Notes from Novogradac

Novogradac’s New Market Tax Credit (NMTC) Mapping Tool has updated its database to show fiscal year (FY) 2021 data on qualified low-income community investments (QLICIs) by state and congressional district. The FY 2021 update gives important insight into the NMTC investments made over time since the creation of the tax credit.

Recently released final Community Reinvestment Act (CRA) regulations could have a substantial impact on affordable housing, community development, historic preservation and renewable energy. For affordable housing, it will be influential beyond the low-income housing tax credit (LIHTC) world.

Rental income and operating expenses at low-income housing tax credit (LIHTC) properties tracked by Novogradac set records in 2022, each outpacing the rate of inflation during a year that saw the nation emerge from the worst of the COVID-19 pandemic while inflation was the highest in more than 40 years.

After a unique one-year drop, payroll at low-income housing tax credit (LIHTC) properties tracked by Novogradac increased at a record pace in 2022. That increase came in a year when a dramatic surge in repairs and maintenance costs and an overall 10.4% increase in operating expenses overshadowed the 9.2% payroll jump.

The familiar real estate maxim could just as easily apply to property insurance costs for properties financed by equity from low-income housing tax credits (LIHTCs): Location, location, location.

Repairs and maintenance expenses for the 186,000 apartments in Novogradac’s proprietary data set of low-income housing tax credit (LIHTC)-financed properties saw a 21.7% increase in 2022, far outstripping the rate of inflation, the overall increase in expenses and any previous annual increase in the 13-year history of such data.

One key component of the Inflation Reduction Act’s (IRA’s) clean energy incentives is the domestic content bonus credit, but unfortunately, many solar and wind developers are unlikely to meet the current requirements for the domestic content bonus credit as currently drafted. If left unrevised by the U.S. Department of the Treasury, this will hinder the development of renewable energy in the United States. To address this possibility, the Renewable Energy Working Group (REWG) identified several concerns regarding the IRS Domestic Content Bonus Credit Guidance with regards to the IRA in a recent comment letter. 

With the Low-Income Communities Bonus Credit program 2023 application now open, it’s important to understand the financial benefits and what the Internal Revenue Service (IRS) will require for eligibility.

In the Sept. 21, 2023, Federal Register, the U.S. Department of Housing and Urban Development (HUD) designated difficult development areas (DDAs) and qualified census tracts (QCTs) for 2024. Low-income housing tax credit (LIHTC) properties located in these areas are allowed to increase their eligible basis by 30% for new construction and rehabilitation costs.

The Internal Revenue Service (IRS) recently updated its frequently asked questions related to the employee retention tax credit (ERC) to outline procedures for employers to withdraw their ERC claims. This update was the latest in a series of communications warning taxpayers of the existence of aggressive ERC promoters and reminding taxpayers that they are responsible for returns filed in their name.