Tax Credit Section 42

The program was created by federal law in 1986 the tax reform act of 1986 and it s administered by the irs.

Tax credit section 42. 5 according to the urban institute the process for allocating tax credits competitively is guided by federal regulation uses federal dollars and is controlled by states. The irc 42 low income housing credit program was enacted by congress as part of the tax reform act of 1986 to encourage new construction and rehabilitation of existing buildings as low income rental housing for households with income at or below specified income levels. Which after the application of subparagraph d ii is a qualified low income building at all times during any taxable year such building shall be treated as described in section 42 b 1 b of such code and having an applicable fraction for such year of 1.

The section 42 low income housing tax credit lihtc program is a federal tax incentive that encourages private sector investors developers and lenders to finance construct and operate affordable housing. The tax credit reform act of 1986 created the low income housing tax credit program lihtc. As a condition for receiving housing tax credits owners must keep the units affordable for a specified number of years.

The section 42 housing program refers to that section of the internal revenue tax code which provides tax credits to investors who build affordable housing. The tax credit encourages developers to build affordable housing to meet the needs of the community. 3 4 you may see an lihtc credit called a section 42 tax credit because it s based on section 42 of the federal tax law.

It particularly benefits low income residents of high rent high income locales like the.