IRS Issues Population Figures Used to Calculate 2021 LIHTCs

IRS Issues Population Figures Used to Calculate 2021 LIHTCs

On March 15, the IRS issued Notice 2021-19 providing the resident population figures needed to determine the 2021 population-based component of the Low-Income Housing Tax Credit ceiling. Nationally, the population-based LIHTC allocations will increase by 0.4 percent ($3.7 million) in 2021.

The backdrop: The LIHTC program is the federal government’s primary policy tool for the development of affordable rental housing. LIHTCs are awarded to developers to offset the cost of constructing rental housing in exchange for agreeing to reserve a fraction of rent-restricted units for lower-income households.

The process of allocating, awarding, and then claiming the LIHTC is a complex and lengthy one. The first step of the process begins at the federal level with each state receiving an annual LIHTC allocation in accordance with federal law. LIHTCs are first allocated to each state according to its population. The IRS notice determines how LIHTCs each state can allocate to developers of rental housing according to the federally required but state-created allocation plan.

One level deeper: In 2021, states will receive LIHTC allocation authority equal to $2.8125 per person, with a minimum small population state allocation of $3,245,625. For this year, the small state minimum has increased $28,125 from $3,217,500.            

Based on the population figures, Alaska, Delaware, the District of Columbia, Montana, North Dakota, Rhode Island, South Dakota, Vermont, and Wyoming will receive the small-state 9 percent LIHTC minimum of $3,245,625 and not the population-based LIHTC allocation.