Blogs| Indiana Low-Income Housing Tax Credit (LIHTC) Program
Written by
Priya Gupta
Published
Sep 13, 2024
Topics
State LIHTC
When viewed from the perspective of the government, it is clear that the Indiana LIHTC program has been a game changer in enabling low earners to access better housing.
The reason behind this is that one of its financing sources are tax credits meant to build or rehabilitate houses or even buy them.
The following article sheds light on the Indiana LIHTC Program by elaborating on eligibility criteria, processes for application, the role of the IHCDA, and results from the program within the housing perspective of the state.
In 1986, congressional legislators brought forth the Indiana LIHTC program that is popularly called Rental Housing Tax Credit. This initiative aims at providing federal tax relief on income level to those who invest in properties or develop homes so that they are able to build and keep affordable rental houses.
Additionally, LIHTC Program in Indiana is also administered by the Indiana Housing & Community Development Authority (IHCDA) which is an agency authorized to grant housing credits in this state as well.
Essential Information Regarding the Indiana Affordable and Workforce Housing Tax Credit Program:
| Indiana Program | Affordable and Workforce Housing Tax Credit |
| Administering Agency | Indiana Housing and Community Development Authority (IHCDA) |
| Enacting Legislation | Senate Bill 382 (S.B. 382) |
| Application Process | A single application is used to request all funding sources, including tax-exempt bonds, 4% LIHTCs, and the state tax credit. |
| Application Deadline | July 3, 2023 |
| Annual State Cap | $30 million |
| Transaction Cap | $25 million |
| Credit Description | The credit covers 40% to 100% of the federal allocation amount of 4% LIHTC. It is claimed over five taxable years, starting the year the federal credit is first claimed. Unused credits can be carried forward for up to nine years. The state is divided into five funding regions, each allocated 20% of the available credit: Northwest, Northeast, Central, Southwest, and Southeast. |
| Bifurcated from Federal LIHTC? | Yes |
| Credit Period (Compliance) | Same as the federal LIHTC credit period. |
| Other | Applicable for state fiscal years starting after June 30, 2023, and ending before July 1, 2028. |
| State Contact | Hayden Wiesinger |
The LIHTC Program grants tax credits to developers to the extent that affordable units are produced or rehabilitated. These credits are sold to investors who offer equity for a specific project’s developments. Consequently, developers can impose cheap property rents since their debt burdens are lightened, making them manageable by people with low incomes.
The Indiana LIHTC Program is a set of criteria an applicant must satisfy to be considered qualified, including ownership in or affiliation with a “qualified project.” A project may be “qualified” under the following conditions:
There are standard income and rent restrictions that must be adhered to in order to continue qualifying a property under the LIHTC Program:
| Bedroom Type | 30% AMI | 40% AMI | 50% AMI | 60% AMI | Total Units |
| One-bedroom | $166 | $290 | $413 | $537 | 16 |
| Two-bedroom | $201 | $350 | $498 | $639 | 24 |
| Three-bedroom | $236 | $408 | $580 | $719 | 24 |
| Four-bedroom | $243 | $435 | $626 | $789 | 8 |
| Total units set aside | 7 | 13 | 31 | 21 | 72 |
This year, Indiana adopted an Affordable Housing Tax Credit, a state credit to complement the federal LIHTC. Governor Eric Holcomb signed it as part of Senate Bill 382. The credit’s goal was to incentivize further development of more affordable housing throughout the state. It is available for projects that already get the federal 4% LIHTC and may be claimed during five taxable years.
Every year, the authority has the power to grant qualified projects a maximum of $30 million in state tax credits. The IHCDA may allocate state tax credits on a project-by-project basis that are equivalent to 40% to 100% of the federal LIHTC amount depending on how much a particular project needs them. Even better, these credits are flexible in their use and transferable, meaning a developer may sell or assign the credits, therefore enhancing the financial feasibility of an affordable housing project.
Application Process and Timing
The IHCDA began considering applications for the state credit on July 1, 2023. Approved applicants claim credits against their Indiana state tax liability for taxable years commencing January 1, 2024. In preparation for this program, developers should position themselves for the new program to ensure the timely execution of the requirements of the said program.
