Low Income Housing Tax Credit

ABOUT THE PROGRAM

Created by the Tax Reform Act of 1986, the Low-Income Housing Tax Credit (LIHTC) program gave state and local LIHTC-allocating agencies authority to issue tax credits for the acquisition, rehabilitation, or new construction of rental housing targeted to lower-income households. This program provides incentives for non-profit and profit motivated organizations and businesses to develop housing for low-income persons and families.

Arkansas receives an allocation of approximately $8.5 million in Low-Income Housing Tax Credit per year. This does not include tax credit developments utilizing tax-exempt bond financing.

PROGRAM GUIDELINES

• Tax Credits may be provided to owners of residential rental developments providing low-income housing units. The credits are taken annually for a term of ten years beginning with the tax year in which the development is placed in service or the following year.
• The maximum allowable annual credits are computed so that the annual credits equals approximately 9% of the total development costs, minus the land cost. Developments must be conventionally financed and reserved for low-income residents of newly constructed or substantially rehabilitated developments.
• Tax credits equal to approximately 4% of the total project cost, minus land cost, are available for new construction or substantial rehabilitation developments financed with tax-exempt bond financing and or other federal funds. Acquired developments must be rehabilitated in an amount exceeding $25,000 per unit, and acquisition of an existing development must meet several requirements to be eligible for tax credits such as not having changed ownership in the past ten years.
• All developments receiving tax credits must comply with income and rent limitations for a minimum of 30 years.