The Low-Income Housing Tax Credit (LIHTC) is available to corporate excise and personal income taxpayers that invest in low-income housing projects that meet federal and state eligibility rules. The credit is part of a federal program that authorizes a federal credit for such investments and subsidizes state credits for eligible projects. The Massachusetts Department of Housing and Community Development (DHCD), determines eligibility for, and the amount of, the Massachusetts credit pursuant to federal guidelines.
The LIHTC has two components. First, the Standard LIHTC is allowed for the construction or development of new low-income housing or the preservation and improvement of existing federal or state subsidized housing. Second, the Donation LIHTC is allowed for the donation of real or personal property to non-profit entities for use in purchasing, constructing, or rehabilitating housing projects otherwise eligible for the LIHTC. The amount of credit that Massachusetts taxpayers may claim is determined by the DHCD, subject to the rules set out in Internal Revenue Code (Code) § 42. Under those rules the amount of the Standard LIHTC is based on a number of factors, including the cost of the project. The Donation LIHTC is generally equal to 50% of the value of the donation, but the DHCD can increase that amount to 65% if necessary for the viability of a specific project. To qualify for the credit, a project must meet affordability standards set out in Code § 42.
The Massachusetts LIHTC is subject to an annual statewide cap of $40 million, plus an additional $5 million to preserve and improve existing housing. DHCD allocates the credit to taxpayers in accordance with federal and state law. The LIHTC can be used to offset the entire Massachusetts tax liability of a personal income taxpayer and all the tax liability of a corporate taxpayer except for the $456 minimum excise. Unused Standard LIHTC can be carried over for five years. However, the Donation LIHTC must be used in the taxable year that the donation is made. If the taxpayer disposes of the property generating the LIHTC, a portion of the credit may be subject to recapture.
The Massachusetts LIHTC can be transferred by the recipient. This is an important feature of the state LIHTC program as developers may be nonprofit organizations that cannot use the credit themselves or developers that wish to use the credit to offset the cost of their investments. These recipients can sell the credit to affluent taxpayers that wish to reduce their tax liability. Note that the federal LIHTC cannot be bought and sold in this manner. However, the benefit of the both federal and state LIHTC can be shifted to affluent investors through the use of pass-through entities (PTEs) that invest in low-income housing eligible for the credit and that are owned by such affluent individuals.
Origin: St. 2018, c. 228; M.G.L. c. 63, §31H
Corporate Excise Tax
Credits Against Tax
2.609
Low Income Housing Credit
The Low-Income Housing Tax Credit (LIHTC) is available to corporate excise and personal income taxpayers that invest in low-income housing projects that meet federal and state eligibility rules. The credit is part of a federal program that authorizes a federal credit for such investments and subsidizes state credits for eligible projects. The Massachusetts Department of Housing and Community Development (DHCD), determines eligibility for, and the amount of, the Massachusetts credit pursuant to federal guidelines. <BR><BR>The LIHTC has two components. First, the Standard LIHTC is allowed for the construction or development of new low-income housing or the preservation and improvement of existing federal or state subsidized housing. Second, the Donation LIHTC is allowed for the donation of real or personal property to non-profit entities for use in purchasing, constructing, or rehabilitating housing projects otherwise eligible for the LIHTC. The amount of credit that Massachusetts taxpayers may claim is determined by the DHCD, subject to the rules set out in Internal Revenue Code (Code) § 42. Under those rules the amount of the Standard LIHTC is based on a number of factors, including the cost of the project. The Donation LIHTC is generally equal to 50% of the value of the donation, but the DHCD can increase that amount to 65% if necessary for the viability of a specific project. To qualify for the credit, a project must meet affordability standards set out in Code § 42. <BR><BR>The Massachusetts LIHTC is subject to an annual statewide cap of $40 million, plus an additional $5 million to preserve and improve existing housing. DHCD allocates the credit to taxpayers in accordance with federal and state law. The LIHTC can be used to offset the entire Massachusetts tax liability of a personal income taxpayer and all the tax liability of a corporate taxpayer except for the $456 minimum excise. Unused Standard LIHTC can be carried over for five years. However, the Donation LIHTC must be used in the taxable year that the donation is made. If the taxpayer disposes of the property generating the LIHTC, a portion of the credit may be subject to recapture.<BR><BR>The Massachusetts LIHTC can be transferred by the recipient. This is an important feature of the state LIHTC program as developers may be nonprofit organizations that cannot use the credit themselves or developers that wish to use the credit to offset the cost of their investments. These recipients can sell the credit to affluent taxpayers that wish to reduce their tax liability. Note that the federal LIHTC cannot be bought and sold in this manner. However, the benefit of the both federal and state LIHTC can be shifted to affluent investors through the use of pass-through entities (PTEs) that invest in low-income housing eligible for the credit and that are owned by such affluent individuals.
<a href="https://malegislature.gov/Laws/SessionLaws/Acts/2018/Chapter228" target="_blank">St. 2018, c. 228</a>; <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter63/Section31h" target="_blank">M.G.L. c. 63, §31H</a>
101.1
106.0
110.8
115.6
120.4
