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Housing Tax Credits Page 1 of 1 <br />Housing Tax Credit Program <br />Allocation <br />The Federal Tax Reform Act of 1986 created the Housing Tax Credit (HTC) <br />Program for qualified residential rental properties. The HTC offers a ten year <br />reduction in tax liability to owners and investors in eligible affordable rental <br />housing units produced as a result of new construction, rehabilitation, or <br />acquisition with rehabilitation. <br />Minnesota Housing was designated by the Minnesota Legislature as the primary <br />allocating Agency of HTC in Minnesota. Qualified local cities and counties have <br />also been designated by the Legislature as suballocators of the HTC. <br />Section 42 of the Internal Revenue Code ("Section 42") requires that tax credit <br />allocating agencies develop an allocation plan for the distribution of the tax <br />credits within the jurisdiction of the allocating agency. The MHFA Qualified <br />Allocation Plan (QAP) combines state and federally legislated priorities with other <br />priorities established by the MHFA following receipt of comments from the public, <br />local municipalities and federal agencies. <br />Compliance <br />Section 42 (m)(i)(B)(iii) of the Internal Revenue Code requires housing credit <br />agencies to include in their Housing Tax Credit Allocation Plan a procedure to <br />monitor all tax credit projects for compliance with the requirements of Section <br />42, the Housing Tax Credit Program (HTC), throughout the compliance period. <br />In Minnesota, Minnesota Housing has been designated by the Legislature as the <br />primary apportionment agency for the state. The Legislature also has designated <br />the following cities and counties as suballocators: Dakota County, Duluth, <br />Minneapolis, Rochester, St. Cloud, St. Paul, and Washington County. <br />An allocating agency must have a procedure for monitoring compliance with the <br />provisions of the Code and notifying the Internal Revenue Service (IRS) of any <br />noncompliance of which it becomes aware whether or not it is corrected. The <br />monitoring requirements became effective on January 1, 1992, were amended on <br />January 14, 2000, and apply to all tax credit projects, even if the projects <br />received an allocation prior to 1992. The IRS has issued final regulations, Income <br />Tax Regulation 1.42-5 ("1.42-5"), relating to the requirements for compliance <br />monitoring. <br />http://www.mnhousing.gov/housing/tax-credits/index.aspx?print=true 12/29/2011 <br />