The Future Path: Preparing a LIHTC Property for Year 15 and Beyond
By Caitlin Jones
1 min read
By A. J. Johnson
Tax Credit Advisor, March 2011: Approximately 1,000 low-income housing tax credit (LIHTC) properties reach the end of their 15-year compliance period each year and enter into their extended use period, which lasts at least through the 30th year. At the end of Year 15, properties may be ripe for a sale or transfer, but at the very least must be preparing for transition to the extended use period.
The tax code requires an Extended Use Agreement (EUA) upfront between the state housing credit agency (HCA) and the property owner in order for the latter to claim housing tax credits. This agreement, a restrictive covenant, has a minimum 30-year term, and specifies the promises that the owner made to the HCA in return for a credit allocation. During the 15-year tax credit compliance period, owners must comply with both the federal housing credit program requirements imposed by the Internal Revenue Service as well as the conditions outlined in the EUA. After Year 15, the EUA controls and the IRS is out of the picture.
