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Tax Management Portfolio, Low-Income Housing Tax Credit, No. 584-2nd, provides an in-depth analysis of the tax credit for the acquisition, construction, and/or rehabilitation of low-income housing. The low-income housing tax credit is calculated as a percentage of the eligible costs of acquiring, constructing, and/or rehabilitating a building that will provide low-income housing (the “eligible basis”), adjusted for the portion of the building occupied by low-income households (the “qualified basis”). The credit is claimed annually for 10 years, provided that low-income use is maintained continuously throughout a 15-year “compliance period” and the taxpayer commits to maintaining the project as a low-income housing project for an “extended use” period of at least an additional 15 years after the end of the compliance period (i.e., a total of 30 years). To qualify for the low-income housing credit, the building must receive an allocation of credits from a designated state agency (or be financed with tax-exempt bonds that are subject to a state's “volume cap”) and at least a specified percentage (which can vary) of the units in the project must be occupied by persons whose incomes are substantially below the local area median. In addition, rents paid by low-income tenants are restricted to 30% of the imputed income limitation for each unit, based on the number of bedrooms in each unit.
The many technical rules and compliance requirements that must be met in order to claim the low-income housing tax credit are analyzed in Sections II through XV of this Portfolio. Important ancillary considerations, including exit issues, partnership allocation issues, state low-income housing tax credits, and certain limitations on the use of low-income housing tax credits, including the at-risk and passive loss rules, are discussed in Sections XVI through XXV.
This portfolio may be cited as Machen, McDermott, and Lavin, 584-2nd T.M., Low-Income Housing Tax Credit.
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