Thirty-four States Get $2.6 million in Additional LIHTCs

Published by Michael Novogradac on Wednesday, October 19, 2016 - 12:00am

The Internal Revenue Service (IRS) recently announced that $2.64 million of unused low-income housing tax credit (LIHTC) carryovers for calendar year 2016 was placed in the national pool and reallocated to 34 qualified states.

About the National Pool

Even though LIHTC demand is robust at the national level, the allocation process at the state and territory level sometimes results in small amounts of unused authority; these small amounts are often reallocated through the national pool.

Specifically, the unused housing credit carryover for a state for any year is the excess of the unused state housing credit ceiling for the previous year over the total housing credit dollar amount allocated for the current year.

Changes from 2015 to 2016

Overall, the changes to the 2015 national pool from the 2016 national pool are larger than last year’s. Overall, the national pool as a whole grew by $45,000 from 2015 to 2016, compared to only $1 growth from 2014 to 2015.

The national pool in 2016 was equal to about 0.3 percent of the total new per capita allocation authority in 2016. The national pool’s modest growth contrasts with the $216 million increase in total per capita LIHTC allocations for 2015, suggesting demand for LIHTCs was strong.

Revenue Procedure 2016-52 describes how the approximately $2.64 million of unused LIHTCs in 2016 was distributed among the 34 states that had used all but a de minimis amount of their 2015 LIHTC authority.

The amounts of national pool LIHTCs reallocated to states range from $8,151 for North Dakota to $416,376 for California. The five states to receive the most unused LIHTC allocation from the national pool in 2016 were:

  1. California - $416,376
  2. Florida - $215,622
  3. New York - $210,564
  4. Illinois - $136,789
  5. Pennsylvania - $136,178

Four of the five states receiving the most unused LIHTC from the national pool are the same as 2015; but this year Pennsylvania joined the top five and Texas wasn’t allocated any national pool dollars.

Takeaways

Many states consistently use their entire annual LIHTC allocation and a few states consistently do not. This consistency means approximately the same amount of credits are available for reallocation to a similar group of states.

In addition to indicating how fully states are using LIHTCs, it is important to note that the national pool allocation provision ensures that the scarce LIHTC resource is used by those states that most need it. This rewards states with the greatest need, while giving an incentive to states to use their full allocation.

Overall, once again, the small sum of credits turned over to the national pool demonstrates the need for affordable rental housing across America, as well as the strong investor demand for LIHTCs.