Administrative Code

Virginia Administrative Code
2/25/2024

Chapter 200. Rules and Regulations for the Allocation of Virginia Housing Opportunity Tax Credits

13VAC10-200-10. Definitions.

The following words and terms when used in this chapter shall have the following meanings, unless the context clearly indicates otherwise:

"Applicant" means an applicant for HOTC under this chapter and also means the owner of the development to whom the HOTC are allocated.

"Authority" means the Virginia Housing Development Authority.

"Eligibility certificate" means a certificate issued by the Authority to the owner of a qualified project certifying that such project qualifies for the HOTC, has been awarded HOTC pursuant to the provisions of this chapter, and specifying the amount of HOTC that the owner of such qualified project may claim.

"Enabling legislation" means §§ 58.1-439.29 and 58.1-439.30 of the Code of Virginia, and any amendments or supplements thereto.

"HOTC" or "credits" means the Virginia housing opportunity tax credits as created in the enabling legislation, as implemented in this chapter.

"IRC" means the Internal Revenue Code of 1986, as amended, and the rules, regulations, notices, and other official pronouncements promulgated under the IRC.

"IRS" means the Internal Revenue Service.

"LIHTC" means the federal low-income housing tax credits as provided in § 42 of the IRC, as amended.

"Qualified application" means a written request for HOTC which is submitted by an applicant on a form or forms prescribed or approved by the executive director together with all documents required by the authority for submission and meets all mandatory items and any minimum scoring requirements as set forth on the application form, instructions, or other communication available to the public.

"Qualified low-income buildings" or "qualified low-income development" means the buildings or development, which meets the applicable requirements in § 42 of the IRC to qualify for an allocation of credits under § 42.

"Qualified project" means a qualified low-income building or qualified low-income development that is located in Virginia, is placed in service on or after January 1, 2021, has received an allocation of HOTC under this chapter, and is issued an eligibility certificate.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 38, Issue 11, eff. January 1, 2022.

13VAC10-200-20. General.

A. The authority is designated in the enabling legislation to administer the HOTC and is authorized to promulgate these regulations, guidelines, instructions, and documents necessary to implement and administer the HOTC and approve, allocate, and certify the use of the HOTC, including the issuance of eligibility certificates.

B. The executive director is authorized to waive or modify any provision in this chapter where the executive director deems it appropriate for good cause to promote the goals and interests of the Commonwealth in the HOTC program, to the extent not inconsistent with the IRC or the enabling legislation.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 38, Issue 11, eff. January 1, 2022.

13VAC10-200-30. Availability and amount of HOTC.

A. Based upon the legislative intent of § 58.1-439.30 G of the Code of Virginia, notwithstanding any provisions of the enabling legislation inconsistent with § 58.1-439.30 G, the authority will award:

1. For calendar year 2021, up to $15 million of HOTC for qualified projects. The credit period shall be one year.

2. For calendar years 2022 through 2025, up to $60 million of HOTC for qualified projects for each of the four calendar years beginning in calendar years 2022 through 2025. The credit period shall be 10 years. The credit shall be allowed ratably for each qualified project, with one-tenth of the credit amount allowed annually for 10 years over the credit period, except that there shall be a reduction in the tax credit allowable in the first year of the credit period due to the calculation in 26 USC § 42(f)(2), and any reduction by reason of 26 USC § 42(f)(2) in the credit allowable for the first taxable year of the credit period shall be allowable for the first taxable year following the credit period.

The aggregate HOTC program for calendar years 2021 through 2025 for qualified projects shall equal up to $255 million. Any HOTC not used by taxpayer in a taxable year may be carried forward by a qualified taxpayer for the succeeding five years. If a HOTC has been awarded prior to January 1, 2026, such credit may continue to be claimed on a return for taxable years on and after January 1, 2026, but only pursuant to its applicable credit period.

B. To qualify for the HOTC, the applicant must have applied for federal 9.0% LIHTC or federal 4.0% LIHTC, and have been (i) allocated LIHTC or (ii) allowed LIHTC (i.e., determined by the authority to be eligible for LIHTC but not allocated LIHTC). In the event of alternative clause (ii) of this subsection, the HOTC may be stand-alone (i.e., not allocated to the applicant in addition to LIHTC). An applicant having applied for 9.0% LIHTC (including applicants having been awarded 9.0% LIHTC) may elect to amend its application from 9.0% LIHTC to 4.0% LIHTC in connection with assignment of points and rankings for HOTC in accordance with 13VAC10-200-40. In so doing, the applicant may increase or decrease its requested federal credit amount.

