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IRS Reallocates $8.2 Million in Unused LIHTCs from 2022, Nearly Tripling Earlier Amount

Published by Peter Lawrence on Monday, April 8, 2024 - 2:06PM

The Internal Revenue Service (IRS) granted approximately $8.2 million in unused low-income housing tax credit (LIHTC) allocation authority to states this week from fiscal year 2022, nearly triple the $3.2 million in unused allocation authority originally reallocated in October 2023.

In Revenue Procedure 2024-18, the IRS announced that 28 states–the same states that received the original reallocation authority six months ago–were allocated carryover credits to their 2023 round. The amounts ranged from $24,000 to Vermont to $1.1 million for Texas.

Below are the totals from Monday’s announcement:

Blog Graphic: Additional Unused LIHTCs Reallocated

The combined $11.4 million between the two carryover announcements is a dramatic uptick over the amounts in recent years.  

The IRS issued Revenue Procedure 2023-32 in October, announcing that it granted more than $3.2 million in unused FY 2022 LIHTC allocation authority to states. That amount was the continuation of a trend of lessening amounts of unused allocation authority being reallocated. In 2021, there was $7.8 million in unused LIHTCs and in 2022, there was $5.4 million–although those figures were likely due to the COVID-19 pandemic resulting in construction delays and larger amounts of returned credits, some of which were not reallocated. The COVID-related factors likely played a major role in the number of reallocated credits for 2023, reflected in Monday’s additional reallocation amount.

In that first round of reallocation, the states received amounts ranging from $9,000 for Vermont to $450,000 for Texas. The IRS distributed both rounds of unused credits among states that used all but a de minimis amount of their 2022 allocation authority.

Unused LIHTC authority is not necessarily because it wasn’t allocated. The amount often results from states or territories having too little remaining LIHTC authority to be allocated to an affordable housing development.

National demand for the LIHTC remains robust. Even adding the $8.2 million reallocated this week, the combined national unused pool from 2023 is equal to about 1.2% of the national 9% LIHTC allocation authority amount

Below are the original amounts reallocated in October 2023:

Blog Graphic: States Receiving 2023 Unused LIHCTs

Takeaway: Reallocation Amount Shows High Use of Financing Tool

Most states consistently use their full LIHTC allocation and even those that don’t still use most of it. That results in the consistently small amount of credits available for reallocation to the states.

While the original allocation ensures that states can use the LIHTC where it’s needed, the allocation of unused LIHTCs shows that the incentive is working as it should.

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