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Low-Income Housing Tax Credit
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Commission Basics
How does the Commission decide which projects to select for credit?
The Commission must, by law, give preference to projects which serve the lowest income tenants for the longest period of time. Beyond the federal requirements imposed on the tax credit program by Section 42 of the Code, the Commission developed additional requirements which must be met by project owners to ensure the goals of the program are met. These requirements are included in the Qualified Allocation Plan and the Policies.
The Qualified Allocation Plan is a requirement of the tax code and provides general guidance on how the Commission will administer the tax credit program, what priorities and preferences we may have, and what specific criteria we will use for awarding credit to projects.
The Policies provides specific guidance in applying for and receiving credit and your responsibilities after the project is placed in service.
The Qualified Allocation Plan and the Policies include specific selection guidelines called the Allocation Criteria. The Allocation Criteria includes nineteen selection criteria such as geographic distribution, whether the project is located in a targeted area, project size, and length of low-income commitment. These criteria are given a point value and used to rank your project against other applicants. After all projects are scored, credits are awarded to eligible projects in descending order until all credits are allocated.
Does the Commission give preference to certain types of developers?
The IRS Code provides for a set-aside of ten percent (10%) of a state's annual credit amount for qualified nonprofit organizations who will materially participate in a proposed project. However, the nonprofit cannot be controlled by or affiliated with a for-profit entity. The Commission has established other set-asides apart from the required qualified nonprofit set-aside. These include:
- Other nonprofit organizations 15% (temporarily suspended)
- Profit motivated entities 15% (temporarily suspended)
- Hope VI Projects 20% (2005-2009)
- Rural Housing Projects 15%
- Rural Development (RD) 5%
- The remainder of the available annual credit is allocated through the "general pool".
What types of fees do you charge in the tax credit program?
The tax credits are a limited commodity for the state and as such, the Commission is charged with the responsibility of allocating credits only to qualified projects. The non-refundable application and reservation fees help recoup our printing and public hearing notification costs and other administrative costs. Additionally, the fees are an incentive for the developer or applicant to take the time to evaluate the seriousness of their commitment to completing a project when they submit an application and pay the fees. These fees are non-refundable and include:
- Application fee = the greater of $1,265 or $26 per unit (includes both low-income and market units). This fee is due at time of application.
- Reservation fee = the greater of $3,795; or 9.5% of the annual credit reservation amount if 51% or more of the units are set aside for residents earning 50% or less of the local area median income; or 12.53% of the annual credit reservation amount for all other projects.
- Compliance fee = prior to March 31, 2001 -$350 for projects with 10 or fewer
low-income housing units and $35 per low-income housing unit for projects with
11 or more low-income housing units
or after March 1, 2001 - $450 for projects with 10 or fewer low-income housing units and $45 per low-income housing unit for projects with 11 or more low-income housing units (the annual compliance monitoring fee may be increased to cover increased compliance monitoring costs in the future)
How do I apply for tax credits from the Commission?
The Commission is presently conducting one application round per year. This gives the early applicant nearly a full year to either place a project in service by the end of the year or to incur the necessary expenditures required for carryover to another year.
If you decide to move forward with an application after reading this guide, you should contact tax credit staff and submit an application. It is advisable for you to carefully review the application procedures and schedules to determine whether you can submit a complete application by the Commission's application deadlines. Having a clear picture of the process and your schedule will save on potential lost costs such as option monies and application fees.
A quick summary of the Commission's application procedure is as follows:
- You submit a complete application with correct application fee.
- Your project is issued a Tax Credit (TC/OID) number for identification purposes.
- Commission reviews the application for completeness and accuracy, scores the project, and determines the credit amount.
- Commission holds a public hearing on your project and gets approval to enter into a reservation contract with you.
- Commission issues a reservation contract which you sign and return with the appropriate reservation fee.
- You send in all documentation needed to place a project in service, and we issue final IRS allocation forms.
If you cannot complete the project in the year you get the credits, you enter into a carryover allocation agreement, complete the project, and submit the required documentation needed to place the project in service, and we issue final IRS allocation forms.
We hope this guide has been helpful to you with tax credit basics. We wish you luck with your project and encourage you to call us if you should have any questions. You may call or write to tax credit staff at:
Tax Credit Division
askustc@wshfc.org
Washington State Housing Finance Commission
1000 Second Avenue, Suite 2700
Seattle, Washington 98104-1046
(206) 464-7139 Seattle or
1-800-767-HOME (767-4663) Statewide
10/30/2008