LIHTC Overview of California Low-Income Housing Tax Credit Program 4

Question 1

Which of the following best describes the '4% federal LIHTC' credit?

Accepted Answer

A noncompetitive credit typically paired with tax-exempt bond financing

Answer

The 4% credit is a noncompetitive, as-of-right credit available when at least 50% of a project's aggregate basis is financed with tax-exempt bonds.

Question 2

Under the LIHTC program, what is the 'credit period' for a qualified low-income building?

Accepted Answer

10 years

Answer

The credit period is 10 years, during which owners claim the annual tax credit on their federal tax returns.

Question 3

California's state LIHTC differs from the federal LIHTC in that California state credits are:

Accepted Answer

Allocated as a single-year credit rather than a 10-year stream

Answer

California state credits are awarded as a lump-sum (dollar-for-dollar) credit claimed in a single year, unlike the federal credit spread over 10 years.

Question 4

What is the 'eligible basis' in the LIHTC calculation?

Accepted Answer

The depreciable cost of the building eligible for the tax credit calculation

Answer

Eligible basis is the depreciable cost of the residential rental property—excluding land—that forms the starting point for computing the LIHTC.

Question 5

Under California's LIHTC program, a project located in a Difficult Development Area (DDA) or Qualified Census Tract (QCT) may be eligible for a boost to its eligible basis of up to:

Accepted Answer

130%

Answer

Projects in DDAs or QCTs can receive a 130% basis boost under IRC Section 42(d)(5)(B), increasing the amount of credits available.

(LIHTC) California Low-Income Housing Tax Credit Exam Practice Test

(LIHTC) California Low-Income Housing Tax Credit Exam Practice Test

LIHTC Overview of California Low-Income Housing Tax Credit Program 4