Workforce Housing Tax Incentives Program

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Summary

This policy allows housing projects that meet specific affordability criteria to apply for state tax incentives to assist with the development and/or rehabilitation of housing sites. It includes certain guidelines to ensure that taxpayer dollars are protected from misuse and that rural areas benefit from the reform.

Workforce Housing Tax Incentives Program

Section. 1. Definitions.

(1) “Brownfield site” means an abandoned, idled, or underutilized property where expansion or redevelopment is complicated by real or perceived environmental contamination. A brownfield site includes property contiguous with the site on which the property is located. A brownfield site does not include property which has been placed, or is proposed for placement, on the national priorities list established pursuant to the federal Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §9601 et seq.

(2) “Community” means a city or county.

(3) “Grayfield site” means a property meeting all of the following requirements:

(a) The property has been developed and has infrastructure in place but the property’s current use is outdated or prevents a better or more efficient use of the property. Such property includes vacant, blighted, obsolete, or otherwise underutilized property.

(b) The property’s improvements and infrastructure are at least twenty-five years old and one or more of the following conditions exists:

(i) Thirty percent or more of a building located on the property that is available for occupancy has been vacant or unoccupied for a period of twelve months or more.

(ii) The assessed value of the improvements on the property has decreased by twenty-five percent or more.

(iii) The property is currently being used as a parking lot.

(iv) The improvements on the property no longer exist.

(4) “Greenfield site” means a site that does not meet the definition of a brownfield site or grayfield site. A project proposed at a site located on previously undeveloped land or agricultural land shall be presumed to be a greenfield site.

(5) “Housing business” means a business that is a housing developer, housing contractor, or nonprofit organization that completes a housing project in the state.

(6) “Housing project” means a project located in this state meeting the requirements of section 2.

(7) “Multi-use building” means a building whose street-level ground story is used for a purpose that is other than residential, and whose upper story or stories are currently used primarily for a residential purpose, or will be used primarily for a residential purpose after completion of the housing project associated with the building.

(8) “Program” means the workforce housing tax incentives program administered under this Act.

(9) “Qualifying new investment” means costs that are directly related to the acquisition, repair, rehabilitation, or redevelopment of a housing project in this state; including costs that are directly related to new construction of dwelling units if the new construction occurs in a distressed workforce housing community.

(a) The amount of costs that may be used to compute “qualifying new investment” shall not exceed the costs used for the first one hundred fifty thousand dollars of value for each dwelling unit that is part of a housing project.

(b) “Qualifying new investment” does not include the following:

(i) The portion of the total cost of a housing project that is financed by federal, state, or local government tax credits, grants, forgivable loans, or other forms of financial assistance that do not require repayment, excluding the tax incentives provided under this part.

(ii) If a housing project includes the rehabilitation, repair, or redevelopment of an existing multi-use building, the portion of the total acquisition costs of the multi-use building, including a proportionate share of the total acquisition costs of the land upon which the multi-use building is situated, that are attributable to the street-level ground story that is used for a purpose that is other than residential.

(10) “Small city” means the following:

(a) Any city or township located in this state, except those located wholly within one or more of the eleven most populous counties in the state, as determined by either the most recent population estimate produced by the United States bureau of census or the most recent decennial census released by the United States bureau of census.

(b) Any city or township located wholly within one or more of the eleven most populous counties in the state, as determined pursuant to paragraph “a” above, and that meets all of the following requirements:

(i) The city or township has a population less than or equal to two thousand five hundred as determined by either the most recent population estimate produced by the United States bureau of census or the most recent decennial census released by the United States bureau of census.

(ii) The city or township had population growth of less than thirty percent as calculated by comparing the population in the most recent decennial census released ten years prior.

(11) “Urban area” means any city or township, except for a small city, that is wholly located within one or more of the eleven most populous counties in the state, as determined by either the most recent population estimate produced by the United States bureau of census or the most recent decennial census released by the United States bureau of census.

Sec. 2. Housing project requirements.

(1) To receive workforce housing tax incentives pursuant to this Act, a proposed housing project shall meet all of the following requirements:

(a) The project includes at least one of the following:

(i) Four or more single-family dwelling units, except for a project located in a small city, then two or more single-family dwelling units.

(ii) One or more multiple dwelling unit buildings each containing three or more individual dwelling units.

(iii) Two or more dwelling units located in the upper story of an existing multi-use building.

(b) The project consists of any of the following:

(i) Rehabilitation, repair, or redevelopment at a brownfield or grayfield site that results in new dwelling units.

