FAQ’s About Georgia State LIHTC
What is the Georgia Low Income Housing Tax Credit (LIHTC)?
The Georgia Housing Tax Credit is authorized pursuant to Sections 48-7-29.6 and 33-1-18 of the Official Code of Georgia. The Georgia Credit is available with respect to Tax Credit Properties located in Georgia that are placed in service after January 1, 2001. The amount of Georgia Credits available for a Tax Credit Project in any year is equal to the amount of the Federal Credit. The Georgia Credit is available as a credit against Georgia state income tax liability and against certain premium taxes imposed by Georgia upon insurance companies.
How do tax credits benefit developers?
Each fall the Georgia Department of Community Affairs allocates both federal and Georgia tax credits to affordable housing developments in Georgia. Once developers are awarded tax credits, both federal and state, they have the ability to sell them to raise capital for qualified developments. Typically, developers sell their credits to a syndicator like CSG and use the equity raised to offset qualified development costs. This allows for a reduction of debts and lower rents. Georgia is one of the few states that permit the state credit to be “bifurcated” or separated from the federal credit. This permits the developers or syndicators to sell the federal credits to investors who have a large federal tax liability and sell the Georgia credit to the same or possibly different investor who has a Georgia liability.
Which developments qualify?
For acquisitions, the building must have been last placed in service at least 10 years prior to application and must involve rehabilitation. Rehabilitation expenditures chargeable to capital account must equal the greater of 10% of the building’s adjusted basis or average at least $10,000 per low-income unit. New Construction properties can be for multifamily occupancy or for senior living occupancy. Additional landlord and tenant restrictions apply based on Area Median Income (AMI) which is calculated by The U.S. Department of Housing and Urban Development for each county and state. CSG can assist in evaluating whether or not a development qualifies for tax credits.
What are allocable credits?
Georgia taxpayers that own an interest in a qualified low-income housing development are allowed a state tax credit for a portion of the investment. This credit can be sold, assigned or transferred to another investor.
What is a normal credit period?
The credits are taken each year for ten years, with an additional five-year compliance period. The first year’s credit is based on the number of months that the low income units are qualified during that year, with the remainder of the first year’s credits take in year 11. The program now requires that buildings remain in low-income use for at least 30 years, although it is still possible to convert to market rents after 15 years.
What does it mean to ‘Carry Forward’?
If the amount of Georgia Credits received in any year exceeds the taxpayer’s Georgia income or premium tax liability for that year, the unused Georgia Credits may be carried forward to apply to the taxpayer’s next three succeeding years; tax liability. The unused Georgia Credits may not be carried back against the taxpayer’s tax liability for years prior to the year of the Georgia Credits. Once the Georgia Credits are allocated to a taxpayer, only that taxpayer may use the Georgia Credits; unused Georgia Credits may not be transferred by one taxpayer to another.
For more information, please contact:
Alex Holverson (727) 233-6415 aholverson@CSGfirst.com