Federal Low Income Housing Tax Credit

A significant change in the method by which the federal government assists the development of affordable housing was born with the passage of the Tax Reform Act of 1986. The Act includes Section 42 of the Tax Code, the Low Income Housing Tax Credit Program. The Tax Credit Program does not provide loans or grants but rather a tax incentive to owners of affordable rental housing. The incentive is an annual tax credit (a dollar for dollar reduction in the tax payer’s federal taxes) earned in the initial ten years following when the units are placed in service assuming program requirements are met. A developer markets or “syndicates” the credits allocated to the development to investors whose contributions are used as equity in the development’s financing plan.

Tax Credits are provided to each state using a per capita formula and each state’s Governor must designate an organization to administer the program on behalf of the federal government. PHFA has been designated as the allocating agency for Pennsylvania.

The states may establish requirements and priorities for the use of the tax credits in addition to those mandated by the Code. These requirements and priorities along with the selection criteria by which each development will be evaluated are documented in the state’s Qualified Allocation Plan (QAP). Developers seeking Tax Credits in Pennsylvania must read and understand the QAP to ensure that the development is compliant with it prior to application submission.

Applications for Tax Credits are accepted only during an application cycle. Please refer to the Application for detailed information about the Tax Credit program requirements and application process.

Qualified Allocation Plans

Tax Credit Submission Requirements and Information

Year 15 – Extended Use Period

Tax Credit Reservations and Allocations

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