Thirty-two States Get $2.7 million More LIHTCs

Published by Michael Novogradac on Friday, October 20, 2017 - 12:00am

The Internal Revenue Service (IRS) recently announced that 32 states have $2.75 million of additional low-income housing tax credits (LIHTCs) to allocate in 2017.  These additional LIHTCs are the result of unused credits from 2016 being placed in the national pool and reallocated in 2017 to other 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 reallocated to other states and territories through the national pool. Unused authority does not mean a general lack of demand; as states often have small amounts of credits returned by affordable housing developments or otherwise remaining towards the end of the year that can’t be efficiently placed with new applications before the end of the year, despite tremendous demand for LIHTC in that state.

Increase from 2016 to 2017
Overall, the increase in the 2017 national pool is larger than last year’s increase.  As a whole, the national pool grew by $111,000 from 2016 to 2017, compared to $45,000 growth from 2015 to 2016.

The national pool in 2017 was equal to about 0.3 percent of the total new per capita allocation authority in 2017. This percentage is the same as it was in 2016, meaning the size of the national pool in percentage terms is extremely small, and has kept pace with the increase in total per capita LIHTC allocations.

Revenue Procedure 2017-54 describes how the approximately $2.74 million of unused LIHTCs in 2017 was distributed among the 32 qualifying states.

The amounts of national pool LIHTCs reallocated to states range from a low of $6,789 for Vermont to a high of $426,613 for California. The five states to receive the most unused LIHTC allocation from the national pool in 2017 were:

  1. California - $426,613
  2. Texas - $302,842
  3. Florida - $224,039
  4. New York - $214,614
  5. Illinois - $139,141

Four of the five states receiving the most unused LIHTC from the national pool in 2017 are the same as 2016; this year Texas rejoined the top five after not being allocated any national pool dollars in 2016. This pushed the other state in the 2016 top five – Pennsylvania – to the sixth position in the 2017 list with $138,953 in national pool dollars.

Many states consistently use their entire annual LIHTC allocation and a few states consistently have small amounts of LIHTC remaining at the end of a given year. 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 LIHTCs unused by one state can be used by other states with tremendous need. This rewards states with the great 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.