IRS Publishes Population Figures Used to Calculate 2022 LIHTCs

IRS Publishes Population Figures Used to Calculate 2022 LIHTCs

The IRS recently published Notice 2022-12, which provides the resident population figures needed to determine the 2021 population-based component of the Low-Income Housing Tax Credit (LIHTC) ceiling. The notice reveals that from 2021 to 2022, the U.S. population increased by 2,409,622 residents to 331,893,745 people, a gain of 0.7 percent.

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: The 2022 LIHTC cap for each state is the greater of two figures: (1) the state population multiplied by $2.60; or (2) $2,975,000. The $2.60 LIHTC multiplier is the lowest since 2017, when it was $2.35. And the $2,975,000 small-state minimum for LIHTCs decreased by $270,625 from 2021. Nationally, the LIHTC allocation authority for 2022 will be more than $870 million, which is down from about $935 million in 2021.