Financial institutions may obtain a credit against the sum total of taxes imposed by the Franchise and Excise Tax Laws when qualified loans, qualified investments, grants, or contributions are extended to eligible housing entities for engaging in eligible low-income housing activities. The amount of the credit shall be applied one time and will be based on the total amount of the loan, investment, grant, or contribution; or the credit may be applied annually for qualified loans and qualified low rate loans and will be based on the unpaid principal balance of the loan. The amount of the credit shall be as follows:
- Five percent (5%) of a qualified loan or qualified long term-term investment; OR three percent (3%) annually of the unpaid principal balance of a qualified loan as of December 31 of each year for the life of the loan, OR fifteen (15) years, whichever is earlier.
- Ten percent (10%) of a qualified low rate loan, grant, or contribution; OR five percent (5%) annually of the unpaid principal balance of a qualified low rate loan as of December 31 of each year for the life of the loan, OR fifteen (15) years, whichever is earlier.
The program is administered in cooperation with The Tennessee Department of Revenue. THDA will certify the housing entity and activity as eligible to receive the tax credits. TDoR will award the tax credits to the financial institutions. The eligible housing entity will be required to maintain records as requested by THDA to ensure that affordable housing opportunities are being provided.
- Activities that create or preserve affordable housing for low-income Tennesseans.
- Activities that assist low-income Tennesseans in obtaining safe and affordable housing.
- Activities that build the capacity of an eligible non-profit organization to provide housing opportunities for low-income Tennesseans.
- Any other low-income housing related activity approved by the THDA Executive Director and the Commissioner of Revenue.
Low-income Tennesseans are defined as those who are at or below 80% of the area median income as adjusted for family size. Applicable income limits are the current income limits produced by the Department of Housing and Urban Development for the Section 8 Programs. Tennessee limits may be found at www.huduser.org/datasets/il.html.
Eligible Housing Entities
- Tennessee based non-profit organizations with an Internal Revenue Code 501 (C)(3) status
- Public Housing Authorities
- Development Districts
- Tennessee Housing Development Agency
Participating financial institutions will receive tax credits for extending the following to eligible housing entities
- Qualified loans defined as a loan at least 2% below the prime rate
- Qualified low-rate loans defined as a loan at least 4% below the prime rate
- Qualified long term investments extending for a period of more than 5 years
- Grants or contributions
Qualified long-term investments are defined as equity investments where repayment is not expected to begin for a period of more than 5 years. Tax credits may be available to financial institutions retroactively for funds extended to eligible housing entities for eligible activities back to the date the bill was signed into law, June 22, 2005. Unused tax credits that are applied one time may be carried forward for a period of 15 years after the tax year in which the credit originated. Unused tax credits that are applied annually may not be carried forward beyond the tax year in which the credit originated.
Certification & Review Process
THDA will certify the financial institution’s contribution as eligible for the tax credit by confirming that the receiving organization meets eligibility requirements and that the proposed activities are eligible. An initial review of the proposed activity will be conducted upon submission of the application packet to THDA. The vast majority of subsequent reviews will be done via desk audits of scheduled progress reports submitted to THDA by the recipient agency. THDA will conduct the reviews until the approved eligible activity is completed or funds are exhausted. Upon receipt of the Certificate of Contribution for Tax Credit from THDA, TDoR will calculate the tax credits to be awarded to the financial institution. In the event that the recipient agency does not accomplish the approved activity, the financial institution will bear no fault, and will retain the awarded tax credits. THDA has established decertification criteria for agencies failing to accomplish approved activities.
Failure to comply with the terms of the Community Investment Tax Credit Program will cause the qualifying organization to be decertified and deemed ineligible to participate in the Community Investment Tax Credit Program for a period not to exceed 36 months from the date of decertification. The qualifying organization may be granted an opportunity to cure findings prior to decertification. Financial institutions that make subsequent loans, investments, grants, or contributions to decertified organizations will not be awarded tax credits for those transactions.
Required Documentation to be Submitted at the Time of Application
- Copy of 501(C)(3) designation letter from the IRS.
- Copy of valid Certificate of Existence from the Tennessee Secretary of State dated no more than 12 months prior to the date of application submission.
- Project business plan describing the proposed housing related activity. The plan will detail what is going to be done, where the activity will take place, who and how many will benefit, the income levels of the population to be served, how the funds from the financial institution will be used, and the expected time frame for completion.
Scheduled reports are to be submitted by the recipient agency to THDA detailing progress on the approved activity. Upon THDA certification, the eligible organization will be informed of the required reporting schedule. The eligible organization will be required to submit a completion report to THDA within 30 days of project completion.
- The requesting agency or the financial institution will secure the Certificate of Contribution for Tax Credit form from the THDA or TDoR website.
- The Certificate of Contribution for Tax Credit should be completed by both the requesting agency and the financial institution. The Certificate of Contribution for Tax Credit should be signed by authorized representatives of the requesting agency and the financial institution.
- The requesting agency will submit the completed Certification form and the project business plan to THDA. If the requesting agency is a non-profit entity, a Certificate of Existence from the Secretary of State, dated no more than 12 months prior to the date of application submission, and IRS documentation designating the organization as a 501 (C)(3) entity must also be submitted.
- THDA will certify both the organization and the funded activity as meeting eligibility guidelines and will forward the Certification form to TDoR.
- TDoR will inform the financial institution and THDA of the amount of tax credits awarded. TDoR will inform THDA if tax credits are not awarded.
- THDA will notify the requesting agency that their Certificate of Contribution for Tax Credit has been fully certified. A schedule for required progress reports will be established.
- The requesting agency will submit scheduled progress reports to THDA until the funded activity is completed or the funds are exhausted.
- The requesting agency will submit a completion report to THDA within 30 days of project completion.
Applications may be e-mailed to: CITC@thda.org
Applications may be physically mailed to:
- Tennessee Housing Development Agency
502 Deaderick St., Third Floor
Nashville, TN 37243-0900