C. While only LIHTC projects placed in service on or after January 1, 2021, may be eligible for HOTC, not every development receiving LIHTC and placing in service on or after January 1, 2021, will receive HOTC. Rankings and awards of HOTC to qualified projects shall be in accordance with 13VAC10-200-40.

D. The HOTC for each qualified project may be (i) up to the amount of the federal LIHTC allocated or allowed for the qualified project or (ii) a percentage of the federal LIHTC allocated or allowed for the qualified project as determined by the authority, based upon the availability of HOTC as compared to the federal LIHTC allocated or allowed for the qualified projects or such other factors the executive director deems appropriate for good cause to promote the goals and interests of the Commonwealth in the HOTC program.

E. The authority may pre-allocate future years' HOTC, but such credits cannot be claimed until the calendar year designated by the authority. Subject to the requirement that the total amount of tax credits authorized under this chapter shall not exceed $15 million for calendar year 2021, and $60 million per year for calendar years 2022 through 2025, the authority may re-allocate, in the following calendar year, but no later than December 31, 2025, any HOTC that are recaptured, disallowed, terminated, or canceled and returned to the authority.

F. If the amount of HOTC authorized in a calendar year for qualified projects is less than the total amount of credits available for qualified projects, the balance of such credits, in an amount not greater than 15% of the amount of credits available (i) shall be allocated by the authority for any qualified project in the following calendar year, (ii) shall not be allocated at any time after such following calendar year, and (iii) shall be allocated no later than December 31, 2025.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 38, Issue 11, eff. January 1, 2022; amended, Virginia Register Volume 39, Issue 9, eff. December 1, 2022.

13VAC10-200-40. Applications, ranking of applications and award of HOTC.

A. Application for a reservation of credits shall be commenced by filing with the authority an application, on such forms as the executive director may from time to time prescribe or approve, together with such documents and additional information as may be requested by the authority in order to comply with this chapter and to make the reservation and allocation of the credits in accordance with this chapter.

B. For purposes of subsection A of this section, the authority may utilize the application submitted for LIHTC, alone or with an HOTC addendum, or may require an entirely new HOTC application be submitted.

C. The executive director may:

1. Reject any application from consideration for a reservation or allocation of credits if in such application the applicant does not provide the proper documentation or information on the forms prescribed by the executive director.

2. Prescribe such deadlines for submission of applications for reservation and allocation of credits for any calendar year as deemed necessary or desirable to allow sufficient processing time for the Authority to make such reservations and allocations.

3. Divide the amount of credits into separate pools and each separate pool may be further divided into separate tiers. The division of such pools and tiers may be based upon one or more of the following factors:

a. Geographical areas of the state;

b. Types or characteristics of housing;

c. Construction;

d. Financing;

e. Owners;

f. Occupants;

g. Source of credits; or

h. Any other factors deemed appropriate by the executive director to best meet the housing needs of the Commonwealth.

D. The development for which an application is submitted may be, but shall not be required to be, financed by the authority. If any such development is to be financed by the authority, the application for such financing shall be submitted to and received by the authority in accordance with Rules and Regulations for Multi-Family Housing Developments (13VAC10-20).

E. The authority shall review each application, and, based on the application and other information available to the authority, shall assign points to each application as follows:

1. According to points assigned pursuant to 13VAC10-180, Rules and Regulations for Allocation of Low-Income Housing Tax Credits; or

2. Such other methodology for assigning points as determined by the executive director to promote the goals and interests of the Commonwealth in the HOTC program. Such methodology may include prioritizing one or more of the following:

a. Unfunded developments in the At-Large pools of the 9.0% LIHTC competition, in order to produce more LIHTC units in Virginia;

b. Unfunded developments in the Local Housing Authority pool of the 9.0% LIHTC competition or other developments that are a part of a local housing authority's public housing revitalization efforts;

c. 9.0% LIHTC and 4.0% LIHTC developments that have not yet placed in service having equity funding gaps, in order to make such developments feasible;

d. Developments that preserve existing affordable housing;

e. Developments with rents and income limits that are more deeply targeted than required by the LIHTC program;

f. Developments in high-opportunity areas; or

g. Developments providing enhanced tenant services, as defined by the Authority.

