Year of Award
Master of Science in Taxation (MST)
College of Business & Professional Studies
IRS, Internal Revenue Service, property, taxpayer, compliance
The low income housing tax credit was enacted by Congress as part of the Tax Reform Act of 1986. The credit was originally scheduled to expire at December 31, 1989, but was temporarily extended by amendments in 1989 and 1990. The credit has now been permanently extended by the Revenue Reconciliation Act of 1993. The legislative history is indicative of Congress' long term commitment to providing affordable housing to low income households. The author believes the low income housing tax credit will be a significant tax policy issue in the future.
The low income housing tax credit offers a significant incentive for private investors who build, rehabilitate or acquire low income residential housing projects. A tax credit of up to 70 percent of the cost of constructing a qualified building can be obtained. The credit reduces taxes on a dollar for dollar basis. Unlike the rehabilitation credit, the low income housing tax credit does not reduce the basis of the building for purposes of depreciation. In return for these generous benefits, Congress demands a long term commitment from the investor or his successors to maintain the low income use of the building.Congress has written an exhaustive set of rules to ensure that the tax credit achieves the objectives that were intended.
Congress has delegated the authority to allocate the federal low income housing tax credit to the states. The aggregate amount of credit dollars that a state may allocate each year is based on it's population. The states, in conjunction with the local governing bodies, are required to develop plans to allocate the credits within their jurisdictions.
Thus, the investor who desires to take advantage of the benefits of the low income tax credit must comply with a multitude of requirements from the federal, state and local level. However, based on the success of these programs to date the benefits seem to justify the compliance burdens.
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Crawford, Byron A., "The Low Income Housing Credit - Analysis and Planning" (1993). Theses, Dissertations, and Capstone Projects. 273.
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