LIHTC EXAM QUESTIONS AND
ANSWERS (GRADED A+)
LIHTC - ANSWER-federal govt primary policy tool for encouraging the development and
rehabilitation of affordable rental housing
How does LIHTC work? - ANSWER-nonrefundable fed housing tax credits are awarded
to developers of rental projects and the developers typically sell the tax credits to
outside investors in exchange for equity in the housing projects
incur - ANSWER-expense has occured and needs to be recognize on the IS even
though no payment has occurred
Gross rent test - ANSWER-rents do not exceed 30% of either 50% or 60% of AMI
depending on tax credit units of project
Minimum Set-Aside (MSA) Election - ANSWER-1) 20-50 test= 20% of units are rent
restricted and occupied by income less than 50% of AMGI
2) 40-60 test= 40% of units are rent restricted and occupied by income less than 60% of
AMGI
3)Average Income test = 40% of units are rent restricted and occupied by individuals
whose income does not exceed the imputed income limitation designed by the taxpayer
with respect to the unit
4) States increase amount of credits available by 12.5% from 2018-2021
Types of Credits - ANSWER-9% credit- for new construction, delivered subsidy of 70%
of the PV of a projects qualified basis
4%- used for rehabilitation projects and new construction that is financed by tax exempt
bonds, delivered subsidy equal to 30% of the PV of a projects qualified basis
qualified basis - ANSWER-amount of eligible basis that will be used to generate LIHTC
based upon proportion of property that will be used for affordable housing, equals
eligible basis times the applicable fraction
Federal Allocation to States - ANSWER-allocated to each state according to population
$2.75 per person
State Allocation to Developers - ANSWER-Fed law requires qualified allocation plans to
give priority to projects serving lowest income and remain affordable for the longest,
allocations to a developer does not imply that all tax credits will be claimed, credits may
not be claimed until project is placed in service
Developers - ANSWER-developers typically exchange the tax credits for equity
ANSWERS (GRADED A+)
LIHTC - ANSWER-federal govt primary policy tool for encouraging the development and
rehabilitation of affordable rental housing
How does LIHTC work? - ANSWER-nonrefundable fed housing tax credits are awarded
to developers of rental projects and the developers typically sell the tax credits to
outside investors in exchange for equity in the housing projects
incur - ANSWER-expense has occured and needs to be recognize on the IS even
though no payment has occurred
Gross rent test - ANSWER-rents do not exceed 30% of either 50% or 60% of AMI
depending on tax credit units of project
Minimum Set-Aside (MSA) Election - ANSWER-1) 20-50 test= 20% of units are rent
restricted and occupied by income less than 50% of AMGI
2) 40-60 test= 40% of units are rent restricted and occupied by income less than 60% of
AMGI
3)Average Income test = 40% of units are rent restricted and occupied by individuals
whose income does not exceed the imputed income limitation designed by the taxpayer
with respect to the unit
4) States increase amount of credits available by 12.5% from 2018-2021
Types of Credits - ANSWER-9% credit- for new construction, delivered subsidy of 70%
of the PV of a projects qualified basis
4%- used for rehabilitation projects and new construction that is financed by tax exempt
bonds, delivered subsidy equal to 30% of the PV of a projects qualified basis
qualified basis - ANSWER-amount of eligible basis that will be used to generate LIHTC
based upon proportion of property that will be used for affordable housing, equals
eligible basis times the applicable fraction
Federal Allocation to States - ANSWER-allocated to each state according to population
$2.75 per person
State Allocation to Developers - ANSWER-Fed law requires qualified allocation plans to
give priority to projects serving lowest income and remain affordable for the longest,
allocations to a developer does not imply that all tax credits will be claimed, credits may
not be claimed until project is placed in service
Developers - ANSWER-developers typically exchange the tax credits for equity
