IRS Population Figures Mean LIHTC, Bond Cap Increases for Most States

Published by Michael Novogradac on Wednesday, April 6, 2016 - 12:00am

For the second consecutive year the nation’s total population grew by approximately 0.8 percent, according to Internal Revenue Service (IRS) Notice 2016-24, which lists the 2016 calendar year resident population figures. Six states (plus Puerto Rico, which lost more than 74,000 residents) had a net decrease in population from 2015 to 2016; the state seeing the largest population decline was Illinois, which lost 20,585 residents (.16 percent). Other states that lost residents from 2015 to 2016 were Maine (.06 percent), Mississippi (.06 percent), New Mexico (.02 percent) and West Virginia (.33 percent).

This overall growth in population, coupled with a $0.05 increase in the per-capita allocation of low-income housing tax credits (LIHTCs) translates into higher LIHTC for 2016 for most states. More specifically, a state’s LIHTC allocation authority is the greater of $2.35 (up from $2.30 in 2015) times the state’s population or the small state minimum of $2.69 million. A state’s tax-exempt private activity bond volume cap in 2016 is the greater of $100 (the same as 2015) times the state’s population or the small state minimum of $302,875,000. As such, bond volume authority in 2016 will be affected by population changes but not a per capita increase.

Analyzing the population figures in Notice 2016-24 to determine states’ 2016 LIHTC ceilings and tax-exempt private activity bond caps reveals the following insights.

  • Total per capita LIHTC and tax exempt bond volume cap increased.
    Nationwide population in large states (those that qualify for LIHTCs on a per-capita basis) grew about 2.4 million (from 315.2 million to 317.6 million) from 2015 to 2016. This growth, combined with the per capita increase, means LIHTC authority will increase by approximately $21.6 million, from $760 million in 2015 to $781 million in 2016, or 2.8 percent. The tax-exempt bond volume cap will increase by approximately $260 million from $36.44 billion to $36.70 billion, or by 0.7 percent.
  • Texas experienced the largest absolute and percentage increase in population.
    Texas’ population increased by 512,156 residents, an increase of nearly 2 percent. This is the second consecutive year Texas had the largest population increase, both in absolute number and in percentage.
  • Of the five most populous states, population increased in four, and decreased in one.
    As mentioned above, Texas’ population increased the most in absolute and percentage terms at 1.9 percent. Next in line was Florida, also with a 1.9 percent increase in population, California with 0.88 percent, New York with 0.25 percent, and Illinois with negative 0.16 percent population growth. This population growth indicates that LIHTC credit caps will increase by $2.74 million in California, $2.55 million in Texas, $1.88 million in Florida, $1.1 million in New York and $595,654 in Illinois. Illinois, despite a slight population decrease in 2015, still will see an overall increase in its credit cap due to the 5 cent increase in the per capita amount. This is the second consecutive year of population loss for Illinois. When states lose population it can present challenges for the LIHTC community, particularly if tax credits had been forward allocated.

Overall, the increases in per capita LIHTCs this year are significantly larger than the increases in 2015, primarily because the $2.30 per capita factor increased by 5 cents from the 2014 and 2015 levels.