Reenact Low-Income Housing Tax Credits.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
H 1
HOUSE BILL 467

Short Title: Reenact Low-Income Housing Tax Credits. (Public)
Sponsors: Representatives Greenfield, A. Jones, T. Brown, and Crawford (Primary
Sponsors).
For a complete list of sponsors, refer to the North Carolina General Assembly web site.
Referred to: Rules, Calendar, and Operations of the House
March 24, 2025
*H467-v-1*
A BILL TO BE ENTITLED 1
AN ACT TO REENACT THE LOW-INCOME HOUSING TAX CREDITS. 2
The General Assembly of North Carolina enacts: 3
SECTION 1. Article 3E of Chapter 105 of the General Statutes, with the exception 4
of G.S. 105-129.41, is reenacted as it existed immediately before its repeal and reads as rewritten: 5
"Article 3E. 6
"Low-Income Housing Tax Credits. 7
"§ 105-129.40. Scope and definitions.Definitions. 8
(a) Scope. – G.S. 105 -129.41 applies to buildings that are awarded a federal credit 9
allocation before January 1, 2003. G.S. 105-129.42 applies to buildings that are awarded a federal 10
credit allocation on or after January 1, 2003. 11
(b) Definitions. – The definitions in section 42 of the Code and the following definitions 12
apply in this Article: 13
(1) Housing Finan ce Agency. – The North Carolina Housing Finance Agency 14
established in G.S. 122A-4. 15
(2) Pass-through entity. – Defined in G.S. 105-228.90. 16
"§ 105-129.42. Credit for low -income housing awarded a federal credit allocation on or 17
after January 1, 2003.allocation. 18
(a) Definitions. – The following definitions apply in this section: 19
(1) Qualified Allocation Plan. – The plan governing the allocation of federal 20
low-income housing tax credits for a particular year, as approved by the 21
Governor after a public hearing a nd publication in the North Carolina 22
Register. 23
(2) Qualified North Carolina low -income housing development. – A qualified 24
low-income project or building that is allocated a federal tax credit under 25
section 42(h)(1) of the Code and is described in subsection (c) of this section. 26
(3) Qualified residential unit. – A housing unit that meets the requirements of 27
section 42 of the Code. 28
(b) Credit. – A taxpayer who is allocated a federal low -income housing tax credit under 29
section 42 of the Code to construct or su bstantially rehabilitate a qualified North Carolina 30
low-income housing development is allowed a credit equal to a percentage of the development's 31
qualified basis, as determined pursuant to section 42 of the Code. For the purpose of this section, 32
qualified basis is calculated based on the information contained in the carryover allocation and 33
General Assembly Of North Carolina Session 2025
Page 2 House Bill 467-First Edition
is not recalculated to reflect subsequent increases or decreases. No credit is allowed for a 1
development that uses tax-exempt bond financing. 2
(c) Developments and Amounts. – The following table sets out the housing developments 3
that are qualified North Carolina low -income housing developments and are allowed a credit 4
under this section. The table also sets out the percentage of the development's qualified basis for 5
which a credit is allowed. The designation of a county or city as Low Income, Moderate Income, 6
or High Income and determinations of affordability are made by the Housing Finance Agency in 7
accordance with the Qualified Allocation Plan in effect as of the time the federal credit is 8
allocated. A change in the income designation of a county or city after a federal credit is allocated 9
does not affect the percentage of the developer's qualified basis for which a credit is allowed. The 10
affordability requirements set out in the chart apply for the duration of the federal tax credit 11
compliance period. If in any year a taxpayer fails to meet these affordability requirements, the 12
credit is forfeited under subsection (h) of this section. 13
Percentage of 14
Basis for 15
Type of Development Which Credit 16
is Allowed 17
Forty percent (40%) of the qualified residential units 18
are affordable to households whose income is fifty Thirty percent 19
percent (50%) or less of area median income and the (30%) 20
units are in a Low-Income county or city. 21
22
Fifty percent (50%) of the qualified residential units 23
are affordable to households whose income is fifty Twenty percent 24
percent (50%) or less of the area median income and (20%) 25
the units are in a Moderate-Income county or city. 26
27
Fifty percent (50%) of the qualified residential units 28
are affordable to households whose income is forty Ten percent 29
percent (40%) or less of the area median income and (10%) 30
the units are in a High-Income county or city. 31
32
Twenty-five percent (25%) of the qualified residential 33
units are affordable to households whose income is Ten percent 34
thirty percent (30%) or less of the area median income (10%) 35
and the units are in a High-Income county or city. 36
37
(d) Election. – When a taxpayer to whom a federal low-income housing credit is allocated 38
submits to the Housing Finance Agency a request to receive a carryover allocation for that credit, 39
the taxpayer must elect a method for receiving the tax credit allowed by this section. A taxpayer 40
may elect to receive the credit in the form of ei ther a direct tax refund or a loan generated by 41
transferring the credit to the Housing Finance Agency. Neither a direct tax refund nor a loan 42
received as the result of the transfer of the credit is considered taxable income under this Chapter. 43
Under the di rect tax refund method, a taxpayer elects to apply the credit allowed by this 44
section to the taxpayer's liability under Article 4 of this Chapter. If the credit allowed by this 45
section exceeds the amount of tax imposed by Article 4 for the taxable year, reduced by the sum 46
of all other credits allowable, the Secretary must refund the excess. In computing the amount of 47
