The Illinois Affordable Housing Tax Credit (IAHTC) program encourages private investment in affordable housing by providing donors to qualified non-profit affordable housing sponsors with a tax credit on their Illinois state income tax equal to 50% of the donation. Rental and for-sale housing developments are eligible assuming they meet income limits.
Many states offer their own versions of a low income housing tax credit, however the Illinois version is unique in that the credits are strictly donation based (i.e. donors do not own equity in the project). This approach greatly simplifies the process and cost for both developer and donor. Additionally, the credits are also similar to investment credits because they can be transferred to interested buyers.
Unlike the Federal LIHTC, which is usually sold to banks, the IAHTC credits are bought by a diverse array of individuals and smaller corporations. The program is designed for a true grassroots support from Illinois residents and businesses.
Program process for developers
The IAHTC program is available for not-for-profit housing developers only. The developer submits an application to the Illinois Housing Development Authority (IHDA) for a reservation of credits. Typically most developers either have been granted a donation or have been promised a donation prior to the application. Once approved, the developer has 12 months to secure the donation (extensions are available, however). The IHDA then issues the credit to the developer upon receipt of evidence of the donation, and the credit is then passed on to the donor.
Most IAHTC donations come in the form of cash grants, but securities, real property (such as land) or personal property (furniture, drywall, windows, etc) are eligible. The donations may be aggregated, but the total donation may never be less than $10,000. All donors must submit a donor affidavit stating that they understand they are making a donation that is eligible for IAHTC and whether or not they will be keeping or transferring the tax credit certificate.
The donor may transfer some or all of their IAHTCs to another individual or entity. Although these credits may be viewed as an investment by some buyers, they are NOT securities as defined by the Securities Act of 1933. This is important to note as buyers do not need to meet the Accredited Investor definition, unlike most other real estate investments. The buyer does not receive equity in the projects.
The individual or entity receiving the transfer of credits must make a donation to the affordable housing project at the time of transfer. The donation must be the lesser of 1) 10% of the amount transferred, or 2) $10,000. Finally, the agency must be informed in writing of all IAHTC transfers.
How Lihtec Funding simplifies the IAHTC fundraising process
Lihtec Funding is the only crowdfunding platform designed for direct investments in low income housing tax credits (LIHTC), using technology to raise capital online for pre-vetted affordable housing properties.
The platform provides a single access point for developers to manage all donor communications to grow awareness of their projects, build advocates in their communities, and optimize donations.
For donors that wish to sell their credits, the platform provides an audience of socially-minded investors seeking tax credits to offset their federal and state income tax liability. The process is convenient for both buyer and seller, as all the necessary paperwork including tax forms and receipts, notifications and affidavits, are handled automatically.