The Virgin Islands Housing Finance Authority is designated as the Housing Credit Agency for the U.S. Virgin Islands for the purposes of allocating and administering the Low Income Housing Tax Credit (LIHTC) established under Section 42 of the Internal Revenue Code. The Territory’s allocable low-income housing credit is apportioned to housing projects pursuant to a Qualified Allocation Plan using prescribed criteria to determine how a particular project will rank in order of the housing needs for the U.S. Virgin Islands.
The Federal Programs Division is tasked with reviewing all applications for credits and making recommendations to the Executive Director; preparing the requisite reservation forms; coordinating with the Accounting Division for issuance of invoices for all billable services; providing technical information to applicants and project owner/sponsors; handling all general inquiries and requests for program information; preparing the annual agency LIHTC tax return; and interfacing with the project sponsors, other tax credit industry professionals, and the compliance monitoring contractor, as necessary. As prescribed by the IRS Code, the annual allocation of tax credits for the Territory is determined based on a set dollar figure known as the small state minimum. The Tax Credit Allocation for the U.S. Virgin Islands for calendar 2015 is $2,680,000.
View the 2015 Qualified Allocation Plan for more details.
In order to qualify for the credit, the project must comply with certain minimum occupancy and maximum rent criteria. In general, a building must meet one of two federally-mandated thresholds to be eligible for the LIHTC:
- Either 20% of the units must be rent-restricted and occupied by tenants whose incomes do not exceed 50% of the “area median gross income” as adjusted for family size, or
- 40% of the units must be rent-restricted and occupied by tenants whose incomes do not exceed 60% of the “area median gross income” again as adjusted for family size. The schedule used to determine the area median gross income is based on that which is published by the Department of Housing and Urban Development (HUD) for the Section 8 Program.
“Rent-restricted” means that the gross rent, including an allowance for utilities, cannot exceed certain limits. Note: Gross rent includes all utilities, excluding telephone and cable television. If paid separately by the tenant, utilities must be deducted from the tenant payment.
The rental restrictions remain in effect for at least 15 years, and building owners are required to enter into agreements to maintain the low income character of the property for an additional 15 years.
Maximum Income & Rent Limits for the LIHTC Program are published annually by the VIHFA.
- Most types of residential rental property (e.g., duplexes, multi-family buildings) are eligible for the Housing Tax Credit and may qualify for the credit based on that portion of the building used for qualified rental housing. Single-family detached units are also eligible.
- Buildings that are on noncontiguous parcels may be eligible for consideration as a tax credit project if 100% of the buildings are designed for low income persons and provided that they are under a common plan of financing.
- Rental units must be suitable for occupancy on a non-transient basis; however, month-to month leases or single room occupancy projects are qualified for the Tax Credit. Homeless shelters may also qualify.
- Projects involving nursing homes and life-care facilities are not eligible.
- All units must meet applicable federal and local building and housing codes including but not limited to ADA, Fair Housing, and Section 504.
- If the property offers both LIHTC and non-LIHTC units (i.e., a mixed-income property), selected low-income units must be developed and maintained in equivalent quality and square footage as non-low-income units.
Properties are subject to annual monitoring review of tenant files and also physical inspection of units and common areas during the 15-year compliance period.
The Low Income Housing Tax Credit (LIHTC) was created by the Tax Reform Act of 1986 in order to encourage the construction and rehabilitation of rental housing for low income individuals and families.
The LIHTC is a tax incentive intended to increase private participation in the development of low-income rental housing. Section 42 of the IRS Code provides an income tax credit to owners of certain newly constructed or substantially rehabilitated low-income rental housing projects which are both income– and rent-restricted.
The annual amount of Low Income Housing Tax Credits available for allocation by each state is based on population. The allocation is currently $2.30 per capita, based on the population data as reported in the most recent census. A minimum annual allocation of $2,000,000 is provided for small states and territories. The small state minimum is adjusted annually for inflation in accordance with the Consumer Price Index (CPI). The Tax Credit Allocation for the U.S. Virgin Islands for calendar 2015 is $2,680,000.
The Territory’s allocable low-income housing credit is apportioned to housing projects pursuant to a “Qualified Allocation Plan” using prescribed criteria to determine how a particular project will rank in order of the housing needs for the U.S. Virgin Islands. Since 1988, a number of developers have taken advantage of the tax credits resulting in the creation of a number of new rental housing communities throughout the Territory.
For more information or questions regarding the LIHTC Program, please contact Ms. Janine Hector, Director of Federal Programs at (340) 772-4432 ext. 3234.