The Housing Tax Credit Program was designed as an incentive for construction and rehabilitation of housing for low-income households.

 

Developers of housing tax credit projects typically raise equity capital for their projects by syndicating the tax credits to investors who are willing to invest in the project. The investors' return is the annual tax credit and other economic benefits generated by the project.  The U.S. Department of Treasury annually allocates South Dakota in excess of $2 million.  SDHDA, as the credit-issuing agency, is responsible for the administration of the tax credits to qualifying housing developers. 

 

Created by the Internal Revenue Code of 1986, the Housing Tax Credit Program offers a reduction in tax liability to owners, subject to restrictions.  The annual housing tax credit amount is intended to provide the owner or investor a return which provides a "present value" of either 30% or 70% of the qualified costs of the low-income units in the development.  Depending on the project type, the qualified project costs (depreciable costs) will be eligible for either 30% present value (correlating to 4%) or 70% present value (correlating to 9%).  The maximum allowable credit amount is determined by multiplying the annual percentage rate (approximately 4% to 9%) by the qualified costs attributed to the designated low-income units in the project.  Per the Housing and Economic Recovery Act of 2008, the 9% is set at 9% until the sunset date of December 31, 2013.

 

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