Indiana State Bill 382 was enacted on March 15, 2022 when signed by Governor Eric Holcomb. Authored by Senator Travis Holdman and Senator Brian Buchanan, the bill covers various tax and fiscal policy, but most excitingly for those in the affordable housing industry, creates a state tax credit.
The credit pool in the aggregate amount not to exceed $30,000,000 is for qualified projects located in Indiana that were awarded federal tax credits using the 30% present value (4% credits) of the qualified basis of the building and financed with tax exempt bonds. Given the declining 30% present value rate over previous years, prior to the 4% floor implementation for bonds issued after December 2020, and raising inflationary costs of construction/rehabilitation, the state credit will further allow properties to recoup federal credit shortfalls.
Commencing July 1, 2023 and before July 1, 2028, applications can be submitted to the Indiana Housing and Community Development Authority (IHCDA), who will review and issue statements to eligible applicants. The annual state credit amount will be equal to 40% to 100%, as determined by IHCDA, of federal credits on Form 8609, line 1b.
Upon issuance of the eligibility statements, the applicant is considered to have acquired 100% of the state credits for each year of the credit period. The credit period starts for taxable years in 2024 and covers a period of five taxable years.
If the credit exceeds the tax liability, the applicant can rollforward the credit for 9 years. The credits are able to be sold, transferred or assigned in part or in full.
The bill allows for IHCDA, at their discretion, to determine the information required to be submitted within the application process and to determine additional requirements for receipt of the state credits. As of July 2022, IHCDA has not issued any correspondence regarding the application process or the requirements for credit eligibility.
As the credits are deemed to be awarded in full upon issuance of the eligibility statement and there is a cap to the credit pool, it will be important to regularly monitor for additional guidance issued by IHCDA to ensure applications are submitted timely and completely.
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Have a question about the new bill, the state credit application process, or other credits available to residential construction properties? Contact us – our tax and affordable housing professionals, as always, are here to help.