What is the 10 year rule for LIHTC?

What is the 10 year rule for LIHTC?

– Current law provides three exceptions to the “ten year rule,” which states that low- income housing credits are not allowed unless it has been at least ten years between the acquisition date and the later of: a) the placed in service date or b) the most recent nonqualified substantial improvement of the building.

What is included in LIHTC eligible basis?

Eligible costs include all “hard” construction costs and most depreciable “soft” costs, e.g. architectural and engineering costs, allowable developer fees and contractor profit, and construction loan interest. Costs attributable to common areas, corridors, etc. are included.

How does the 4% LIHTC work?

4 Percent. The LIHTC is designed to subsidize either 30 percent or 70 percent of the low-income unit costs in a project. The 30 percent subsidy, which is known as the so-called automatic 4 percent tax credit, covers new construction that uses additional subsidies or the acquisition cost of existing buildings.

What is Section 42 LIHTC program?

The Section 42 housing program refers to that section of the Internal Revenue Tax Code which provides tax credits to investors who build affordable housing. Investors receive a reduction in their tax liability in return for providing affordable housing to people with fixed or lower income.

What is the placed in service date for LIHTC?

The placed-in-service date generally marks the beginning of the credit period. It is defined as the date the property is ready for occupancy.

How long is the LIHTC program compliance period?

15 years
The compliance period is 15 years beginning with the first year of the tax credit period (placed in service year or subsequent year if deferral was elected).

How is the LIHTC calculated?

The LIHTC is composed of two major credit types: the 4 percent credit and 9 percent credit. Credits are redeemable every year for 10 years and calculated as 4 percent or 9 percent of the project’s qualified basis, a figure calculated from the gross construction costs of the project’s affordable units.

How does 9% LIHTC work?

Low-Income Housing Tax Credits, or LIHTCs, are used to either construct new rental buildings or renovate existing buildings. The 9% tax credit (70% subsidy) is usually for new construction and substantial rehabilitation without federal subsidies. Either tax credit can be claimed for up to 10 years.

How are LIHTC allocated?

A typical affordable rental housing project that secures a LIHTC allocation generally benefits investors in two ways: (1) general tax savings earned by any rental property owner (not just LIHTC investors) by deducting the depreciation of the rental property plus operating losses, if any are incurred, and (2) the …

What is the difference between LIHTC and Section 8?

Section 8 is generally the name for HUD-subsidized housing programs. LIHTC is a newer form of providing affordable housing and it is ultimately overseen by the IRS.

What does novogradac mean?

Novogradac is a national professional services organization. Novogradac works extensively in the affordable housing, community development, historic preservation, opportunity zones and renewable energy fields, providing tax, accounting, audit and valuation services to affordable housing developments.

What does LIHTC stand for?

LIHTC stands for Low-Income Housing Tax Credit (program) This definition appears very frequently and is found in the following Acronym Finder categories:

What is LIHTC experience?

LIHTC properties typically experience a relatively quick lease-up . LIHTC properties are often packaged as limited partnerships such that they afford limited liability to their investors. Broad economic principles influence where financed affordable housing will be built.

What does LIHTC mean?

LIHTC is a federal program to help develop affordable rental housing for low-income households. LIHTC communities are owned and managed by for-profit or not-for-profit organizations. The tax credit program is overseen by the Internal Revenue Service (IRS).

What is the definition of placed in service?

Placed in service means the point in time when a fixed asset that can be depreciated is first placed in use. The date of placed in service of depreciable asset is important for proper accounting procedures and calculation of tax deductions.