Program Administration
The program is administered at the state level with each state getting a fixed allocation
of credits based on its population. The state housing agency has wide discretion in determining
which projects to award credits, and applications are considered under the state's "Qualified
Allocation Plan" (QAP). The credits are usually awarded to projects in a few "allocation
rounds" held each year, on a competitive basis. Typically, the top ranked project will get
credits, then the second, and so on until the credits are exhausted for the round. A portion
of each state's credits must be "set aside" for projects sponsored by non-profit organizations,
although non-profits more typically apply for credits under the "general" rules, without
regard to the set-aside.
This allows each state to set its own priorities and address its specific housing goals.
It also encourages developers to offer benefits that are better than the established minimums
when competing against other projects (e.g., charging lower rents, or maintaining the low
income requirements for a longer number of years, will often improve a project's rank in the
competitive process; it is important to check the particular state's QAP and application to
see how it makes these judgments).
Not all projects claim the low income credit based on this competitive process. Projects
that are financed by tax-exempt bonds can also qualify for the credit. Tax-exempt bonds are
also limited on a state-by-state basis, and the state agency responsible for bonds may be
different, but it will generally apply similar rules than the agency responsible for the tax
credit program.