Income tax, state; tax credit for affordable housing projects.

Plain English Breakdown

The bill does not provide specific details on how to allocate credits if applications exceed $5 million in a year, leaving this aspect open to interpretation or future guidelines.

Income Tax Credit for Affordable Housing Projects

This bill creates a nonrefundable income tax credit for taxpayers who own an interest in affordable housing projects that rent units to low-income tenants, with specific definitions and limitations.

What This Bill Does

• Creates a new section in the Virginia Code allowing qualifying taxpayers to claim a nonrefundable tax credit against their state income taxes.
• Defines 'affordable housing project' as one committed to renting at least 60% of its units to low-income tenants for 30 years, determined by the locality where it is located.
• Specifies that 'qualifying tenant' means someone with a Virginia adjusted gross income less than 120% of the area median income, adjusted for family size.
• Limits the total tax credit amount to $5 million per year and allows excess credits to be carried over for up to five additional years if they exceed an individual's tax liability.

Who It Names or Affects

• Taxpayers who own an interest in affordable housing projects through pass-through entities like partnerships or LLCs.
• Low-income tenants renting units from qualifying affordable housing projects.

Terms To Know

Affordable Housing Project

A housing project determined by the locality to be affordable and committed for a 30-year term to holding at least 60% of its units aside for low-income tenants.

Qualifying Tenant

A tenant with a Virginia adjusted gross income less than 120% of the area median income, adjusted for family size.

Limits and Unknowns

• The bill does not specify how to allocate credits if applications exceed $5 million in a year.
• It is unclear what happens if the total tax credit amount exceeds an individual's tax liability for one year.

Official Summary Text

Income tax; credit for affordable housing projects.
Provides, for taxable years 2026 through 2030, a nonrefundable income tax credit for qualifying taxpayers, defined in the bill as taxpayers that, during the taxable year, own a direct or indirect interest through one or more pass-through entities, in an affordable housing project, also defined in the bill. The credit amount shall be equal to the product of (i) the portion of such taxpayer's ownership in such affordable housing project and (ii) the sum of 50 percent of the difference between the fair market value of each unit rented to a qualifying tenant and the rent actually charged to such tenant for the unit, computed for that portion of the taxable year in which the unit was rented to such tenant. The bill defines a qualifying tenant as a tenant with a Virginia adjusted gross income less than 120 percent of the area median income, adjusted for family size. The aggregate amount of credits allowable under the provisions of the bill shall not exceed $5 million per taxable year.

Current Bill Text

A BILL to amend the Code of Virginia by adding in Article 13 of Chapter 3 of Title 58.1 a section numbered
58.1-439.12:13
, relating to income tax; credit for affordable housing projects.

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia is amended by adding in Article 13 of Chapter 3 of Title 58.1 a section numbered
58.1-439.12:13
as follows:

§
58.1-439.12:13
. Tax credit for affordable housing pr
ojects.

A. For purposes of this section:

"Affordable housing project" means a housing project
determined by the locality in which it is located to be a
ffordable housing and that is

committed for a 30-year term
to holding 60 percent of the units aside for
qualifying tenants
.

"Qualifying
taxpayer" mean
s a
taxpayer that
,
during the taxable year,
own
s
a
direct or indirect
interest

through one or more
pass-through entities, in
an affordable housing project
.

"Qualifying tenant" means a tenant with a Virginia adjusted gross income less than 120 percent of the area median income, adjusted for family size
.

B. For taxable years beginning on and after January 1, 2026, but before January 1, 2031, a
qualifying
taxpayer shall be allowed to claim
a nonrefundable credit

against the tax levied pursuant to §
58.1-320
or
58.1-400
in an amount equal to

the
product of
(i)
the portion of such taxpayer's ownership in
an
affordable housing project and
(ii)
the
sum of

5
0 percent of the difference between the
fair market value of
each unit rented to a
qualifying

tenant
and
the rent
actually
charged to such tenant
for the unit, computed for that portion of the taxable year

in which the unit was
rented to
such
tenant.

C.
The amount of the credit
that may be
claimed
in any single taxable year
shall not exceed the
individual's liability for taxes
imposed by this chapter
f
or the taxable year.
If the amount of the credit allowed under this section exceeds the individual's tax liability for the taxable year in which the credit is claimed, the amount that exceeds the tax liability may be carried
over for credit against the inc
ome taxes of the
individual
in the next five taxable years or until the total amount of the tax credit has been taken, whichever is sooner.
The aggregate amount of credits allowable under this section shall not exceed $5 million per taxable year.
In the event applications for the tax credit exceed the amount allocated by the Department
,
c
redits shall be allocated by the Department
on a pro rata basis
.

D.
Credits granted to a partnership, limited liability company, or electing small business corporation (S corporation) shall be allocated to the individual partners, members, or shareholders,
respectively
, in proportion to their ownership interests in such entities or in accordance with a written agre
ement entered into by such individual partners, members, or shareholders.

E.
The Tax Commissioner
, in consultation with the Department of Housing and Community Development,
shall develop guidelines for claim
ing the credit provided by this section. Such guidelines shall be exempt from the provisions of the Administrative Process Act (§
2.2-4000
et seq.).