USA - IOWA Trends and Developments Contributed by: David M Erickson, Robert J Douglas, Jr, Christopher S Talcott and Amy S Montgomery, Dentons Davis Brown
county is based upon. TIF is implemented and approved at the local level by city councils and/ or boards of supervisors. The creation of TIF areas involves an intricate statutory framework with certain restrictions on the areas that can be designated as TIF requiring the local govern - mental body to hold a public hearing and pass resolutions and ordinances to establish urban renewal areas and urban revitalisation areas and corresponding detailed plans for the designated areas. Low income housing tax credits Low Income Housing Tax Credits (LIHTCs) are federal tax credits that promote investment in the development of multi-family residential rental housing for individuals or families with fixed or limited incomes. LIHTCs offer a direct reduc - tion in investors’ federal tax obligations equal to the amount of their investment in developing affordable rental housing. By contributing equity, investors support the construction of housing for low-income individuals, enabling some units to be rented at rates below the market average. In exchange for their investment, investors receive tax credits distributed annually over a period of time. The LIHTC programme allows develop - ers to deliver high-quality affordable housing to low-income individuals, and gives investors an opportunity to generate a financial return; however, both the application process and the compliance requirements after the project is completed are complex. Iowa’s LIHTCs are man - aged and awarded by the Iowa Finance Author - ity. There are two LIHTC programmes available; one is a 9% tax credit and the other is a 4% tax credit. The application process is highly compet - itive, particularly for the 9% tax credit. Projects are evaluated and scored based on criteria such as feasibility, affordability, location, amenities offered to residents, etc. Collaboration with and
buy-in from local communities is important for a project’s LIHTC application to be successful. Tax-exempt private activity bonds In addition to administering LIHTCs, the Iowa Finance Authority issues private activity bonds, which are tax-exempt bonds to help finance the private development of qualifying projects, such as affordable housing, solid waste disposal facil - ities, and projects for non-profit corporations. Some 4% LIHTC projects also qualify for pri - vate activity bonds. Typically, tax-exempt bonds are issued by state and local governments for projects that serve a public purpose and benefit the general public. However, there are excep - tions for certain bonds that serve private inter - ests but also provide significant public benefits, which are known as private activity bonds and are allowed to be tax-exempt. Private activity bonds are repaid using revenues generated by the private users of the facilities or projects they finance. It is solely the developer’s responsibility for repaying private activity bonds, and the state of Iowa has no liability for repaying the debt. Historic tax credits Historic tax credits are awarded for projects involving the rehabilitation of historic buildings. Historic tax credits can be combined with other tax credit incentives, such as LIHTC. The Iowa Economic Development Authority and the State Historic Preservation Office (SHPO) adminis - ter the State Historic Preservation Tax Credit Program, which consists of a state income tax credit. There is a related Federal Historic 20% Rehabilitation Tax Credit, which is administered by SHPO, the National Parks Service, and Inter - nal Revenue Service. Iowa also has a County Historic Property Tax Exemption Program, which is administered by SHPO and county boards of supervisors.
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