of this Act [
Certifications with respect to 1st year of credit period.—
The amendment made by subsection (p) [amending this section] shall apply to taxable years ending on or after
Certain rules which apply to bonds.—
Paragraphs (1)(D) and (2)(D) of section 42(m) of such Code, as added by this section, shall apply to obligations issued after
Clarifications.—
The amendments made by the following provisions of this section shall apply as if included in the amendments made by section 252 of the Tax Reform Act of 1986 [Pub. L. 99–514, enacting this section and amending sections 38 and 55 of this title]:
Paragraph (1) of subsection (h) (relating to units rented on a monthly basis) [amending this section].
Subsection (l) (relating to eligible basis for new buildings to include expenditures before close of 1st year of credit period) [amending this section].
Guidance on difficult development areas and posting of bond to avoid recapture.—
Not later than 180 days after the date of the enactment of this Act [
the Secretary of Housing and Urban Development shall publish initial guidance on the designation of difficult development areas under section 42(d)(5)(C) of such Code, as added by this section, and
the Secretary of the Treasury shall publish initial guidance under section 42(j)(6) of such Code (relating to no recapture on disposition of building (or interest therein) where bond posted).”
Effective Date of 1988 Amendment
In general.—
The amendment made by subsection (a) [amending this section] shall take effect as if included in the amendments made by section 252 of the Reform Act [section 252 of Pub. L. 99–514, enacting this section and amending sections 38 and 55 of this title].
Period for election.—
The period for electing not to have section 42(j)(5) of the 1986 Code apply to any partnership shall not expire before the date which is 6 months after the date of the enactment of this Act [
Effective Date of 1986 Amendment
Effective Date
In general.—
The amendments made by this section [enacting this section and amending sections 38 and 55 of this title] shall apply to buildings placed in service after
Special rule for rehabilitation expenditures.—
Subsection (e) of section 42 of the Internal Revenue Code of 1986 (as added by this section) shall apply for purposes of paragraph (1).”
Savings Provision
Grants to States for Low-Income Housing Projects in Lieu of Low-Income Housing Credit Allocations for 2009
In General.—
The Secretary of the Treasury shall make a grant to the housing credit agency of each State in an amount equal to such State’s low-income housing grant election amount.
Low-Income Housing Grant Election Amount.—
For purposes of this section, the term ‘low-income housing grant election amount’ means, with respect to any State, such amount as the State may elect which does not exceed 85 percent of the product of—
the sum of—
100 percent of the State housing credit ceiling for 2009 which is attributable to amounts described in clauses (i) and (iii) of section 42(h)(3)(C) of the Internal Revenue Code of 1986, and
40 percent of the State housing credit ceiling for 2009 which is attributable to amounts described in clauses (ii) and (iv) of such section, multiplied by
10.
Subawards for Low-Income Buildings.—
In general.—
A State housing credit agency receiving a grant under this section shall use such grant to make subawards to finance the construction or acquisition and rehabilitation of qualified low-income buildings. A subaward under this section may be made to finance a qualified low-income building with or without an allocation under section 42 of the Internal Revenue Code of 1986, except that a State housing credit agency may make subawards to finance qualified low-income buildings without an allocation only if it makes a determination that such use will increase the total funds available to the State to build and rehabilitate affordable housing. In complying with such determination requirement, a State housing credit agency shall establish a process in which applicants that are allocated credits are required to demonstrate good faith efforts to obtain investment commitments for such credits before the agency makes such subawards.
Subawards subject to same requirements as low-income housing credit allocations.—
Any such subaward with respect to any qualified low-income building shall be made in the same manner and shall be subject to the same limitations (including rent, income, and use restrictions on such building) as an allocation of housing credit dollar amount allocated by such State housing credit agency under section 42 of the Internal Revenue Code of 1986, except that such subawards shall not be limited by, or otherwise affect (except as provided in subsection (h)(3)(J) of such section [section 42(h)(3) has no subpar. (J)]), the State housing credit ceiling applicable to such agency.
Compliance and asset management.—
The State housing credit agency shall perform asset management functions to ensure compliance with section 42 of the Internal Revenue Code of 1986 and the long-term viability of buildings funded by any subaward under this section. The State housing credit agency may collect reasonable fees from a subaward recipient to cover expenses associated with the performance of its duties under this paragraph. The State housing credit agency may retain an agent or other private contractor to satisfy the requirements of this paragraph.
