Tax Credit Industry Overview

Overview of the Tax Credit Program
  • The Tax Reform Act of 1986 created the Affordable Housing Tax Credit program. Congress made the program permanent in 1993 and expanded it in 2000.

  • The Affordable Housing Tax Credit program (Section 42) is the largest production program funded by the Federal government for both new construction and rehabilitation of affordable housing.

  • Approximately 1,800,000 apartment units have been built or renovated by this program.

  • The 20-year history of performance is excellent.

Key Reasons Why Corporations Invest in Tax Credit Programs

Tax Credit Investments:
1) increase earnings
2) reduce effective tax rate
3) provide an attractive after-tax rate of return
4) provide CRA benefits

Positive impact on earnings
Tax credits increase earnings on a dollar-for-dollar basis.

Lower effective tax rate
By investing in a tax credit program, you have the opportunity to lower your effective tax rate.

Attractive After Tax Returns on 2011 Spring Funds.
• Non-Guaranteed: 7 % – 9%
• Guaranteed: 5% – 6%

CRA Benefits
Provides banking and other financial institutions with an investment alternative to serve the community needs in their markets.


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