LIHTC Background
- The Low Income Housing Tax Credit accounts for more than 90% of all Affordable rental housing created in the United States
- Section 42 of the IRS Code = Most successful program in U.S. History
- Part of the 1986 tax act, made permanent in 1993
- More than 2.5 million housing units created
- Long history of bipartisan support continues today
- Expanded and improved in 2008 following financial crisis
- Estimated $25 billion market in 2024
- Investors are predominantly banks and insurance companies
Tax Credits
- The LIHTC is based on a public-private partnership to generate investment in the creation of affordable rental housing
- Predictable 10 year credit stream based on the cost of constructing or acquiring/rehabilitating rental housing development
- Tax credits provide a dollar for dollar reduction in federal income tax liability
- Equity paid in over time, upon achievement to various development and financing benchmarks
- One year carryback, 20 year carryforward of credits
- Tax losses, generated primarily from depreciation provide additional tax 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 IRR
• Economic IRRs: 7% – 8%
• CRA IRRs: 4% – 6+%
CRA Benefits
Provides banking and other financial institutions with an investment alternative to serve the community needs in their markets.