LIHTC (Tax Credits)
In order to be considered for tax credits in Nebraska, the proposed development must involve new construction, substantial rehabilitation, or acquisition and substantial rehabilitation. For a building to be substantially rehabilitated, the expenditures during any 24-month period must be at least the greater of: (a) 20 percent of the depreciable basis of the building determined as of the first day of the 24-month period; or (b) an average of $6,700 per low income unit.
Qualified new construction and substantial rehabilitation costs earn credits at a rate of approximately 9% (4% if tax-exempt bonds or other federal subsidies are used) each year for a 10-year period.
An eligible development must include a minimum percentage of units (20% or 40%) to be set-aside for eligible low-income tenants. The rent charged on these set-aside units is restricted so that the gross rent, with respect to such units, does not exceed 30 percent of the imputed income of the proposed occupant of the unit.
A development qualifies for low-income housing tax credits if it is residential rental property and meets one of the following requirements:
- At least 20 percent or more of the residential units in the development are both rent restricted and occupied by individuals whose income is 50 percent or less of the area median gross income,* or
- at least 40 percent or more of the residential units in the development are both rent restricted and occupied by individuals whose income is 60 percent or less of the area median gross income.*
* The median income tables are established and adjusted annually by HUD.
Since tax credits are awarded on a competitive basis, NIFA's Qualified Allocation Plan encourages "targeting" of the units to income levels lower than the federal limits described above.
Tax credits may only be claimed on units that have been set aside for participation under the program. Because of the significant benefit of the tax credit, it is common for developers to set aside 100 percent of the units for qualification under the tax credit program. In doing so, developers or investors may claim the maximum amount of tax credits eligible for the development.