Terms and Conditions
The "eligible basis" of a project is the cost of acquiring an existing building if there is
one (but not the cost of the land), plus construction and other construction-related costs to
complete the project. (For example, the costs of obtaining permanent financing, or "syndicating"
the credits to an investor are not included. Adjustments must be made for federal grants as
well). This is then multiplied by the percentage of the units that are "low income", in
accordance with the conditions described above, to determine the project's "qualified basis"
that actually qualifies for the credit. For this reason, many developers agree to make 100% of
the units low income in order to maximize the potential tax credits. Projects for (1) new
construction and (2) the cost of rehabilitating an existing building, if not funded by tax-exempt
bonds or "below market federal loans", can receive a maximum tax credit allocation of
approximately 8% to 9% of the project's eligible basis annually. The cost of acquiring an
existing building (but not the land), provided the building was (in general) last "placed in
service" at least ten years earlier, and projects financed in whole or in part with tax-exempt
bonds or below market federal loans, are eligible for a credit of approximately 3 to 4% annually.
The credit percentages are announced monthly by the Internal Revenue Service.