Mass. Gen. Laws ch. 63, sec. 38PP — MA Code / Part I / Title IX / Chapter 63 / Section 38PP
Massachusetts homeownership tax credit; amount allowed; eligibility certificate; affordability period; transfer, sale or assignment of tax credit; fees; adoption and promulgation of rules and regulations
Status: in_force

[Text of section effective for tax years beginning on or after January 1, 2025. See 2024, 150, Sec. 140.]

[Text of section effective for tax years beginning on or after January 1, 2025. See 2024, 150, Sec. 140.]

Section 38PP. (a) For the purposes of this section, unless the context clearly requires otherwise, the following words shall have the following meanings:

''Affordability period'', the 10–year period that commences on the date of the initial sale of a single-family dwelling constructed as part of a qualified homeownership development project.

''Affordability restriction'', a restriction in form and substance approved by the director and the secretary, imposing resale restrictions on a single-family dwelling constructed as part of a qualified homeownership development project during the affordability period.

''Commissioner'', the commissioner of revenue.

''Credit amount'', the amount computed by the director pursuant to subsection (d) before issuing an eligibility certificate.

''Credit award amount'', the amount determined by the director and stipulated in the notice sent pursuant to paragraph (2) of subsection (c).

''Director'', the executive director of the Massachusetts Housing Finance Agency, established pursuant to chapter 708 of the acts of 1966.

''Eligibility certificate'', a certificate issued to a sponsor pursuant to subsection (d).

''Eligible location'', a geographic area in which a qualified homeownership development project may be located, based on criteria established in the qualified homeownership allocation plan.

''Maximum credit amount'', the amount equal to 35 per cent of the lesser of: (i) the total qualified project expenditures calculated on a per single-family dwelling basis; or (ii) 80 per cent of the area median new single-family dwelling sales price, subject to such further limitations as may be established under the qualified homeownership credit allocation plan.

''Project development team'', the group of entities that develops, constructs, reports, appraises, finances and services the associated properties of a qualified homeownership development project in partnership with the project development owner.

''Qualified buyer'', an individual that is a first-time homebuyer with an annual income not exceeding 120 per cent of the area median income, as determined by the United States Department of Housing and Urban Development, for the location in which the single-family dwelling being purchased is located, and who satisfies any additional qualifications established by the director under the qualified homeownership credit allocation plan.

''Qualified homeownership credit allocation plan'', a plan adopted by the director with the approval of the secretary, establishing: (i) criteria and metrics under which homeownership development projects shall be assessed for qualification and the geographic areas in which qualified homeownership development projects may be located; (ii) criteria for approving and ranking applications for credits; (iii) a methodology to determine applicable median new single-family dwelling sales prices for the area in which the project is located; (iv) mechanisms to maintain affordability of each single-family dwelling that is created as part of a qualified homeownership development project and restricted for sale to qualified buyers, throughout the affordability period; (v) criteria to be used in determining qualification as a qualified buyer; (vi) criteria governing the purchase, ownership and sale of completed qualified homeownership development project single-family dwellings; and (vii) the manner of determining qualified project expenditures.

''Qualified homeownership development project'', a project to develop for sale single-family dwellings in the commonwealth that satisfies any qualifications established by the director with the approval of the secretary in the qualified homeownership credit allocation plan; provided, that the proposed project shall: (i) involve the new construction of not less than 10 single-family dwellings; (ii) be located in an eligible location; and (iii) result in not less than 20 per cent of the single-family dwellings being sold to qualified buyers, subject to an affordability restriction in accordance with the qualified homeownership credit allocation plan.

''Qualified project expenditure'', an expenditure directly related to the construction of a qualified homeownership development project, including, but not limited to, the cost of acquiring land, site assessment and remediation of hazardous materials and as further provided in the qualified homeownership credit allocation plan; provided, however, that: (i) the director has certified that the proposed project meets the definition of a qualified homeownership development project; (ii) prior to construction, the director has certified that all or a portion of the project costs are for new construction; and (iii) after the construction of the project has been completed, the director has certified that the project has been completed in compliance with this section and the requirements and conditions of any prior certifications.

''Secretary'', the secretary of housing and livable communities.

''Single-family dwelling'', (i) a residential property containing not more than 4 residential units; provided, that all units shall comprise a single property, to be sold to and owned by a single homeowner; or (ii) a condominium unit in a professionally managed condominium development.

''Sponsor'', a sponsor, as defined in section 25 of chapter 23B, of a qualified homeownership development project or owner of a qualified homeownership development project.

''Taxpayer'', a taxpayer subject to the income tax under this chapter.

[Paragraph (1) of subsection (b) effective until January 1, 2030. For text effective January 1, 2030, see below.]

(b)(1) There shall be a Massachusetts homeownership tax credit. The director, in consultation with the secretary, may authorize annually under this section and section 6O of chapter 62 a total sum not exceeding: (i) $10,000,000; (ii) the amount, if any, not authorized in the preceding taxable year; and (iii) any Massachusetts homeownership tax credits returned to the director by a sponsor.

[Paragraph (1) of subsection (b) as amended by 2024, 150, Sec. 27 effective January 1, 2030. See 2024, 150, Sec. 142. For text effective until January 1, 2030, see above.]

(b)(1) There shall be a Massachusetts homeownership tax credit. The director, in consultation with the secretary, may authorize annually under this section and section 6O of chapter 62 a total sum not exceeding: (i) the amount, if any, not authorized in the preceding taxable year; and (ii) any Massachusetts homeownership tax credits returned to the director by a sponsor.

