Discover how the Tennessee Housing Development Agency’s Community Investment Tax Credit program encourages the production and rehabilitation of affordable homes for low to moderate-income families.
Introduction
Affordable housing is a critical need for many communities, ensuring that all individuals and families have access to safe and stable living conditions. Tennessee’s Community Investment Tax Credit program stands out as a pivotal initiative that leverages tax incentive investments to foster the creation and rehabilitation of affordable housing. By providing financial incentives to financial institutions, this program not only promotes housing development but also stimulates economic growth within the state.
What is the Community Investment Tax Credit?
The Community Investment Tax Credit (CITC) is a program administered by the Tennessee Housing Development Agency (THDA) in collaboration with the Tennessee Department of Revenue (TDoR). This initiative offers financial institutions a significant tax credit for extending qualified loans, investments, grants, or contributions to eligible housing entities engaged in low-income housing activities.
Tax Credit Details
- Qualified Loans or Long-Term Investments:
- 5% credit based on the total amount.
3% annually of the unpaid principal balance as of December 31 each year for the life of the loan or fifteen years, whichever comes first.
Qualified Low-Rate Loans, Grants, or Contributions:
- 10% credit based on the total amount.
- 5% annually of the unpaid principal balance as of December 31 each year for the life of the loan or fifteen years, whichever comes first.
These credits can be applied one time or annually, depending on the type of investment, and unused credits can be carried forward for up to 25 years.
Eligible Activities and Entities
Eligible Activities
The CITC program supports activities that:
- Create or preserve affordable housing for low-income Tennesseans.
- Assist low-income individuals in obtaining safe and affordable housing.
- Enhance the capacity of non-profit organizations to provide housing opportunities.
- Engage in any other low-income housing-related activities approved by the THDA Executive Director and the Commissioner of Revenue.
Eligible Housing Entities
Eligible entities include:
- Tennessee-based non-profit organizations with 501(c)(3) status.
- Public Housing Authorities.
- Development Districts.
- Tennessee Housing Development Agency.
How the Program Works
Financial institutions participating in the CITC program can obtain tax credits by extending qualified financial support to eligible housing entities. The process involves:
- Certification: THDA certifies the housing entity and the eligible activities.
- Application: Financial institutions and housing entities complete and submit the Certificate of Contribution for Tax Credit.
- Review: THDA conducts an initial review and ongoing desk audits to ensure compliance.
- Awarding Credits: TDoR calculates and awards the tax credits to the financial institutions upon certification.
Benefits for Financial Institutions
Participating in the CITC program offers numerous advantages:
- Financial Incentives: Significant tax credits reduce the overall tax liability for financial institutions.
- Community Impact: Contributing to affordable housing strengthens community ties and supports economic development.
- Long-Term Returns: Investments in affordable housing can yield stable, long-term returns while fostering social responsibility.
Impact on Affordable Housing in Tennessee
The CITC program has a profound impact on the availability and quality of affordable housing in Tennessee. By incentivizing financial institutions to invest in low-income housing projects, the program ensures that more families have access to affordable living options. This not only enhances the quality of life for residents but also contributes to the economic stability and growth of the region.
How to Participate
Financial institutions interested in participating in the CITC program should follow these steps:
- Obtain Forms: Secure the Certificate of Contribution for Tax Credit form from the THDA or TDoR website.
- Complete Documentation: Fill out the required forms, including project narratives and proof of eligibility.
- Submit Application: Send the completed forms to THDA via email or mail.
- Certification: Await certification from THDA and TDoR to receive the tax credits.
- Maintain Records: Keep detailed records and submit progress reports as required.
Required Documentation
- 501(c)(3) Designation Letter from the IRS.
- Certificate of Existence from the Tennessee Secretary of State.
- Project Narrative detailing the housing-related activity.
Conclusion
Tennessee’s Community Investment Tax Credit program is a powerful tool that utilizes tax incentive investments to support and expand affordable housing initiatives. By providing substantial tax credits to financial institutions, the program not only promotes the development and rehabilitation of affordable homes but also fosters a more inclusive and economically vibrant community. Financial institutions have a unique opportunity to make a significant impact while reaping financial benefits through their participation.
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