3. Of the $60 million of HOTC authorized per calendar years 2022 through 2025, $20 million of such credits shall be first allocated exclusively for qualified projects located in a locality with a population no greater than 35,000 as determined by the most recent United States census (priority developments). Such allocation of HOTC shall constitute the minimum amount of such tax credits to be allocated for priority developments. However, if the amount of such tax credits requested for priority developments is less than the total amount of such credits available for priority developments, the balance of such credits shall be allocated for any qualified project, regardless of location. In allocating or allowing such credits to priority developments, the authority shall give equal consideration to qualified 9.0% LIHTC and 4.0% LIHTC projects.

The executive director may exclude and disregard any application that the executive director determines is not submitted in good faith or would not be financially feasible.

F. Upon assignment of points to all of the applications, the executive director shall rank the applications based on the number of points so assigned. If any pools shall have been established, each application shall be assigned to a pool and, if any, to the appropriate tier within such pool and shall be ranked within such pool or tier, if any. The amount of credits made available to each pool will be determined by the executive director. Those applications assigned more points shall be ranked higher than those applications assigned fewer points. Applications with the highest rankings shall receive allocations up to the allowable amount, determined by the executive director pursuant to 13VAC10-200-30, prior to any allocations to lower ranking applicants.

In the event of a tie in the number of points assigned to two or more projects, the executive director shall select one or more of such applications by lot for an award of credits.

G. Within a reasonable time after credits are reserved to any applicant applications, the executive director shall notify each applicant for such reservations of credits either:

1. Of the amount of credits reserved to such applicant's application by issuing to such applicant a written binding commitment to allocate such reserved credits subject to such terms and conditions as may be imposed by the executive director therein and by this chapter, or

2. That the applicant's application has been rejected or excluded or has otherwise not been reserved credits in accordance with this chapter.

H. The authority's board shall review and consider the analysis and recommendation of the executive director for the reservation of credits to an applicant, and, if it concurs with such recommendation, it shall by resolution ratify the reservation by the executive director of the credits to the applicant, subject to such terms and conditions as it shall deem necessary or appropriate to assure compliance with the binding commitment issued or to be issued to the applicant and this chapter. If the board determines not to ratify a reservation of credits or to establish any such terms and conditions, the executive director shall notify the applicant of the board's determination.

I. The authority shall provide the Department of Taxation with copies of HOTC award letters and eligibility certificates, or summary reports of the HOTC award letters and eligibility certificates no less than annually.

J. In the event the Authority terminates an applicant's award of LIHTC pursuant to 13VAC10-180-60 or the applicant enters into a cancellation agreement with the Authority for such award, the award of HOTC shall also immediately terminate or be canceled, as applicable, and the Authority will notify the Department of Taxation accordingly.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 38, Issue 11, eff. January 1, 2022; amended, Virginia Register Volume 39, Issue 9, eff. December 1, 2022.

13VAC10-200-50. Eligibility certificate.

Upon the authority's approval of a final cost certification that complies with the authority's requirements and the satisfaction of all requirements set forth in the HOTC award letter issued by the authority, the executive director shall issue an eligibility certificate to a qualified project.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 38, Issue 11, eff. January 1, 2022.

13VAC10-200-60. Recapture of HOTC.

A. The authority will monitor the developments receiving HOTC in the same manner it monitors LIHTC properties pursuant to the IRC and in accordance with 13VAC10-180, Rules and Regulations for Allocation of Low-Income Housing Tax Credits.

B. If under § 42 of the IRC, a portion of any federal LIHTC taken on a qualified project is required to be recaptured or is otherwise disallowed during the one-year HOTC credit period, the taxpayer claiming HOTC with respect to such project shall also be required to recapture a portion of any HOTC. The percentage of HOTC subject to recapture shall be equal to the percentage of LIHTC subject to recapture or otherwise disallowed during such period. Any tax credits recaptured or disallowed shall increase the income tax liability of the qualified taxpayer who claimed the tax credits in a like amount and shall be included on the tax return of the qualified taxpayer submitted for the taxable year in which the recapture or disallowance event is identified.

C. In the event the HOTC is awarded as a stand-alone credit, the percentage of HOTC subject to recapture shall be equal to the percentage of LIHTC that would have been subject to recapture or otherwise disallowed, as determined by the executive director, during such period.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 38, Issue 11, eff. January 1, 2022.

13VAC10-200-70. Fees.

The executive director may impose application, allocation, certification, and monitoring fees designed to recoup the costs of the authority in administering the HOTC. Such fees shall be payable at such time as the executive director shall require.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 38, Issue 11, eff. January 1, 2022.

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