IRS Notice Means Slight Increase for Many States’ LIHTC, Bond Caps

Published by Michael Novogradac on Tuesday, February 28, 2017 - 12:00am

The nation’s population grew by 0.7 percent during the year that ended July 1, 2016 and that means the 2017 low-income housing tax credit (LIHTC) ceiling and tax-exempt private activity bond cap for many states will increase. The 0.7 percent growth follows two consecutive years of 0.8 percent growth.

IRS Notice 2017-19  lists 2017 calendar-year resident population figures, which determine the state ceilings. Under Rev. Proc. 2016-55, each state’s 2017 LIHTC ceiling is the greater of $2.35 multiplied by the state population or $2.71 million. Each state’s tax-exempt bond volume cap is the greater of $100 multiplied by the state population or $305,315,000. To simplify, that means that states with population of less than 1.153 million people get the LIHTC minimum and states with less than 3.053 million people get the bond minimum. Because the per-capita factors were the same as last year, states not receiving the small-state minimum and losing population will receive less LIHTC and bond cap than they did last year. The small-state minimum factors increased modestly.

Analyzing the population figures in Notice 2017-19 reveals the following information:

Fastest growth: Utah is the nation’s fastest-growing state by percentage, having jumped nearly 2 percent to 3,051,217 residents. Arizona, Colorado, the District of Columbia, Florida, Georgia, Idaho, Montana, Nevada, North Carolina, Oregon, South Carolina, Texas, Utah and Washington all grew at least 1 percent during the time period. Texas, Florida, Washington California, North Carolina and Arizona had the largest numeric increases in 2016.

Losing population: Illinois lost the most population, with 58,456 fewer residents, and West Virginia had the largest percentage decrease at 0.7 percent. Seven states and one territory lost population over the one-year time period: Connecticut, Illinois, New York Pennsylvania, Vermont, West Virginia, Wyoming and Puerto Rico. However, because Vermont and Wyoming are eligible for the small-state minimum, their LIHTC and bond cap allocations increased.

Regional growth: The Census bureau, which compiles the figures, breaks the nation into four major regions, none of which lost population. However, both the South and West grew by 1.1 percent, while the Midwest saw a 0.2 percent bump and the Northeast stayed essentially even.

Biggest states: The nation’s largest state by population continues to be California, followed by Texas, Florida, New York and Illinois. Of the 10 largest states by population, only Illinois, Pennsylvania and New York saw a decrease in the period.

Small-state LIHTC minimum: Based on their population, the following eight states will receive the small-state minimum, rather than a population-based LIHTC allocation: Alaska, Delaware, Montana, North Dakota, Rhode Island, South Dakota, Vermont and Wyoming. The District of Columbia will also receive the small-state minimum. The small-state-minimum recipients are the same as in 2016.

Drop in LIHTC ceiling: Of the remaining 42 states, nine–Connecticut, Hawaii, Illinois, Kansas, Mississippi, New Mexico, New York, Pennsylvania and West Virginia–will see a decrease in their LIHTC ceiling, due to losing population. The other 33 will see increases.

Small-State Bond Cap Recipients: Concerning the tax-exempt private activity bond cap, the eight states (and the District of Columbia) that received the small-state LIHTC minimum will be joined in receiving the $305,315,000 bond minimum by Arkansas, Hawaii, Idaho, Kansas, Maine, Mississippi, Nebraska, New Hampshire, New Mexico, Utah and West Virginia.

Drop in Bond Cap Ceiling: Of the remaining 31 states, five will see a decrease in their state bond cap ceiling:  Connecticut, Illinois, New Jersey, New York and Pennsylvania.