Pennsylvania state housing tax credit program signed into law

November 05, 2020

Affordable Housing Alert

Author(s): Meghan C. Altidor, John M. Marti, Claire Alexander

We cover the highlights of a new state housing tax credit program in Pennsylvania.

In a move that encourages the continued construction and rehabilitation of affordable housing in the Commonwealth, Pennsylvania Governor Tom Wolf signed Senate Bill 30 (S.B. 30) on November 4, 2020, establishing a state housing tax credit (the “credits”) that follows a similar structure to the federal low-income housing tax credit (“LIHTC”) program. The credits would flow over a five-year period, benefitting qualified low-income housing projects, as determined under Section 42(g)(1) of the Internal Revenue Code of 1986.

The credit program will be administered by the Pennsylvania Housing Finance Agency (the “Agency”), the entity that administers the federal LIHTC program, and the Department of Revenue of the Commonwealth (the “Department”). The Agency is not yet accepting applications to the program, but the legislation reflects that the Agency would look to the federal LIHTC program for guidelines, procedures, and priorities.

Pursuant to this new Pennsylvania Housing Tax Credit program, projects that receive credit awards and comply with the program would receive up to 20% of the awarded credits per year, spread out over that five-year period. These credits will support projects providing housing to some of the Commonwealth’s lowest income residents with the requirement that at least 10% of the credits target households with incomes at or below 30% of the area median income. These credits may be used by taxpayers to claim a tax credit against their Commonwealth tax liability, and are subject to recapture in cases of noncompliance and fraud. The credits are limited to offsetting no more than 50% of a taxpayer’s tax liability, and may be carried forward for a period not to exceed five years, but may not be carried back, and taxpayers may not receive a refund of any unused credits.

Pennsylvania joins twenty other states with the creation of its state LIHTC program.

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