Basics of LIHTC
What does the acronym LIHTC stand for?
a. Low-Income Housing Tax Credits
b. Limited Investing Housing Tax Credits
c. Long-term Investment Housing Tax Credits
d. Local Infrastructure Housing Tax Coupons
a. Low-Income Housing Tax Credits
Which U.S. tax reform act introduced the Low-Income Housing Tax Credit program?
a. The Economic Recovery Tax Act of 1981
b. The Tax Reform Act of 1986
c. The Omnibus Budget Reconciliation Act of 1993
d. The American Taxpayer Relief Act of 2012
b. The Tax Reform Act of 1986
Who administers the LIHTC program at the federal level?
a. The Department of Housing and Urban Development (HUD)
b. The Internal Revenue Service (IRS)
c. The Federal Housing Finance Agency (FHFA)
d. The Department of the Treasury
b. The Internal Revenue Service (IRS)
How many low-income units has LIHTC helped to finance?
a. Over 1 million units
b. Over 3 million units
c. Over 5 million units
d. Over 10 million units
b. Over 3 million units
Costs for a LIHTC project include $1,000,000 for the land, $6,500,000 for new construction, and $900,000 in permanent financing costs. What is the eligible basis for the project?
a. $900,000
b. $5,400,000
c. $6,500,000
d. $7,500,000
b. 6,500,000
For how long must properties developed using LIHTC remain affordable?
a. 5 years
b. 10 years
c. 15 years
d. At least 15 years, with an additional 15-year compliance period, totaling 30 years
d. At least 15 years, with an additional 15-year compliance period, totaling 30 years.
Has the LIHTC program been permanently extended?
a. Yes, the LIHTC program was made permanent in 1993.
b. No, the LIHTC program is subject to periodic renewal by Congress.
c. Yes, but only until 2030.
d. No, but the program is set to expire in 2025.
a. Yes, the LIHTC program was made permanent in 1993.
Who typically invests in LIHTC projects?
a. Individual taxpayers
b. Non-profit organizations
c. Corporate investors, often through syndication
d. Local government agencies.
c. Corporate investors, often through syndication
What impact does the LIHTC program have on land values in surrounding areas?
a. It decreases land value.
b. It has no significant impact on land value.
c. It raises land value.
d. It initially raises land value but then causes a decline.
c. It raises land value
Costs for a LIHTC project include $125,000 for the land, $1,000,000 for new construction, and $100,000 in permanent financing costs. 60% of units will be dedicated to Low-Income tenants with incomes of 60% or less of AMI. What is the qualified basis for the project?
a. $540,000
b. $600,000
c. $615,000
d. $675,000
b. $600,000
What percentage of all affordable housing in the United States is funded by the LIHTC program?
a. 50%
b. 70%
c. 90%
d. 100%
c. 90%
Which event in 2008 significantly impacted the LIHTC market?
a. The global financial crisis and housing crisis, which led to a decrease in the demand for tax credits.
b. The introduction of a 4% credit rate for acquisition of existing buildings.
c. The expansion of the program to include non-residential developments.
d. The decision to allow states to allocate additional credits for disaster relief.
a. The global financial crisis and housing crisis, which led to a decrease in the demand for tax credits.
What is the role of a Qualified Allocation Plan (QAP) in the LIHTC process?
a. It outlines the selection criteria and application process for allocating tax credits at the state level.
b. It determines the federal tax rates for LIHTC projects.
c. It provides direct funding for the construction of affordable housing.
d. It sets the income limits for residents of the LIHTC properties.
a. It outlines the selection criteria and application process for allocating tax credits at the state level.
What are some of the economic impacts of the LIHTC program in its neighborhood?
a. It creates jobs and boosts economic development.
b. It leads to a decrease in local employment and economic activity.
c. It has no significant impact on job creation or economic development.
d. It primarily benefits high-income communities at the expense of economic development in low-income areas.
a. It creates jobs and boosts economic development.
What amount of tax credits can a developer expect to receive over a 10 year period for a project that has an eligible basis of 10,000,000, a dedicated 50% of units for low-income housing, and at the credit rate of 9%?
a. $45,000
b. $90,000
c. $450,000
d. $900,000
c. $450,000
Can LIHTC be used for both new construction and rehabilitation of existing housing units?
a. Yes, LIHTC can be used for both new construction and the rehabilitation of existing housing units.
b. No, LIHTC can only be used for new construction.
c. No, LIHTC can only be used for the rehabilitation of existing housing units.
d. Yes, but only if the rehabilitation costs exceed 50% of the total project cost.
a. Yes, LIHTC can be used for both new construction and the rehabilitation of existing housing units.
What major change occurred to the LIHTC program in 2000?
a. The introduction of a 15-year compliance period.
b. The establishment of a fixed 9% credit rate for new construction and substantial rehabilitation.
c. The introduction of income averaging as an eligibility criterion.
d. The increase of the minimum set-aside requirement to 40%
b. The establishment of a fixed 9% credit rate for new construction and substantial rehabilitation.
What is the maximum income level for tenants in LIHTC properties?
a. 30% of the area median income (AMI)
b. 50% of the AMI
c. 60% of the AMI
d. 80% of the AMI
c. 60% of the AMI
What is the significance of the LIHTC program in terms of affordable housing creation?
a. It is a minor source of new affordable housing, creating less than 10,000 units each year.
b. It is a moderate source of new affordable housing, creating around 50,000 units each year.
c. It is the largest source of new affordable housing, creating 100,000 units each year.
d. It primarily focuses on rehabilitating existing units rather than creating new affordable housing.
c. It is the largest source of new affordable housing, creating 100,000 units each year.
What remaining equity would be required for a project with a total cost of $15,000,000, total tax credits of $10,000,000, and permanent debt of $5,000,000? The credits will be traded for equity at $0.90 on the dollar.
a. $0
b. $1,000,000
c. $4,500,000
d. $6,000,000
b. $1,000,000
In the context of LIHTC, what is a tax credit syndicator?
a. A government agency that allocates tax credits to developers.
b. An entity that pools tax credits from various projects to sell to investors.
c. A financial institution that provides loans for LIHTC projects.
d. A developer that constructs affordable housing using LIHTC funds.
b. An entity that pools tax credits from various projects to sell to investors.
What significant amendment was made to the LIHTC program under the Housing and Economic Recovery Act of 2008 in response to the financial crisis.
a. Introduction of the 4% credit rate for acquisition of existing buildings.
b. Creation of the Tax Credit Assistance Program (TCAP) to provide additional funding.
c. Increase in state per capita credit ceiling by 20%.
d. Establishment of the National Pool for unused credits.
b. Creation of the Tax Credit Assistance Program (TCAP) to provide additional funding.
What is the minimum cost requirement for building or rehabilitation per low-income unit to be eligible for LIHTC?
a. $500
b. $1,000
c. $1,500
d. $2,000
d. $2,000
Where are LIHTC developments typically located, and what areas are often left out?
a. Typically located in rural areas, often leaving out urban and suburban areas.
b. Primarily in suburban areas, frequently excluding urban and rural regions.
c. Equally distributed across urban, suburban, and rural areas, with no areas left out.
d. Mostly in urban and suburban areas, with rural areas often left out.
d. Mostly in urban and suburban areas, with rural areas often left out.
Costs for a LIHTC project include $1,000,000 for the land, $5,000,000 for new construction, and $900,000 in permanent financing costs. Project owners are looking to receive $360,000 in credits yearly for 10 years at the 9% rate. What portion of the project needs to be dedicated to low-income housing?
a. 40%
b. 60%
c. 80%
d. 100%
c. 80%