A personal income tax and corporate excise credit is allowed for up to 25% of qualified expenditures in certified housing development projects. The credit is administered by the Department of Housing and Community Development (DHCD). The DHCD determines the amount of the credit to which a taxpayer is entitled.
Qualified expenditures are those costs directly related to the construction or substantial rehabilitation of residential property located in designated areas of gateway municipalities. Qualified expenditures do not include the initial purchase price of the property. Gateway municipalities include only those cities and towns specified by statute, which are Attleboro, Barnstable, Brockton, Chelsea, Chicopee, Everett, Fall River, Fitchburg, Haverhill, Holyoke, Lawrence, Leominster, Lowell, Lynn, Malden, Methuen, New Bedford, Peabody, Pittsfield, Quincy, Revere, Salem, Springfield, Taunton, Westfield, and Worcester.
To be considered a certified housing development a project must meet a number of requirements. Specifically, the project must contain two or more housing units. In addition, 80% of the units contained in the project must be priced consistently with prevailing rents or sale prices in the city or town where the property is located. Finally, the city or town must have adopted full or partial property tax exemptions for projects that are otherwise eligible for the credit. Notably, the credit is not restricted to low-income housing. Rather, as stated above, it is available to taxpayers that develop housing that will be offered at market rate prices.
A taxpayer can claim a credit equal to the amount awarded by the DHCD. The total amount of credits awarded in the Commonwealth cannot exceed $10 million. The credit is available for the tax year in which the DHCD gives the Department of Revenue (DOR) written notification of completion of the certified housing development project. The credit may be claimed against the full amount of the recipient's tax liability, except that corporations may not use the credit to offset the $456 minimum excise. Unused credits may be carried forward for ten years. Taxpayers are allowed to sell their credits to third parties.
In the absence of the credit developers would bear the entire cost of constructing market rate housing in gateway municipalities. The amount of revenue foregone as a result of the credit constitutes a tax expenditure.
Origin: St. 2010, c. 240; M.G.L. c. 40V; c. 63, §38BB