On June 15th, the Ohio Housing Finance Agency announced the recipients of the 2016 Housing Tax Credit Awards (also known as Low-Income Housing Tax Credits or LIHTCs), which are used to fund the acquisition, construction, and rehabilitation of affordable housing. This year, 41 affordable housing developments in Ohio received tax credit awards worth over $31 million. Click here to see a full list of the affordable housing developments that received 2016 tax credit awards.
The Low-Income Housing Tax Credit program was created by congress in 1986 as an incentive for private developers to construct and rehabilitate affordable housing. As authorized in Section 42 of the Internal Revenue Code, LIHTCs are claimed over a 10-year period in which investors receive a dollar-for-dollar reduction in their federal tax liability. In exchange for the tax credits, developers agree to restrict occupancy to low-income tenants for up to 30 years, as well as maintain affordable rents.
There are two types of LIHTCs: the 4% tax credit (30% subsidy) or the 9% tax credit (70% subsidy). An investor in a LIHTC property receives a yearly tax credit approximately equal to the qualified basis of the development multiplied by the credit rate (4% or 9%). This tax credit is received each year for 10 years.
One major difference between the two credit types (other than the amount of the credit) is 9% credits have a limited supply, meaning the application process is much more competitive and not all developers who apply will receive an award. Typically, 4% credits are awarded as long as a development qualifies for the award.
Due to the federal subsidies involved, owning and operating an affordable housing property is extremely complex. Barnes Dennig is a member of the Affordable Housing Association of CPAs and has significant experience working with affordable housing developers. We perform annual audits, tax return preparation, cost certifications, cash flow projections, syndication assistance, and many more related services. Contact Kathy Ahearn or Andrew Bosserman, or call 513-241-8313 to learn more about how Barnes Dennig can assist your LIHTC or affordable housing development.