(ii) The rehabilitation, repair, or redevelopment of dilapidated dwelling units.

(iii) The rehabilitation, repair, or redevelopment of dwelling units located in the upper story of an existing multi-use building.

(iv) Construction of new dwelling units at a greenfield site.

(v) For a housing project located in any county that has been declared a major disaster by the president of the United States, and that is also a county in which individuals are eligible for federal individual assistance, development at a greenfield site.

(vi) (a) The new construction, rehabilitation, repair, or redevelopment of dwelling units in a distressed workforce housing community.

(b) The determination as to whether a community is considered a distressed workforce housing community shall be within the discretion of the authority after considering all of the following:

(i) Whether or not the community has a severe housing shortage relative to demand, low vacancy rates, or rising housing costs combined with low unemployment.

(ii) The relative merits of all applications for designation as a distressed workforce housing community.

(iii) The demand for projects applying under this subparagraph compared to the demand for projects applying under subparagraphs (1) through (3).

(vii) (a) Except as provided in paragraph “b”, the average dwelling unit cost does not exceed the maximum amount established by the authority for each fiscal year for the applicable project type and project location. The authority shall establish the maximum average dwelling unit cost for a project that includes single-family dwelling units that is located in a small city and for a project that includes single-family dwelling units that is located in an urban area. The board shall establish the maximum average dwelling unit cost for a project that includes multiple dwelling unit buildings and is located in a small city and for a project that includes multiple dwelling unit buildings and is located in an urban area. In establishing each maximum average dwelling unit cost, the authority shall primarily consider the most recent annual United States census bureau building permits survey and historical program data.

(b) If the project involves the rehabilitation, repair, redevelopment, or preservation of property as defined under Section 47 of the Internal Revenue Code, the average dwelling unit cost shall not exceed one hundred twenty-five percent of the maximum average dwelling unit cost established by the board for the applicable project type and project location as provided in paragraph “a”.

(c) The dwelling units, when completed and made available for occupancy, meet the United States department of housing and urban development’s housing quality standards and all applicable local safety standards.

Sec. 3.  Housing project application and agreement.

(1) Application.

(a) A housing business seeking workforce housing tax incentives provided in section 4 shall make application to the authority in the manner prescribed by the authority. The authority may accept applications during one or more annual application periods to be determined by the authority by rule.

(b) The application shall include all of the following:

(i) The following information establishing local participation for the housing project:

(1) A resolution in support of the housing project by the community where the housing project will be located.

(2) Documentation of local matching funds pledged for the housing project in an amount equal to at least one thousand dollars per dwelling unit, including but not limited to a funding agreement between the housing business and the community where the housing project will be located. For purposes of this paragraph, local matching funds shall be in the form of cash or cash equivalents, or in the form of a local property tax exemption, rebate, refund, or reimbursement.

(3) A report submitted to the authority by a business together with its application describing all violations of environmental law or worker safety law within the last five years. If, upon review of the application, the authority finds that the business has a record of violations of the law, statutes, rules, or regulations that tends to show a consistent pattern, the authority shall not provide incentives or assistance to the business unless the authority finds either that the violations did not seriously affect public health, public safety, or the environment, or, if such violations did seriously affect public health, public safety, or the environment, that mitigating circumstances were present.

(4) Information showing the total costs and funding sources of the housing project sufficient to allow the authority to adequately determine the financing that will be utilized for the housing project, the actual cost of the dwelling units, and the amount of qualifying new investment.

(5) Any other information deemed necessary by the authority to evaluate the eligibility and financial need of the housing project under the program.

(c) In addition to complying with all applicable requirements in paragraph “b”, a housing business that chooses to be considered as an applicant for tax credits reserved for disaster relief, shall also submit a certification that the applicant’s housing project is located in a county that has been declared a major disaster by the president of the United States on or after March12, 2019, and is also a county in which individuals are eligible for federal individual assistance. The housing business must also submit documentation that provides evidence that the qualified housing project is needed due to impact of the disaster that is the subject of the presidential major disaster declaration.

(2) Registration.

(a) All completed applications shall be reviewed and scored on a competitive basis by the authority pursuant to rules adopted by the authority.

(b) Upon review and scoring of all applications received during an application period, the authority may make a tax incentive award to a housing project, which tax incentive award shall represent the maximum amount of tax incentives.  In determining a tax incentive award, the authority shall not use an amount of project costs that exceeds the amount included in the application of the housing business. Tax incentive awards shall be approved by the director of the authority.

