The Housing Tax Credit Program was created by the Tax
Reform Act of 1986. Section 42 of the Internal Revenue Code of 1986,
as amended (the Code), is the federal law that governs the program.
The Housing Tax Credit Program is a tax incentive intended to increase
the availability of low income rental housing. The tax credit is a credit
against regular tax liability for investments in affordable housing
properties constructed, acquired and rehabilitated after 1986.
Applicants should be familiar with Section 42 of the Code, regulations
and administrative documents (revenue rulings, revenue notices), and
all relevant material published by the IRS. Applicants should also consult
with their attorney and accountant in order to comply with all program
requirements.
Description of Housing Tax Credits
The Housing Tax Credit is received each year for ten years-the period
the taxpayer claims the tax credit on his/her federal income tax return.
The owner must maintain the income and rent restrictions continuously
for 15 years-this is the compliance period. Additionally, the owner
must enter into an extended use period of an additional 15 years by
filing a regulatory agreement on the project with the clerk of court
in the parish where the property is located.
The amount of tax credits to which a project owner is eligible is based
on the amount of qualified development costs incurred and the percentage
of low income units within a development that meet the applicable federal
requirements for both tenant income and rent. Each qualified tax credit
development must include a minimum percentage of units to be set-aside
for eligible low income tenants. These set-aside units must also be
rent-restricted. The Compliance Division of the Agency monitors the
property throughout the compliance and extended use periods to ensure
that the property remains affordable to low income families.
Use of Housing Tax Credits
To qualify for tax credits, the proposed development must involve new
construction or substantial rehabilitation of existing residential units
that is occupied by low income individuals and families. The costs associated
with the development of these low income units are the building's eligible
basis. However, there are certain project costs not subject to inclusion
into eligible basis. The housing credit is not available for any of
the following facilities: hospitals, nursing homes, sanitariums, life
care facilities, retirement homes (if providing significant services
other than housing are mandatory for residents), employer housing, mobile
homes and dormitories. Consult a housing credit tax advisor or Section
42 of the Code for more information.
How to Apply for Housing Tax Credits
Prospective applicants apply for housing tax credits by submitting an application to LHFA. Applications are received and evaluated under the Qualified Allocation Plan (QAP) at least once a year. LHFA's QAP provides
information on the calendar year program including minimum project requirements,
competitive criteria and underwriting criteria. Data tables are also
included with the QAP to provide applicants with the necessary localized
data regarding such information as median family income, qualified census
tracts and rent limits by parish.
The QAP and all necessary forms and additional supportive documents
are available for downloading at the Housing Tax Credit Files page. Applicants
should review all program information and application for a thorough
understanding of LHFA's program.
To learn more about the Low Income Housing Tax Credit program,
contact lihtcwebinfo@lhfa.state.la.us.
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