A. Overview There are three types of credits available to developers of affordable rental housing. The first type of credit is a 9% annual credit for the costs of new construction or substantial rehabilitation of an existing building. The second type of credit is a 4% annual credit for the cost of acquiring an existing building that involves substantial rehabilitation. Both the 9% and this 4% credit are part of the state’s annual per capita allocation. The third type of credit is also a 4% annual credit for the costs of new construction or substantial rehabilitation, including acquisition, of an existing building and is made available through the issuance of tax-exempt bonds. For further information and detailed requirements relating to the different credit types and methods of calculating the credit, refer to IRC Section 42. B. Rhode Island Annual LIHTC Allocation Pool Each state is awarded a limited amount of 9% LIHTCs annually. Rhode Island will receive the small state minimum or approximately $3,600,000 for 2025, indexed for inflation. The pool of LIHTCs may be greater in any year if the allocation is modified by Congress, unused credits are carried forward or if previously allocated credits are returned or rescinded. Please refer to Section IV for information related to tax exempt bond financing and 4% LIHTC.
