HRS § 235-110.8 — Low-income housing tax credit


§235-110.8 Low-income housing tax credit.
[Repeal and reenactment on December 31, 2027. L 2021, c 226, §2.] (a)
As modified herein, section 42 (with respect to low-income housing credit) of
the Internal Revenue Code shall be operative for the purposes of this chapter
as provided in this section. A taxpayer owning a qualified low-income building
who has been awarded a subaward under section 1602 of the American Recovery and
Reinvestment Act of 2009, Public Law 111-5, shall also be eligible for the
credit provided in this section.
(b) Each taxpayer subject to the tax imposed
by this chapter, who has filed a net income tax return for a taxable year may
claim a low-income housing tax credit against the taxpayer's net income tax
liability. The amount of the credit shall be deductible from the taxpayer's
net income tax liability, if any, imposed by this chapter for the taxable year
in which the credit is properly claimed on a timely basis. A credit under this
section may be allocated by a partnership or limited liability company in any
manner agreed to by the partners or members regardless of whether the
individual or entity to receive the credit is deemed to be a partner or member
for federal income tax purposes, so long as the individual or entity is deemed
to be a partner or member pursuant to applicable state law. The credit may be
claimed whether or not the taxpayer is eligible to be allocated a federal
low-income housing tax credit pursuant to section 42 of the Internal Revenue
Code.
(c) For any qualified low-income building that
receives an allocation prior to January 1, 2017, the amount of the low-income
housing tax credit that may be claimed by a taxpayer as provided in subsection
(b) shall be fifty per cent of the applicable percentage of the qualified basis
of each building located in Hawaii. The applicable percentage shall be
calculated as provided in section 42(b) of the Internal Revenue Code.
(d) For any qualified low-income building that
receives an allocation after December 31, 2016, the amount of the low-income
housing tax credits that may be claimed by a taxpayer as provided in subsection
(b) shall be:
(1) For the first five years, equal to the amount of
the federal low-income housing tax credits that have been allocated to the
qualified low-income building pursuant to section 42(b) of the Internal Revenue
Code by the corporation, provided that, if in any year the aggregate amount of
credits under this subsection would be such that it would exceed the amount of
state credits allocated by the corporation for the qualified low-income
building, the credits allowed for that year shall be limited to such amount necessary
to bring the total of such state credits (including the current year state
credits) to the full amount of state credits allocated to the qualified
low-income building by the corporation;
(2) For the sixth year, zero, except that, if, and
only if, the amount of credits allowed for the first five years is less than
the full amount of state credits allocated by the corporation for the qualified
low-income building, an amount necessary to bring the amount of the state
credits to the full amount allocated by the corporation for the qualified
low-income building; and
(3) For any remaining years, zero.
(e) If a subaward under section 1602 of the
American Recovery and Reinvestment Act of 2009, Public Law 111-5, has been
issued for a qualified low-income building, the amount of the low-income
housing tax credits that may be claimed by a taxpayer as provided in subsection
(b) shall be equal to fifty per cent of the amount of the federal low-income
housing tax credits that would have been allocated to the qualified low-income
building pursuant to section 42(b) of the Internal Revenue Code by the corporation
had a subaward not been awarded with respect to the qualified low-income
building.
(f) For the purposes of this section, the
determination of:
(1) Qualified basis and qualified low-income building
shall be made under section 42(c);
(2) Eligible basis shall be made under section 42(d);
(3) Qualified low-income housing project shall be
made under section 42(g);
(4) Recapture of credit shall be made under section
42(j), except that the tax for the taxable year shall be increased under
section 42(j)(1) only with respect to credits that were used to reduce state
income taxes; and
(5) Except as provided under subsection (j)(1),
application of at-risk rules shall be made under section 42(k);
of the Internal Revenue Code.
(g) As provided in section 42(e),
rehabilitation expenditures shall be treated as a separate new building and
their treatment under this section shall be the same as in section 42(e). The
definitions and special rules relating to credit period in section 42(f) and
the definitions and special rules in section 42(i) shall be operative for the
purposes of this section.
(h) The state housing credit ceiling under
section 42(h) shall be zero for the calendar year immediately following the
expiration of the federal low-income housing tax credit program and for any
calendar year thereafter, except for the carryover of any credit ceiling amount
for certain projects in progress which, at the time of the federal expiration,
meet the requirements of section 42.
(i) The credit allowed under this section
shall be claimed against net income tax liability for the taxable year. For
the purpose of deducting this tax credit, net income tax liability means net
income tax liability reduced by all other credits allowed the taxpayer under
this chapter.
A tax credit under this section that exceeds
the taxpayer's income tax liability may be used as a credit against the
taxpayer's income tax liability in subsequent years until exhausted. All
claims for a tax credit under this section shall be filed on or before the end
of the twelfth month following the close of the taxable year for which the
credit may be claimed and shall include a copy of Form 8609 issued by the
corporation with respect to the building; provided that with respect to the
first year that the credit is claimed for a qualified low-income housing
project, if the taxpayer has not yet received the Form 8609 prior to the time
the taxpayer files its original tax return claiming the credit under this
section, the taxpayer may claim the credit based upon the amount of credit set
forth in the carryover allocation or 42(m) letter, as applicable, issued to the
qualified low-income housing project, and upon receipt of the Form 8609, the
taxpayer shall:
(1) Amend its tax return to include the Form 8609;
and
(2) If the credit amount in the Form 8609 is
different than the amount of credit previously claimed, adjust the credit
amount claimed on its amended return.
Failure to properly and timely claim the credit
shall constitute a waiver of the right to claim the credit. A taxpayer may
claim a credit under this section only if the building or project is a
qualified low-income housing building or a qualified low-income housing project
under section 42 of the Internal Revenue Code.
Except as provided under subsection (j)(1),
section 469 (with respect to passive activity losses and credits limited) of
the Internal Revenue Code shall be applied in claiming the credit under this
section.
(j) For any qualified low-income building
placed in service under this section after December 31, 2020:
(1) Section 453 (with respect to the installment
method), section 465 (with respect to deductions limited to amount at risk),
and section 469 (with respect to passive activity losses and credits limited)
of the Internal Revenue Code shall not be operative with respect to investments
made in buildings and projects claiming the credit under this section;
(2) All allocations to partners or members of their
distributive shares of income, loss, and deductions under chapter 235 shall be
made in accordance with the written agreement of the partners or members;
(3) The total amount of state credits allocated by
the corporation for the qualified low-income building shall not exceed fifty
per cent of the total amount of federal credits allocated to the building for
the ten-year federal credit period; and
(4) The deductions and expenses claimed by all Hawaii
taxpayers on Hawaii income tax returns shall not exceed the deductions and
expenses claimed by all taxpayers on federal returns;
provided that this subsection shall not apply to any
building that ceases to serve low-income households in accordance with federal
and state low-income housing tax credit programs.
(k) In lieu of the credit awarded under this
section for a qualified low-income building that has been awarded federal
credits that are subject to the state housing credit ceiling under section
42(h)(3)(C) of the Internal Revenue Code, federal credits that are allocated
pursuant to section 42(h)(4) of the Internal Revenue Code, or a subaward under
section 1602 of the American Recovery and Reinvestment Act of 2009, Public Law
111-5, the taxpayer owning the qualified low-income building may make a request
to the corporation for a loan under section 201H-86. If the taxpayer elects to
receive the loan pursuant to section 201H-86, the taxpayer shall not be
eligible for the credit under this section.
(l) The director of taxation may adopt any
rules under chapter 91 and forms necessary to carry out this section.