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Frequently Asked Questions Tax Credit Allocating

• How do tax credits work?
• What types of developments are eligible for tax credits?
• What types of developments may not use tax credits?
• How are tax credits awarded?
• What benefits do tax credits give communities?
• Can I combine tax credits with other sources of funds?

How do tax credits work? 

Investors and/or owners invest cash in a tax credit housing development and receive a dollar-for-dollar credit against their federal income tax liability each year for 10 years. In exchange for receiving the credit, owners agree to set aside for 30 years at least 20% of the units for households with income less than 50% of the county median income (CMI), or set aside at least 40% of the units for households with income less than 60% of CMI.

What types of developments are eligible for tax credits? 

• New construction of residential rental units
• Acquisition of existing residential rental developments with a rehabilitation component of at least $3,000 per set-aside unit
• Rehabilitation of existing residential rental developments of at least $3,000 per set-aside unit
• A development can serve families, persons with special needs, seniors, and seniors in Residential Care Apartment Complexes (RCACs)

If you have a development proposal that may qualify and would like to know more about tax credits, contact a Senior Underwriter.

What types of developments may not use tax credits? 

• Transient housing
• Nursing Homes, life care facilities, retirement Homes, licensed Community Based Residential Facilities (CBRFs)
• Mobile Home parks
• Owner-occupied buildings with four or fewer units
• Buildings receiving Section 8 Moderate Rehabilitation Assistance unless under the Stewart B. McKinney Homeless Assistance Act

How are tax credits awarded? 

Tax credits are awarded to proposals that meet the WHEDA standard for housing quality and need. Among other criteria, we review:

• market
• development team experience
• community support
• development characteristics
• population served

What benefits do tax credits give communities? 

• More quality housing with affordable rents for working families.
• Available, reasonably priced housing makes a community more attractive to employers.
• Developments for elderly individuals allow seniors to age in place and stay active in the community. They can enjoy the benefits of housing with services. This frees up Homes for first-time Homebuyers.
• Tenants paying affordable rents have more discretionary income to spend in the local economy or pay for needed services.

Can I combine tax credits with other sources of funds? 

Yes. In fact, often other resources are needed to keep primary financing at a level that permits the development to be feasible at affordable rent levels. Although there are restrictions, tax credits may be combined with WHEDA financing, Community Development Block Grants (CDBG), Federal Home Loan Bank grants or loans, the Home Investment Partnership Program, and other types of local loans or grants. For more detailed information, contact a Senior Underwriter.