tax against which multiple credits are allowed, nonrefundable credits are subtracted before this 48
credit. The provisions that apply to an overp ayment of tax apply to the refundable excess of a 49
credit allowed under this section. 50
General Assembly Of North Carolina Session 2025
House Bill 467-First Edition Page 3
Under the loan method, a taxpayer elects to transfer the credit allowed by this section to the 1
Housing Finance Agency and receive a loan from that Agency for the amount of the credit. The 2
terms of the loan are specified by the Housing Finance Agency in accordance with the Qualified 3
Allocation Plan. 4
(e) Exception When No Carryover. – If a taxpayer does not submit to the Housing 5
Finance Agency a request to receive a carryover allocation, the taxpayer must elect the method 6
for receiving the credit allowed by this section when the taxpayer submits to the Agency federal 7
Form 8609. A taxpayer to whom this subsection applies claims the credit for the taxable year in 8
which the taxpayer submits federal Form 8609. 9
(f) Pass-Through Entity. – Notwithstanding the provisions of G.S. 105-131.8 and 10
G.S. 105-269.15, a pass-through entity that qualifies for the credit provided in this Article does 11
not distribute the credit among any of its own ers. The pass -through entity is considered the 12
taxpayer for purposes of claiming the credit allowed by this Article. If a return filed by a 13
pass-through entity indicates that the entity is paying tax on behalf of the owners of the entity, 14
the credit allowed under this Article does not affect the entity's payment of tax on behalf of its 15
owners. 16
(g) Return and Payment. – A taxpayer may claim the credit allowed by this section on a 17
return filed for the taxable year in which the taxpayer receives a carryover allocation of a federal 18
low-income housing credit. The return must state the name and location of the qualified 19
low-income housing development for which the credit is claimed. 20
If a taxpayer chooses the loan method for receiving the credit allowed under this section, the 21
Secretary must transfer to the Housing Finance Agency the amount of credit allowed the 22
taxpayer. The Agency must loan the taxpayer the amount of the credit on terms consistent with 23
the Qualified Allocation Plan. The Housing Finance Agency is n ot required to make a loan to a 24
qualified North Carolina low-income housing development until the Secretary transfers the credit 25
amount to the Agency. 26
If the taxpayer chooses the direct tax refund method for receiving the credit allowed under 27
this section, the Secretary must transfer to the Housing Finance Agency the refundable excess of 28
the credit allowed the taxpayer. The Agency holds the refund due the taxpayer in escrow, with 29
no interest accruing to the taxpayer during the escrow period. The Agency must release the refund 30
to the taxpayer upon the occurrence of the earlier of the following: 31
(1) The Agency determines that the taxpayer has complied with the Qualified 32
Allocation Plan and has completed at least fifty percent (50%) of the activities 33
included in the development's qualified basis. 34
(2) Within 30 days after the date the development is placed in service. 35
(h) Forfeiture. – A taxpayer that receives a credit under this section must immediately 36
report any recapture event under section 42 of the Code to the Housing Finance Agency. If the 37
taxpayer or any of its owners are required under section 42(j) of the Code to recapture all or part 38
of a federal credit with respect to a qualified North Carolina low -income development, the 39
taxpayer forfeits the corresponding part of the credit allowed under this section. This requirement 40
does not apply in the following circumstances: 41
(1) When the recapture of part or all of the federal credit is the result of an event 42
that occurs in the sixth or a subsequent calendar yea r after the calendar year 43
in which the development was awarded a federal credit allocation. 44
(2) The taxpayer elected to transfer the credit allowed by this section to the 45
Housing Finance Agency. 46
(i) Liability From Forfeiture. – A taxpayer that forfeits all or part of the credit allowed 47
under this section is liable for all past taxes avoided and any refund claimed as a result of the 48
credit plus interest at the rate established under G.S. 105-241.21. The interest is computed from 49
the date the Secretary transf erred the credit amount to the Housing Finance Agency. The past 50
taxes, refund, and interest are due 30 days after the date the credit is forfeited. A taxpayer that 51
General Assembly Of North Carolina Session 2025
Page 4 House Bill 467-First Edition
fails to pay the taxes, refund, and interest by the due date is subject to the penalties pro vided in 1
G.S. 105-236. 2
"§ 105-129.43. Substantiation. 3
A taxpayer allowed a credit under this Article must maintain and make available for 4
inspection any information or records required by the Secretary of Revenue or the Housing 5
Finance Agency. The burden of proving eligibility for a credit and the amount of the credit rests 6
upon the taxpayer. 7
"§ 105-129.44. Report. 8
The Department must include in the economic incentives report required by G.S. 105-256 the 9
following information itemized by taxpayer: 10
(1) The number of taxpayers that took the credit allowed in this Article. 11
(2) The location of each qualified North Carolina low-income building or housing 12
development for which a credit was taken. 13
(3) The total cost to the General Fund of the credits taken. 14
"§ 105-129.45. Sunset. 15
This Article is repealed effective January 1, 2015. 2030. The repeal applies to developments 16
to which federal credits are allocated on or after January 1, 2015.2030." 17
SECTION 2. This act is effective for taxable years beginning on or after January 1, 18
2025, and applies to allocations of federal low-income housing tax credits on or after that date. 19