(c) After making a tax incentive award, the authority shall notify the housing business of its tax incentive award. The notification shall include the amount of tax incentives under section 4 for which the housing business has received an award and a statement that the housing business has no right to receive a tax incentive certificate or claim a tax incentive until all requirements of the program, including all requirements imposed by the agreement entered into pursuant to subsection 3, are satisfied. The amount of tax credits included on a tax credit certificate issued pursuant to this section, or a claim for refund of sales and use taxes, shall be contingent upon completion of all requirements in subsection 3.

(d) An applicant that does not receive a tax incentive award during an application period may make additional applications during subsequent application periods. Such applicant shall be required to submit a new application, which shall be competitively reviewed and scored in the same manner as other applications in that application period.

(3) Agreement and fees.

(a) Upon receipt of a tax incentive award of the housing project, the housing business shall enter into an agreement with the authority for the successful completion of all requirements of the program.

(b) The compliance cost fees imposed by administrative rule by the authority, shall apply to all agreements entered into under this program and shall be collected by the authority in the same manner and to the same extent as described in that subsection.

(c) A housing business shall complete its housing project within three years from the date the housing project is registered by the authority.

(d) Upon completion of a housing project, an examination of the project in accordance with the American institute of certified public accountants’ statements on standards for attestation engagements, completed by a certified public accountant authorized to practice in this state, shall be submitted to the authority.

(e) Upon review of the examination and verification of the amount of the qualifying new investment, the authority may issue a tax credit certificate to the housing business stating the amount of workforce housing investment tax credits under section 4 the eligible housing business may claim.

(4) Maximum tax incentives amount.

(a) The maximum aggregate amount of tax incentives that may be awarded under section 4 to a housing business for a housing project shall not exceed one million dollars.

(b) If a housing business qualifies for a higher amount of tax incentives under section 4 than is allowed by the limitation imposed in paragraph “a”, the authority and the housing business may negotiate an apportionment of the reduction in tax incentives between the sales tax refund provided in section 4, subsection 2, and the workforce housing investment tax credits provided in section 4, subsection 3, provided the total aggregate amount of tax incentives after the apportioned reduction does not exceed the amount in paragraph “a”.

(c) The authority shall issue tax incentives under the program on a first-come, first-served basis until the maximum amount of tax incentives allocated is reached. The authority shall maintain a list of registered housing projects under the program so that if the maximum aggregate amount of tax incentives is reached in a given fiscal year, registered housing projects that were completed but for which tax incentives were not issued shall be placed on a wait list in the order the registered housing projects were registered and shall be given priority for receiving tax incentives in succeeding fiscal years.

(d) In allocating tax credits pursuant to this Act, the authority shall not allocate more than fifty million dollars for any one fiscal year. Of the moneys allocated under this paragraph, twenty-five million dollars shall be reserved for allocation to qualified housing projects in small cities, as defined in section 1.

(5) Termination and repayment. The failure by a housing business in completing a housing project to comply with any requirement of this program or any of the terms and obligations of an agreement entered into pursuant to this section may result in the reduction, termination, or rescission of the approved tax incentives and may subject the housing business to the repayment or recapture of tax incentives claimed under section 4. The repayment or recapture of tax incentives pursuant to this section shall be considered a tax payment due and payable to the department of revenue by any taxpayer who has claimed such incentives, and the failure to make such a repayment may be treated by the department of revenue in the same manner as a failure to pay the tax shown due or required to be shown due with the filing of a return or deposit form. In addition, the county shall have the authority to take action to recover the value of property taxes not collected as a result of the exemption provided to the business under this part.

Sec. 4. Workforce housing tax incentives.

(1) A housing business that has entered into an agreement pursuant to section 3 is eligible to receive the tax incentives described in subsections 2 and 3.

(2) (a) A housing business may claim a tax credit in an amount not to exceed ten percent of the qualifying new investment of a housing project.

(b) The tax credit shall be allowed against the personal income tax, business tax on corporations, tax on financial institutions, tax on insurance companies, and tax on credit unions.

(c) An individual may claim a tax credit under this subsection of a partnership, limited liability company, S corporation, estate, or trust electing to have income taxed directly to the individual. The amount claimed by the individual shall be based upon the pro rata share of the individual’s earnings from the partnership, limited liability company, S corporation, estate, or trust.

