CALIFORNIA LOW INCOME HOUSING TAX CREDIT PROGRAM

As a non-profit focusing on providing affordable housing for individuals, you may be looking for an accountant that understands how to handle the use of various tax credits available from the government, federal, state, and local. California also deals with high priced housing, and in urban areas, such as Los Angeles, San Francisco, and San Diego, affordable housing is fast becoming extinct.

To combat the struggle to maintain affordable housing, there is a low income housing tax credit (LIHTC). In California, the California Tax Credit Allocation Committee (TCAC) facilitates the investment of private capital into the development of affordable rental housing for those who are considered low income in California. Corporations are then in the position to provide equity that assists in getting these affordable housing projects built in the urban and suburban areas that need them in exchange for tax credits.

The low income housing tax credit program in California allocates federal and state tax credits that developers of affordable housing projects can then apply for and use to help offset the costs associated with creating these housing projects. When applying for these low income housing tax credits, federal law dictates the size of the income for households who will be using the housing.

When a project developer or sponsor applies for low income housing tax credits in California

They will elect to do one of the following minimum federal set-aside requirements:

  • Minimum of 40% of the housing rental units must be both rent-restricted and occupied by households with incomes that are 60% or less of the area median gross income, after being adjusted for the size of the household;
  • Minimum of 20% of the housing rental units must be both rent-restricted and occupied by households with incomes that are 50% or less of the area median gross income, after being adjusted for the size of the household;

Minimum of 40% of the housing rental units must both rent-restricted and occupied by households with incomes are 80% or less of the area median gross income, after being adjusted for the size of the household. In addition, the average income and rent limitation must not exceed 60% of the area median income.

There are two types of low income housing tax credit programs in California.

The first one distributes federal tax credits as part of the creation of affordable housing throughout the state. The state low income housing tax credit program in California that distributes the state tax credits gives them to affordable housing projects that are also receiving federal tax credits.

Both of these programs are targeting private investment into the affordable rental housing market. Along with the low income housing tax credit program in California, there are also programs that fall in line with other programs, such as fee-deferral programs and expedited building permit insurance.

Federal low income housing tax credit program includes two types of federal tax credits, which are generally referred to as the nine percent (9%) and the four percent (4%) credits. Each number refers to the approximate percentage that is multiplied against a requested “qualified basis” to determine the amount of annual federal credits awarded to the project.

Currently, the 9% federal credit is limited and calculated at $2.70 per person, but that will be returning to $2.35 per person in 2022. Project owners can take the annual credit each year for 10 years, but the credit is limited in supply and are awarded competitively twice a year. On the other hand, 4% tax credits derive from a project’s use of tax-exempt bond authority, which are limited only by the amount of bond cap available to California.

CALIFORNIA LOW INCOME HOUSING TAX CREDIT PROGRAM

The state low income housing tax credit was developed to address the issues surrounding the extremely high cost of developing housing within California.

The state program is meant to supplement the federal tax credit program, which means it does not have a tenfold multiplier.

If your non-profit corporation is going to pursue these projects as part of its mission, then you are going to need to put together your financials to meet their specific requirements and follow the timeline for regularly reporting to meet deadlines that keep you in compliance with the low income housing tax credit program in California.

Our team can help you walk through the process of complying with this low income housing tax credit program, while assisting you in understanding how the tax credits are going to impact your bottom line. The TCAC will also require you to complete their verification process, so you can show as the developer that you have met all the requirements of the program. That includes determining if the property is still being maintained as affordable housing.

Where To Next?

Now you have an idea about the California Low Income Housing Tax Credit Program we provide. To learn the details of Forensic Accounting services and the kinds of results you could get, click on Forensic Accounting.