Recapture.—
The State housing credit agency shall impose conditions or restrictions, including a requirement providing for recapture, on any subaward under this section so as to assure that the building with respect to which such subaward is made remains a qualified low-income building during the compliance period. Any such recapture shall be payable to the Secretary of the Treasury for deposit in the general fund of the Treasury and may be enforced by means of liens or such other methods as the Secretary of the Treasury determines appropriate.
Return of Unused Grant Funds.—
Any grant funds not used to make subawards under this section before
Definitions.—
Any term used in this section which is also used in section 42 of the Internal Revenue Code of 1986 shall have the same meaning for purposes of this section as when used in such section 42. Any reference in this section to the Secretary of the Treasury shall be treated as including the Secretary’s delegate.
Appropriations.—
There is hereby appropriated to the Secretary of the Treasury such sums as may be necessary to carry out this section.”
Election To Determine Rent Limitation Based on Number of Bedrooms and Deep Rent Skewing
In the case of a building to which the amendments made by subsection (e)(1) or (n)(2) of section 7108 of the Revenue Reconciliation Act of 1989 [Pub. L. 101–239, amending this section] did not apply, the taxpayer may elect to have such amendments apply to such building if the taxpayer has met the requirements of the procedures described in section 42(m)(1)(B)(iii) of the Internal Revenue Code of 1986.
In the case of the amendment made by such subsection (e)(1), such election shall apply only with respect to tenants first occupying any unit in the building after the date of the election.
In the case of the amendment made by such subsection (n)(2), such election shall apply only if rents of low-income tenants in such building do not increase as a result of such election.
An election under this subsection may be made only during the 180-day period beginning on the date of the enactment of this Act [
Election To Accelerate Credit Into 1990
In general.—
At the election of an individual, the credit determined under section 42 of the Internal Revenue Code of 1986 for the taxpayer’s first taxable year ending on or after
Reduction in aggregate credit to reflect increased 1990 credit.—
The aggregate credit allowable to any person under section 42 of such Code with respect to any investment for taxable years after the first taxable year referred to in paragraph (1) shall be reduced on a pro rata basis by the amount of the increased credit allowable by reason of paragraph (1) with respect to such first taxable year. The preceding sentence shall not be construed to affect whether any taxable year is part of the credit, compliance, or extended use periods.
Election.—
The election under paragraph (1) shall be made at the time and in the manner prescribed by the Secretary of the Treasury or his delegate, and, once made, shall be irrevocable. In the case of a partnership, such election shall be made by the partnership.”
Exception to Time Period for Meeting Project Requirements in Order To Qualify as Low-Income Housing
State Housing Credit Ceiling for Calendar Year 1990
Transitional Rules
Limitation to non-acrs buildings not to apply to certain buildings, etc.—
In general.—
In the case of a building which is part of a project described in subparagraph (B)—
section 42(c)(2)(B) of the Internal Revenue Code of 1986 (as added by this section) shall not apply,
such building shall be treated as not federally subsidized for purposes of section 42(b)(1)(A) of such Code,
the eligible basis of such building shall be treated, for purposes of section 42(h)(4)(A) of such Code, as if it were financed by an obligation the interest on which is exempt from tax under section 103 of such Code and which is taken into account under section 146 of such Code, and
the amendments made by section 803 [enacting section 263A of this title, amending sections 48, 267, 312, 447, 464, and 471 of this title, and repealing sections 189, 278, and 280 of this title] shall not apply.
Project described.—
A project is described in this subparagraph if—
an urban development action grant application with respect to such project was submitted on
a zoning commission map amendment related to such project was granted on
the number assigned to such project by the Federal Housing Administration is 023–36602.
Additional units eligible for credit.—
In the case of a building to which subparagraph (A) applies and which is part of a project which meets the requirements of subparagraph (D), for each low-income unit in such building which is occupied by individuals whose income is 30 percent or less of area median gross income, one additional unit (not otherwise a low-income unit) in such building shall be treated as a low-income unit for purposes of such section 42.
