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2022 SPECIAL SESSION I
22101688DBe it enacted by the General Assembly of Virginia:
1. That §§ 58.1-439.29 and 58.1-439.30 of the Code of Virginia are amended and reenacted as follows:
§ 58.1-439.29. Definitions.
As used in this article, unless the context requires a different meaning:
"Authority" means the Virginia Housing Development Authority, or its successor agency.
"Credit period" means the 10-year credit period as defined in § 42(f)(1) of the Internal Revenue Code, as amended.
"Eligibility certificate" means a certificate issued by the Authority to the owner of a qualified project certifying that such project qualifies for the Virginia housing opportunity tax credit authorized by this article, and specifying the annual amount of housing opportunity tax credits that the owner of such qualified project may claim in each year of the credit period. The Authority shall issue an eligibility certificate to a qualified project upon the Authority's approval of a final cost certification that complies with the Authority's requirements.
"Federal low-income housing tax credit" means the federal tax credit as provided in § 42 of the Internal Revenue Code, as amended.
"Housing opportunity tax credit" or "tax credit" means the tax credit created by this article.
"Qualified allocation plan" means the same as such term is defined in § 42(m)(1)(B) of the Internal Revenue Code, as amended.
"Qualified project" means a qualified low-income building, as defined in § 42(c) of the Internal Revenue Code, as amended, that is located in Virginia, is placed in service on or after January 1, 2021, and is issued an eligibility certificate.
"Qualified taxpayer" means a taxpayer owning an interest, direct or indirect, through one or more pass-through entities, in a qualified project at any time prior to filing a tax return claiming a housing opportunity tax credit.
"Taxpayer" means an individual, corporation, S corporation, partnership, limited partnership, limited liability partnership, limited liability company, joint venture, or nonprofit organization.
"Virginia tax liability" means the income taxes imposed by Articles 2 (§ 58.1-320 et seq.), 6 (§ 58.1-360 et seq.), and 10 (§ 58.1-400 et seq.) of this chapter, Chapter 12 (§ 58.1-1200 et seq.), Article 1 (§ 58.1- 2500 et seq.) of Chapter 25, and Article 2 (§ 58.1-2620 et seq.) of Chapter 26. An insurance company claiming a housing opportunity tax credit against the taxes, licenses, and other fees, fines, and penalties imposed by Article 1 of Chapter 25, including any retaliatory tax imposed on insurance companies by the Code of Virginia, shall not be required to pay any additional tax as a result of claiming the housing opportunity tax credit. The housing opportunity tax credit may fully offset any retaliatory tax imposed by the Code of Virginia.
§ 58.1-439.30. Tax credit.
A. A For fiscal years beginning on and after January 1,
2021, but before January 1, 2026, the Authority, upon allocating a federal
low-income housing tax credit and issuing a binding reservation or eligibility
determination to a qualified project pursuant to the Authority's
qualified allocation plan, shall reserve a housing opportunity tax credit under
this article for the owner of the qualified project so long as doing so will
not result in exceeding the fiscal year reservation cap prescribed by subsection
G. The reserved tax credit shall not be less than
one-half of the aggregate amount of the federal low-income housing tax credit
allocated or allowed to the qualified project under the Authority's qualified
allocation plan for all years of the project's credit period. The Authority
shall send written notice of the reservation to the owner of the qualified
project. The notice shall state the aggregate amount of housing opportunity tax
credit reserved for all 10 years of the
qualified project's credit period and stipulate that receipt of the tax credit
is contingent upon issuance of an eligibility certificate. Upon issuance of an
eligibility certificate to the owner of a qualified project, a
housing opportunity tax credit shall be allowed for each qualified project for
each year of the credit period, in an amount equal to the
lesser of (i) the amount of federal low-income housing tax
credit allocated or allowed by the Authority to such qualified project, except
that there shall be no reduction in the tax credit allowable in the first year
of the credit period due to the calculation in 26 U.S.C. § 42(f)(2), or (ii) one-tenth of the reserved tax credit
amount stated in the reservation notice.
