Low-Income Housing Tax Credit (LIHTC)

§ 42. Low-income housing credit(a) In generalFor purposes of section 38, the amount of the low-income housing credit determined under this section for any taxable year in the credit period shall be an amount equal to—(1) the applicable percentage of (2) the qualified basis of each qualified low-income building. (b) Applicable percentage: 70 percent present value credit for certain new buildings; 30 percent present value credit for certain other buildings(1) Determination of applicable percentageFor purposes of this section—(A) In generalThe term “applicable percentage” means, with respect to any building, the appropriate percentage prescribed by the Secretary for the earlier of—(i) the month in which such building is placed in service, or (ii) at the election of the taxpayer—(I) the month in which the taxpayer and the housing credit agency enter into an agreement with respect to such building (which is binding on such agency, the taxpayer, and all successors in interest) as to the housing credit dollar amount to be allocated to such building, or (II) in the case of any building to which subsection (h)(4)(B) applies, the month in which the tax-exempt obligations are issued.  A month may be elected under clause (ii) only if the election is made not later than the 5th day after the close of such month. Such an election, once made, shall be irrevocable. (B) Method of prescribing percentagesThe percentages prescribed by the Secretary for any month shall be percentages which will yield over a 10-year period amounts of credit under subsection (a) which have a present value equal to—(i) 70 percent of the qualified basis of a new building which is not federally subsidized for the taxable year, and (ii) 30 percent of the qualified basis of a building not described in clause (i). (C) Method of discountingThe present value under subparagraph (B) shall be determined—(i) as of the last day of the 1st year of the 10-year period referred to in subparagraph (B), (ii) by using a discount rate equal to 72 percent of the average of the annual Federal mid-term rate and the annual Federal long-term rate applicable under section 1274(d)(1) to the month applicable under clause (i) or (ii) of subparagraph (A) and compounded annually, and (iii) by assuming that the credit allowable under this section for any year is received on the last day of such year. (2) Minimum credit rate for non-federally subsidized new buildingsIn the case of any new building—(A) which is placed in service by the taxpayer after the date of the enactment of this paragraph, and (B) which is not federally subsidized for the taxable year, the applicable percentage shall not be less than 9 percent. (3) Minimum credit rateIn the case of any new or existing building to which paragraph (2) does not apply and which is placed in service by the taxpayer after December 31, 2020, the applicable percentage shall not be less than 4 percent.