(d) Any tax credit in excess of the taxpayer’s liability for the tax year is not refundable but may be credited to the tax liability for the following five years or until depleted, whichever is earlier.

(e) (1) To claim a tax credit under this subsection, a taxpayer shall include one or more tax credit certificates with the taxpayer’s tax return.

(2) The tax credit certificate shall contain the taxpayer’s name, address, tax identification number, the amount of the credit, the name of the eligible housing business, any other information required by the department of revenue, and a place for the name and tax identification number of a transferee and the amount of the tax credit being transferred.

(3) The tax credit certificate, unless rescinded by the authority, shall be accepted by the department of revenue as payment for the personal income tax, business tax on corporations, tax on financial institutions, tax on insurance companies, and tax on credit unions, subject to any conditions or restrictions placed by the authority upon the face of the tax credit certificate and subject to the limitations of this program.

(4) Tax credit certificates issued under section 3, subsection 3, paragraph “e”, may be transferred to any person. Within ninety days of transfer, the transferee shall submit the transferred tax credit certificate to the department of revenue along with a statement containing the transferee’s name, tax identification number, and address, the denomination that each replacement tax credit certificate is to carry, and any other information required by the department of revenue. However, tax credit certificate amounts of less than the minimum amount established by rule of the authority shall not be transferable.

(5) Within thirty days of receiving the transferred tax credit certificate and the transferee’s statement, the department of revenue shall issue one or more replacement tax credit certificates to the transferee. Each replacement tax credit certificate must contain the information required for the original tax credit certificate and must have the same expiration date that appeared on the transferred tax credit certificate.

(6) A tax credit shall not be claimed by a transferee under this section until a replacement tax credit certificate identifying the transferee as the proper holder has been issued. The transferee may use the amount of the tax credit transferred against the personal income tax, business tax on corporations, tax on financial institutions, tax on insurance companies, and tax on credit unions, for any tax year the original transferor could have claimed the tax credit. Any consideration received for the transfer of the tax credit shall not be included as income for the personal income tax, business tax on corporations, tax on financial institutions, tax on insurance companies, and tax on credit unions.

(f) For purposes of the individual and corporate income taxes and the franchise tax, the increase in the basis of the property that would otherwise result from the qualifying new investment shall be reduced by the amount of the tax credit computed under this subsection.

Sec. 5  Sales and Use Tax Refund.

(1) A housing business may claim a refund of the sales and use taxes that are directly related to a housing project.

(2) The housing business shall be entitled to a refund of the sales and use taxes for gas, electricity, water, or sewer utility services, tangible personal property, or on services rendered, furnished, or performed to or for a contractor or subcontractor and used in the fulfillment of a written contract relating to the construction or equipping of a housing project.  Taxes attributable to intangible property and furniture and furnishings shall not be refunded.

(3) To receive the refund, a claim shall be filed by the housing business with the department of revenue as follows:

(a) The contractor or subcontractor shall state under oath, on forms provided by the department of revenue, the amount of the sales of tangible personal property or services rendered, furnished, or performed including water, sewer, gas, and electric utility services upon which sales or use tax has been paid prior to the contract completion, and shall file the forms with the housing business before final settlement is made.

(b) The housing business shall, after contract completion, make application to the department of revenue for any refund of the amount of the sales and use taxes paid upon any tangible personal property, or services rendered, furnished, or performed, including water, sewer, gas, and electric utility services.  The application shall be made in the manner and upon forms to be provided by the department of revenue, and the department of revenue shall audit the claim and, if approved, issue a warrant to the eligible business in the amount of the sales or use tax which has been paid to the state under a contract.

(c) The application must be made within one year after the project completion date.

(d) The eligible business shall inform the department of revenue in writing after contract completion.

(4) A contractor or subcontractor who willfully makes a false report of tax paid under the provisions of this section is guilty of a simple misdemeanor and in addition is liable for the payment of the tax and any applicable penalty and interest.

(5) For purposes of this section, “contract completion” means the date of completion of a written contract relating to the construction or equipping of the facility that is part of the project of the eligible business.

Sec. 6.  Workforce housing investment tax credit.

The taxes imposed under this division, less the credits allowed under the personal income tax, business tax on corporations, and tax on financial institutions, shall be reduced by a workforce housing investment tax credit allowed under section 4, subsection 3.

Sec. 7. Effective Upon Enactment; Applicability.

This division of this Act, being deemed of immediate importance, takes effect upon enactment.  This division of this Act applies to qualifying new investment costs incurred on or after the effective date of this division of this Act.