For distributing tax credits plus running the RHTC program within Indiana is what IHCDA does. In specific terms, IHCDA is responsible for extracting and managing these funds:
IHCDA drafts and issues an IRS Form 8609 for each building in a LIHTC development. This form is very significant because it formalizes the allocation of tax credits to the property owner.
All developments have a prior approval of an Extended Use Agreement by IHCDA before executing IRS Form 8609. This specifies that the property has to be affordable for some additional years after the original minimum compliance of 15-year period.
The Extended Use Agreement should be recorded by the end of the first year of the Credit Period at the latest.
Owners must file an Annual Owner Certification with IHCDA attesting to continued compliance with the LIHTC Program requirements. IHCDA monitors those certifications to ensure the owner remains qualified.
LIHTC developments are subject to file monitoring and physical inspections by IHCDA at least once every three years. The first inspection is carried out within two years of the last building being placed into service, and subsequent inspections occur every three years thereafter.
If any property is found not to meet the criteria, IHCDA must report these violations to the IRS through the standard Form 8823.
For multiple violations of regulations, misuse of funds and acts of fraud as well as other wrongful actions, IHCDA can suspend or debar an entity from its participation in any of its programs.
IHCDA retains all Annual Owner Certifications and related documentation for at least three years from the end of the calendar year they are received.
The IHCDA shall provide or make arrangements for compliance training so that owners and management agents understand and comply with the LIHTC program requirements.
IHCDA can also subcontract certain responsibilities, such as LIHTC compliance monitoring, to private contractors. Property owners are notified accordingly, and the name and contact number for any contractor are attached.
The Indiana LIHTC Program is one of the prime drivers for developing and preserving affordable housing in the State of Indiana. According to data, Indiana has 643 LIHTC properties comprising more than 45,000 apartment units serving approximately 134,000 residents.
LIHTC Program is not just a means to extend and maintain an affordable rental stock; it also brings a host of positive, quantifiable effects. For example, one recent study by the National Association of Home Builders estimated that a 100-unit LIHTC property may generate $7.9 million in local income, $827,000 in taxes, and 122 jobs during construction.
After construction, the LIHTC benefits do not stop: an operating property may generate $2.4 million in local income, $441,000 in taxes, and 30 ongoing jobs yearly.
Even with its potential success, the LIHTC program remains surrounded by several yet-to-be-resolved challenges, especially concerning property tax evaluations. Adding the value of the LIHTCs to the property’s tax assessment could disproportionately increase the tax liability of a property with LIHTCs to incredibly unbearable heights.
This could lead to potential financial jeopardy, defaults, and foreclosures of the subject properties. If this happens, it would ultimately result in a shrinkage of the supply base for Indiana’s affordable housing stock.
Finding affordable housing in Indianapolis is crucial for many residents. The city offers several options for Low Income Housing in Indianapolis, including Income Based Housing and Subsidized Housing. These programs aim to assist low-income families, seniors, and individuals by providing affordable living options.
For those in need of immediate housing, some properties offer Low Income Housing with No Waiting List in Indiana. These are particularly helpful for families and individuals who cannot afford to wait for housing.
Seniors can explore Income Based Senior Apartments in Indianapolis, which offer a safe and affordable living environment tailored to their needs. Additionally, the Section 8 Apartments Indianapolis program, managed by the Indianapolis Housing Agency, provides rental assistance to qualified residents, making housing more affordable across various communities.
Indianapolis residents can apply for these programs through the Indianapolis Housing Agency, which offers resources and assistance for those seeking affordable housing. Whether you need income-based housing or subsidized housing, Indianapolis provides a range of options to meet your housing needs.
To move forward, the Indiana LIHTC Program needs ongoing review through new laws and updates. The state Affordable Housing Tax Credit will end in 2028, and the Indiana General Assembly will consider its effects and whether to keep it going then. This program matters a lot, so developers, investors, and lawmakers must pay attention to the problems and ensure they use all the good things it offers.
The Indiana LIHTC Program is key to the state’s plan for affordable housing. It gives developers and investors tax breaks while ensuring low-income families have decent homes.
As Indiana continues to deal with housing cost issues, the LIHTC Program will play a big part in helping the state’s most at-risk people.
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