IRS Issues Low-Income Housing Tax Credit Rates for July 2015

A low-income housing tax credit’s value originally floated with interest rates, but the credit rate was temporarily fixed at 9 percent under the Housing and Economic Recovery Act (HERA), and this flat rate was again extended through Dec. 31, 2013 and 2014 under two additional legislative acts. The 9 percent minimum credit rate simplified the administration of the program and removed the financial uncertainty and risk associated with underwriting LIHTC-financed properties.

However, since the floor expired at the end of 2014, the floating rate has returned. This may reduce the amount of equity that a development could receive. The IRS recently issued Revenue Ruling 2015-15, which provides various prescribed rates for federal income tax purposes, including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, and the adjusted federal long-term tax-exempt rate.

According to the revenue ruling, the appropriate percentages under Section 42(b)(1), the LIHTC for July 2015 is:

• Appropriate percentage for the 70 percent present value low-income housing credit: 7.52 percent
• Appropriate percentage for the 30 percent present value low-income housing credit: 3.22 percent.

Advocates are continuing to lobby Congress to make the credit rate for the 70 percent present value credit permanently locked at 9 percent and the 30 percent present value low-income housing credit locked at 4 percent.