Bill Tracking - 2021 session (2023)


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An Act to amend the Code of Virginia by adding in Chapter 3 ofTitle 58.1 an article numbered 13.4, consisting of sections numbered58.1-439.29 and 58.1-439.30, relating to Virginia housing opportunity taxcredit.

[S 1197]

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia is amended by adding in Chapter3 of Title 58.1 an article numbered 13.4, consisting of sections numbered58.1-439.29 and 58.1-439.30, as follows:

Article 13.4.
Virginia Housing Opportunity Tax Credit Act.

§ 58.1-439.29. Definitions.

As used in this article, unless the context requires adifferent meaning:

"Authority" means the Virginia HousingDevelopment Authority, or its successor agency.

"Credit period" means the credit period asdefined in § 42(f)(1) of the Internal Revenue Code, as amended.

"Eligibility certificate" means a certificateissued by the Authority to the owner of a qualified project certifying thatsuch project qualifies for the Virginia housing opportunity tax creditauthorized by this article, and specifying the amount of housing opportunitytax credits that the owner of such qualified project may claim in each year ofthe credit period. The Authority shall issue an eligibility certificate to aqualified project upon the Authority's approval of a final cost certificationthat complies with the Authority's requirements.

"Federal low-income housing tax credit" means thefederal tax credit as provided in § 42 of the Internal Revenue Code, asamended.

"Housing opportunity tax credit" or "taxcredit" means the tax credit created by this article.

"Qualified project" means a qualified low-incomebuilding, as defined in § 42(c) of the Internal Revenue Code, as amended, thatis located in Virginia, is placed in service on or after January 1, 2021, andis issued an eligibility certificate.

"Qualified taxpayer" means a taxpayer owning aninterest, direct or indirect, through one or more pass-through entities, in aqualified project at any time prior to filing a tax return claiming a housingopportunity tax credit.

"Taxpayer" means an individual, corporation, Scorporation, partnership, limited partnership, limited liability partnership,limited liability company, joint venture, or nonprofit organization.

"Virginia tax liability" means the income taxesimposed 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.) ofChapter 26. An insurance company claiming a housing opportunity tax creditagainst the taxes, licenses, and other fees, fines, and penalties imposed byArticle 1 of Chapter 25, including any retaliatory tax imposed on insurancecompanies by the Code of Virginia, shall not be required to pay any additionaltax as a result of claiming the housing opportunity tax credit. The housingopportunity tax credit may fully offset any retaliatory tax imposed by the Codeof Virginia.

§ 58.1-439.30. Tax credit.

A. A housing opportunity tax credit shall be allowed foreach qualified project for each year of the credit period, in an amount equalto the amount of federal low-income housing tax credit allocated or allowed bythe Authority to such qualified project, except that there shall be noreduction in the tax credit allowable in the first year of the credit perioddue to the calculation in 26 U.S.C. § 42(f)(2).

B. For taxable years beginning on and after January 1,2021, but before January 1, 2026, a qualified taxpayer may claim a housingopportunity tax credit against its Virginia tax liability prior to reduction byany other credits allowed the taxpayer. The housing opportunity tax credit maybe 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 whetheror not any such person is allocated or allowed any portion of any federallow-income housing tax credit with respect to the qualified project, whether ornot the allocation of the housing opportunity tax credit under the terms of theagreement has substantial economic effect within the meaning of § 704(b) of theInternal Revenue Code, and whether or not any such person is deemed a partnerfor federal income tax purposes as long as the partner or member would be considereda partner or member as defined under applicable state law, and has beenadmitted as a partner or member on or prior to the date for filing thequalified taxpayer's tax return, including any amendments thereto, with respectto the year of the housing opportunity tax credit. Such pass-through entitiesor qualified taxpayer may assign all or any part of its interest, including itsinterest in the tax credits, to one or more pass-through entities or qualifiedtaxpayers, and the qualified taxpayer shall be able to claim the housingopportunity tax credit so long as its interest is acquired prior to the filingof its tax return claiming the housing opportunity tax credit.

C. The housing opportunity tax credit authorized by thisarticle shall not be refundable. Any housing opportunity tax credit not used ina taxable year may be carried forward for the succeeding five years.

D. A qualified taxpayer claiming a housing opportunity taxcredit shall submit a copy of the eligibility certificate at the time of filingits tax return with the Department. If the owner of the qualified project hasapplied to the Authority for the eligibility certificate but the Authority hasnot yet issued the eligibility certificate at the time the qualified taxpayerfiles its original tax return claiming the housing opportunity tax credit, thetaxpayer may claim the housing opportunity tax credit based upon the amount oftax credit set forth in the carryover allocation or 42(m) letter, asapplicable, issued to the qualified project and shall amend its tax return toinclude the eligibility certificate upon its receipt. If the amount of taxcredit in the eligibility certificate is different than the amount of taxcredit previously claimed, the taxpayer shall adjust the tax credit amount claimedon 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 projectis required to be recaptured or is otherwise disallowed during the creditperiod, the taxpayer claiming housing opportunity tax credits with respect tosuch project shall also be required to recapture a portion of any tax creditsauthorized by this article. The percentage of housing opportunity tax creditssubject to recapture shall be equal to the percentage of federal low-incomehousing credits subject to recapture or otherwise disallowed during suchperiod. Any tax credits recaptured or disallowed shall increase the income taxliability of the qualified taxpayer who claimed the tax credits in a likeamount and shall be included on the tax return of the qualified taxpayersubmitted for the taxable year in which the recapture or disallowance event isidentified.

F. The Authority shall administer the housing opportunitytax credit program and shall be authorized to promulgate the regulations andguidelines necessary to implement and administer the provisions of thisarticle. Such regulations and guidelines may include the imposition ofapplication, allocation, certification, and monitoring fees designed to recoupthe costs of the Authority in administering the housing opportunity tax creditprogram. The Authority may also promulgate regulations and guidelines inconsultation with the Department to allow a qualified project to elect in itsapplication to the Authority to sell all or any portion of its credits awardedpursuant to this article to one or more unrelated taxpayers. Regulations andguidelines regarding the sale of credits, if promulgated, shall not take effectprior to January 1, 2023, and shall not apply to credits awarded prior toJanuary 1, 2023.

G. The total amount of tax credits authorized under thisarticle shall not exceed $15 million per calendar year.

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