B. For taxable years beginning on and after January 1, 2021, but before January 1, 2026, a
qualified taxpayer that has been
issued an eligibility certificate under subsection A may
claim a housing opportunity tax credit against its Virginia tax liability prior
to reduction by any other credits allowed the taxpayer. The housing opportunity
tax credit may be allocated by pass-through entities to some or all of its
partners, members, or shareholders in any manner agreed to by such persons,
regardless of whether or not any such person is allocated or allowed any
portion of any federal low-income housing tax credit with respect to the
qualified project, whether or not the allocation of the housing opportunity tax
credit under the terms of the agreement has substantial economic effect within
the meaning of § 704(b) of the Internal Revenue Code, and whether or not any
such person is deemed a partner for federal income tax purposes as long as the
partner or member would be considered a partner or member as defined under
applicable state law, and has been admitted as a partner or member on or prior
to the date for filing the qualified taxpayer's tax return, including any
amendments thereto, with respect to the year of the housing opportunity tax
credit. Such pass-through entities or qualified taxpayer may assign all or any
part of its interest, including its interest in the tax credits, to one or more
pass-through entities or qualified taxpayers, and the qualified taxpayer shall
be able to claim the housing opportunity tax credit so long as its interest is
acquired prior to the filing of its tax return claiming the housing opportunity
tax credit.
C. The housing opportunity tax credit authorized by this article shall not be refundable. Any housing opportunity tax credit not used in a taxable year may be carried forward for the succeeding five years.
D. A qualified taxpayer claiming a housing opportunity tax credit shall submit a copy of the eligibility certificate at the time of filing its tax return with the Department. If the owner of the qualified project has applied to the Authority for the eligibility certificate but the Authority has not yet issued the eligibility certificate at the time the qualified taxpayer files its original tax return claiming the housing opportunity tax credit, the taxpayer may claim the housing opportunity tax credit based upon the amount of tax credit set forth in the carryover allocation or 42(m) letter, as applicable, issued to the qualified project and shall amend its tax return to include the eligibility certificate upon its receipt. If the amount of tax credit in the eligibility certificate is different than the amount of tax credit previously claimed, the taxpayer shall adjust the tax credit amount claimed on the amended tax return.
E. If under § 42 of the Internal Revenue Code, as amended, a portion of any federal low-income housing credits taken on a qualified project is required to be recaptured or is otherwise disallowed during the credit period, the taxpayer claiming housing opportunity tax credits with respect to such project shall also be required to recapture a portion of any tax credits authorized by this article. The percentage of housing opportunity tax credits subject to recapture shall be equal to the percentage of federal low-income housing credits subject to recapture or otherwise disallowed during such period. Any tax credits recaptured or disallowed shall increase the income tax liability of the qualified taxpayer who claimed the tax credits in a like amount and shall be included on the tax return of the qualified taxpayer submitted for the taxable year in which the recapture or disallowance event is identified.
F. The Authority shall administer the housing opportunity tax
credit program and shall be authorized to promulgate the regulations and
guidelines necessary to implement and administer the provisions of this
article. Such regulations and guidelines may include the imposition of
application, allocation, certification, and monitoring fees designed to recoup
the costs of the Authority in administering the housing opportunity tax credit
program. The Authority may also promulgate regulations and
guidelines in consultation with the Department to allow a qualified project to
elect in its application to the Authority to sell all or any portion of its
credits awarded pursuant to this article to one or more unrelated taxpayers.
Regulations and guidelines regarding the sale of credits, if promulgated, shall
not take effect prior to January 1, 2023, and shall not apply to credits
awarded prior to January 1, 2023.
G. The total amount of tax credits
authorized reserved by the
Authority under this article
in a fiscal year shall not exceed
$15 the sum of (i) $150
million per calendar year; (ii) the amount, if
any, by which the tax credit allocation prescribed by this article for the preceding
fiscal year exceeds the tax credits reserved by the Authority in that year;
and (iii) the amount of tax credits recaptured or otherwise disallowed under
subsection E in the preceding fiscal year.