Project described.—
A project is described in this subparagraph if—
rents charged for units in such project are restricted by State regulations,
the annual cash flow of such project is restricted by State law,
the project is located on land owned by or ground leased from a public housing authority,
construction of such project begins on or before
for a 20-year period, 20 percent or more of the residential units in such project are occupied by individuals whose income is 50 percent or less of area median gross income.
Maximum additional credit.—
The maximum present value of additional credits allowable under section 42 of such Code by reason of subparagraph (C) shall not exceed 25 percent of the eligible basis of the building.
Additional allocation of housing credit ceiling.—
In general.—
There is hereby allocated to each housing credit agency described in subparagraph (B) an additional housing credit dollar amount determined in accordance with the following table:
The additional | |
“For calendar year: | allocation is: |
1987 | $3,900,000 |
1988 | $7,600,000 |
1989 | $1,300,000. |
Housing credit agencies described.—
The housing credit agencies described in this subparagraph are:
A corporate governmental agency constituted as a public benefit corporation and established in 1971 under the provisions of Article XII of the Private Housing Finance Law of the State.
A city department established on
The State housing finance agency referred to in subparagraph (C), but only with respect to projects described in subparagraph (C).
Project described.—
A project is described in this subparagraph if such project is a qualified low-income housing project which—
receives financing from a State housing finance agency from the proceeds of bonds issued pursuant to chapter 708 of the Acts of 1966 of such State pursuant to loan commitments from such agency made between
is subject to subsidy commitments issued pursuant to a program established under chapter 574 of the Acts of 1983 of such State having award dates from such agency between
Special rules.—
Any building—
which is allocated any housing credit dollar amount by a housing credit agency described in clause (iii) of subparagraph (B), and
which is placed in service after
shall be treated for purposes of the amendments made by this section as placed in service on
Section 42(c)(2)(B) of the Internal Revenue Code of 1986 shall not apply to any building which is allocated any housing credit dollar amount by any agency described in subparagraph (B).
All units treated as low income units in certain cases.—
In the case of any building—
which is allocated any housing credit dollar amount by any agency described in subparagraph (B), and
which after the application of subparagraph (D)(ii) is a qualified low-income building at all times during any taxable year,
such building shall be treated as described in section 42(b)(1)(B) of such Code and having an applicable fraction for such year of 1. The preceding sentence shall apply to any building only to the extent of the portion of the additional housing credit dollar amount (allocated to such agency under subparagraph (A)) allocated to such building.
Certain projects placed in service before 1987.—
In general.—
In the case of a building which is part of a project described in subparagraph (B)—
section 42(c)(2)(B) of such Code shall not apply,
such building shall be treated as placed in service during the first calendar year after 1986 and before 1990 in which such building is a qualified low-income building (determined after the application of clause (i)), and
for purposes of section 42(h) of such Code, such building shall be treated as having allocated to it a housing credit dollar amount equal to the dollar amount appearing in the clause of subparagraph (B) in which such building is described.
Project described.—
A project is described in this subparagraph if the code number assigned to such project by the Farmers’ Home Administration appears in the following table:
The housing credit | |
“The code number is: | dollar amount is: |
(i) 49284553664 | $16,000 |
(ii) 4927742022446 | $22,000 |
(iii) 49270742276087 | $64,000 |
(iv) 490270742387293 | $48,000 |
(v) 4927074218234 | $32,000 |
(vi) 49270742274019 | $36,000 |
(vii) 51460742345074 | $53,000. |
Determination of adjusted basis.—
The adjusted basis of any building to which this paragraph applies for purposes of section 42 of such Code shall be its adjusted basis as of the close of the taxable year ending before the first taxable year of the credit period for such building.
Certain rules to apply.—
Rules similar to the rules of subparagraph (E) of paragraph (2) shall apply for purposes of this paragraph.
Definitions.—
For purposes of this subsection, terms used in such subsection which are also used in section 42 of the Internal Revenue Code of 1986 (as added by this section) shall have the meanings given such terms by such section 42.
Transitional rule.—
In the case of any rehabilitation expenditures incurred with respect to units located in the neighborhood strategy area within the community development block grant program in Ft. Wayne, Indiana—
the amendments made by this section [enacting this section and amending sections 38 and 55 of this title] shall not apply, and
paragraph (1) of section 167(k) of the Internal Revenue Code of 1986, shall be applied as if it did not contain the phrase ‘and before
The number of units to which the preceding sentence applies shall not exceed 150.”