What is the federal low-income housing tax credit (the “Credit”)?
The 1986 Tax Reform Act created the Credit under Section 42 of the Internal Revenue Code (the “Code”) to assist the development of low-income rental housing by providing qualified Owners with Credit to reduce their federal tax obligations. The Credit is a dollar for dollar reduction of federal income tax liability for Owners of or investors in low-income rental housing. The Credit is available for a 10-year period subject to compliance with the requirements of the Code and the Washington State Housing Finance Commission (the “Commission”). The amount of Credit is based on the type of Project, the costs of developing a Project, the percentage of Qualified Low-Income Housing Units in a Project, and the nature and amount of financing for a Project. The Commission is the agency authorized to allocate Credit for Residential Rental Property located in Washington State (the “allocating agency”).
