§ 105-129.42. (See note for repeal) Credit for low-income housing awarded a federal credit allocation on or after January 1, 2003.
§ 105‑129.42. (See notefor repeal) Credit for low‑income housing awarded a federal creditallocation on or after January 1, 2003.
(a) Definitions. Thefollowing definitions apply in this section:
(1) Qualified AllocationPlan. The plan governing the allocation of federal low‑income housingtax credits for a particular year, as approved by the Governor after a publichearing and publication in the North Carolina Register.
(2) Qualified NorthCarolina low‑income housing development. A qualified low‑incomeproject or building that is allocated a federal tax credit under section42(h)(1) of the Code and is described in subsection (c) of this section.
(3) Qualifiedresidential unit. A housing unit that meets the requirements of section 42 ofthe Code.
(b) Credit. Ataxpayer who is allocated a federal low‑income housing tax credit undersection 42 of the Code to construct or substantially rehabilitate a qualifiedNorth Carolina low‑income housing development is allowed a credit equalto a percentage of the development's qualified basis, as determined pursuant tosection 42 of the Code. For the purpose of this section, qualified basis iscalculated based on the information contained in the carryover allocation andis not recalculated to reflect subsequent increases or decreases. No credit isallowed for a development that uses tax‑exempt bond financing.
(c) Developments andAmounts. The following table sets out the housing developments that arequalified North Carolina low‑income housing developments and are alloweda credit under this section. The table also sets out the percentage of thedevelopment's qualified basis for which a credit is allowed. The designation ofa county or city as Low Income, Moderate Income, or High Income anddeterminations of affordability are made by the Housing Finance Agency inaccordance with the Qualified Allocation Plan in effect as of the time thefederal credit is allocated. A change in the income designation of a county orcity after a federal credit is allocated does not affect the percentage of thedeveloper's qualified basis for which a credit is allowed. The affordabilityrequirements set out in the chart apply for the duration of the federal taxcredit compliance period. If in any year a taxpayer fails to meet these affordabilityrequirements, the credit is forfeited under subsection (h) of this section.
Percentageof
Basisfor
Typeof Development WhichCredit
isAllowed
Fortypercent (40%) of the qualified residential units
areaffordable to households whose income is fifty Thirtypercent
percent(50%) or less of area median income and the (30%)
unitsare in a Low‑Income county or city.
Fiftypercent (50%) of the qualified residential units
areaffordable to households whose income is fifty Twentypercent
percent(50%) or less of the area median income and (20%)
theunits are in a Moderate‑Income county or city.
Fiftypercent (50%) of the qualified residential units
areaffordable to households whose income is forty Tenpercent
percent(40%) or less of the area median income and (10%)
theunits are in a High‑Income county or city.
Twenty‑fivepercent (25%) of the qualified residential
unitsare affordable to households whose income is Tenpercent
thirtypercent (30%) or less of the area median income (10%)
and theunits are in a High‑Income county or city.
(d) Election. When ataxpayer to whom a federal low‑income housing credit is allocated submitsto the Housing Finance Agency a request to receive a carryover allocation forthat credit, the taxpayer must elect a method for receiving the tax creditallowed by this section. A taxpayer may elect to receive the credit in the formof either a direct tax refund or a loan generated by transferring the credit tothe Housing Finance Agency. Neither a direct tax refund nor a loan received asthe result of the transfer of the credit is considered taxable income underthis Chapter.
Under the direct tax refundmethod, a taxpayer elects to apply the credit allowed by this section to thetaxpayer's liability under Article 4 of this Chapter. If the credit allowed bythis section exceeds the amount of tax imposed by Article 4 for the taxableyear, reduced by the sum of all other credits allowable, the Secretary mustrefund the excess. In computing the amount of tax against which multiplecredits are allowed, nonrefundable credits are subtracted before this credit.The provisions that apply to an overpayment of tax apply to the refundableexcess of a credit allowed under this section.
Under the loan method, ataxpayer elects to transfer the credit allowed by this section to the HousingFinance Agency and receive a loan from that Agency for the amount of thecredit. The terms of the loan are specified by the Housing Finance Agency inaccordance with the Qualified Allocation Plan.
(e) Exception When NoCarryover. If a taxpayer does not submit to the Housing Finance Agency arequest to receive a carryover allocation, the taxpayer must elect the methodfor receiving the credit allowed by this section when the taxpayer submits tothe Agency federal Form 8609. A taxpayer to whom this subsection applies claimsthe credit for the taxable year in which the taxpayer submits federal Form8609.
(f) Pass‑ThroughEntity. Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15,a pass‑through entity that qualifies for the credit provided in thisArticle does not distribute the credit among any of its owners. The pass‑throughentity is considered the taxpayer for purposes of claiming the credit allowedby this Article. If a return filed by a pass‑through entity indicatesthat the entity is paying tax on behalf of the owners of the entity, the creditallowed under this Article does not affect the entity's payment of tax onbehalf of its owners.
(g) Return and Payment. A taxpayer may claim the credit allowed by this section on a return filed forthe taxable year in which the taxpayer receives a carryover allocation of afederal low‑income housing credit. The return must state the name andlocation of the qualified low‑income housing development for which thecredit is claimed.
If a taxpayer chooses the loanmethod for receiving the credit allowed under this section, the Secretary musttransfer to the Housing Finance Agency the amount of credit allowed thetaxpayer. The Agency must loan the taxpayer the amount of the credit on termsconsistent with the Qualified Allocation Plan. The Housing Finance Agency isnot required to make a loan to a qualified North Carolina low‑incomehousing development until the Secretary transfers the credit amount to theAgency.
If the taxpayer chooses thedirect tax refund method for receiving the credit allowed under this section,the Secretary must transfer to the Housing Finance Agency the refundable excessof the credit allowed the taxpayer. The Agency holds the refund due thetaxpayer in escrow, with no interest accruing to the taxpayer during the escrowperiod. The Agency must release the refund to the taxpayer upon the occurrenceof the earlier of the following:
(1) The Agencydetermines that the taxpayer has complied with the Qualified Allocation Planand has completed at least fifty percent (50%) of the activities included inthe development's qualified basis.
(2) Within 30 days afterthe date the development is placed in service.
(h) Forfeiture. A taxpayerthat receives a credit under this section must immediately report any recaptureevent under section 42 of the Code to the Housing Finance Agency. If thetaxpayer or any of its owners are required under section 42(j) of the Code torecapture all or part of a federal credit with respect to a qualified NorthCarolina low‑income development, the taxpayer forfeits the correspondingpart of the credit allowed under this section. This requirement does not applyin the following circumstances:
(1) When the recaptureof part or all of the federal credit is the result of an event that occurs inthe sixth or a subsequent calendar year after the calendar year in which thedevelopment was awarded a federal credit allocation.
(2) The taxpayer electedto transfer the credit allowed by this section to the Housing Finance Agency.
(i) Liability FromForfeiture. A taxpayer that forfeits all or part of the credit allowed underthis section is liable for all past taxes avoided and any refund claimed as aresult of the credit plus interest at the rate established under G.S. 105‑241.21.The interest is computed from the date the Secretary transferred the creditamount to the Housing Finance Agency. The past taxes, refund, and interest aredue 30 days after the date the credit is forfeited. A taxpayer that fails topay the taxes, refund, and interest by the due date is subject to the penaltiesprovided in G.S. 105‑236. (2002‑87, s. 1; 2003‑416, ss. 6‑8;2004‑110, s. 4.2; 2007‑491, s. 44(1)a.)