IRS Announces $2.7 Million in 2018 LIHTC National Pool Credits

Published by Mark Shelburne, Michael Novogradac on Wednesday, October 30, 2019 - 12:00am

The Internal Revenue Service (IRS) published Revenue Procedure 2019-41, announcing $2,709,998 of unused low-income housing tax credit (LIHTC) allocated from the national pool to 31 qualified states for calendar year 2019. (Note that the term state includes a possession of the United States and constitutional home rule cities Chicago and New York City.)

The IRS calculates what an agency had carried forward from 2017 and yet did not allocate in 2018. The national pool sweeps up these amounts and distributes the total to other states. For example, if a state had not used $500,000 in 2017 and allocated $400,000 in 2018, the IRS would assign $100,000 to the 2019 national pool.

Under IRS guidance, a state becomes qualified by having timely submitted a request and “allocated its entire state housing credit ceiling for the preceding calendar year.”  We understand that the informal interpretation of “entire” has been at least 98.5 percent.

Unused authority should not be confused for a general lack of demand. On the contrary, national demand for LIHTC remains robust. However, the allocation process sometimes results in small amounts of LIHTCs returned by affordable housing developments or otherwise remaining toward the end of the year that can’t be efficiently placed with new applications before the end of the year. In fact, the total amount is merely 0.3 percent of the annual population-based LIHTC.

As a whole, the national pool increased by $20,002 from $2,689,996 in 2018. In comparison, the national pool was $36,527 higher in 2017 at $2,746,525.

The IRS guidance explains that the national pool is distributed on a per-capita basis among the qualified states. Amounts of reallocated LIHTC range from a low of $6,464 for Vermont to a high of $408,227 for California. Ten states received in excess of $100,000 each and together accounted for more than two-thirds of the total: California, Texas, Florida, New York, Pennsylvania, Illinois, Ohio, Georgia, North Carolina and Michigan.