The passage of the new COVID-19 relief bill (Consolidated Appropriations Act, 2021) by Congress on December 21, 2020, which was signed into law by President Trump on December 27, 2020, includes legislation that amends Internal Revenue Code Section 42. This new bill sets a minimum 4% housing credit rate for new and existing buildings that are not eligible for the 9% housing credit floor rate.
The 4% housing credit rate applies to:
1. Projects that utilize tax-exempt bond financing, and
2. Acquisitions of existing buildings for rehabilitation.
Prior to the change in the law, the actual 4% tax credit rate varied based on the Applicable Federal Rate (AFR) that is adjusted each month by the U.S. Treasury Department. During the year 2020, the rate has varied between 3.07% and 3.19%. With the enactment of the new law, the minimum floor rate of 4% will apply when the AFR is below 4%.
This new law will apply to:
1. Any building which receives an allocation of 4% housing credit after December 31, 2020, and
2. Any building which is financed with tax-exempt bonds that are issued after December 31, 2020.
If you have any questions about the minimum housing credit rate or the new COVID-19 relief bill, please contact us at info@lvhj.com or your engagement lead member directly.