(2) A taxpayer may be allowed a nonrefundable tax credit with respect to a qualified homeownership development project under this section equal to the credit amount listed on the eligibility certificate pursuant to subsection (d). If the credit allowable for any taxable year is unused by the taxpayer or exceeds the taxpayer's tax liability under this chapter for the taxable year, the taxpayer may carry forward and apply in any subsequent taxable year, the portion, as reduced from year to year, of the credit which exceeds the tax for the taxable year; provided, however, that in no event shall the taxpayer apply the credit to the tax due for any taxable year beginning after the affordability period.

(3) To be eligible to receive a credit pursuant to this section, a sponsor shall submit an application to the director on a form and in a manner prescribed by the director, in consultation with the secretary; provided, that said application shall include, but shall not be limited to: (i) the name and address of the sponsor; (ii) the names and addresses of all members of the project development team; (iii) an estimate of the total qualified project expenditures; and (iv) any other information as the director, in consultation with the secretary, may require pursuant to the qualified homeownership credit allocation plan.

(c)(1) The director, in consultation with the secretary, shall competitively evaluate and approve applications and award tax credits under this section for a qualified homeownership development project in accordance with the qualified homeownership credit allocation plan. The director, in consultation with the secretary, shall determine the credit amount awarded for each qualified homeownership development project, which shall not exceed the maximum credit amount.

(2) The director shall send written notice of the tax credit award to the sponsor of a qualified homeownership development project. The notice shall stipulate that receipt of the tax credit is contingent upon the sale of all single-family dwellings that are required to be sold to qualified buyers and issuance of an eligibility certificate.

(d)(1) Upon completion of a qualified homeownership development project for which a tax credit was awarded under this section and the sale of all single-family dwellings that are required to be sold to qualified buyers, the sponsor shall provide the director a final qualified project expenditures certification for approval. Immediately after approving the final cost certification, the director shall compute the credit amount and issue an eligibility certificate to the project development owner. The credit amount, which shall be stated on the certificate, shall equal the credit award amount stated in the notice issued under paragraph (2) of subsection (c), subject to any reduction or increase as the result of the approval of the final qualified project expenditures certification; provided, that such amount shall not exceed the maximum credit amount.

(2) Each eligibility certificate shall state the credit amount, the years that comprise the affordability period, the name, address and taxpayer identification number of the sponsor and all members of the project development team, the date the certificate is issued, a unique identifying number and any additional information the director, in consultation with the secretary and the commissioner, may require. The director shall certify a copy of each eligibility certificate to the secretary and the commissioner.

(e)(1) The sponsor shall maintain ownership of a qualified homeownership development project and all single-family dwellings that are required to be sold to qualified buyers until such dwellings are sold to qualified buyers.

(2) The qualified buyer of a single-family dwelling constructed as part of a qualified homeownership development project for which a tax credit was issued under this section shall occupy such single-family dwelling as the qualified buyer's primary residence during the affordability period; provided, that a qualified buyer of a single-family dwelling that includes more than 1 residential unit need only occupy a single residential unit within the single-family dwelling as the qualified buyer's primary residence during the affordability period and may lease any additional units to third-party lessees.

(3) If a single-family dwelling constructed as part of a qualified homeownership development project is sold during the affordability period, the seller shall transfer to the director an amount equal to 90 per cent of the gain from such resale, reduced by 10 per cent for each year of the affordability period which ends before the date of such sale, subject to such additional criteria as may be established under the qualified homeownership credit allocation plan. The director shall use any amount received pursuant to a repayment under this paragraph for the purpose of providing financial assistance to first-time homebuyers and offsetting the costs of administering this section. The director may place a lien on each single-family dwelling constructed as part of a qualified homeownership development project for an amount it deems necessary to ensure potential repayment pursuant to this paragraph.

(4) During the affordability period, a qualified buyer of a single-family dwelling that includes more than 1 residential unit shall not separate the ownership of individual residential units within the single-family dwelling.

(f)(1) All or any portion of a tax credit issued in accordance with this section may be transferred, sold or assigned to any individual or entity and the transferee shall be entitled to claim the credit pursuant to paragraph (2) of subsection (b) with the same effect as if the transferee had incurred the qualified project expenditures itself.

(2) A sponsor or transferee desiring to make a transfer, sale or assignment as described in paragraph (1) shall submit to the commissioner a statement that describes the amount of the tax credit for which such transfer, sale or assignment of the tax credit is eligible. The sponsor shall provide to the commissioner appropriate information for proper allocation of the tax credit.

(3) If the recapture of a tax credit is required pursuant to subsection (g), any statement submitted to the commissioner pursuant to paragraph (2) shall include the proportion of the tax credit required to be recaptured, the identity of each transferee subject to recapture and the amount of the tax credit previously transferred to such transferee.

(g) The director, in consultation with the secretary, shall determine whether a sponsor or qualified homeownership development project: (i) does not qualify for the credit; (ii) ceases to qualify for the credit; or (iii) did not qualify for the credit at the time the credit was claimed. Notwithstanding the time limitations on assessments pursuant to chapter 62C, the commissioner shall determine the taxpayer or taxpayers that claimed the credit, the tax against which the credit was claimed and the amount to be recaptured and shall make an assessment against the taxpayer or taxpayers for the amount to be recaptured under this section.

(h) The director may assess application, processing and reporting fees to cover the cost of administering this section.

(i) The credit under this section shall be attributed on a pro rata basis to the owners, partners or members of the legal entity entitled to the credit under this section and shall be allowed as a credit against the tax due under this chapter from such owners, partners or members in a manner determined by the commissioner.

(j) The secretary, in consultation with the commissioner and director, shall adopt any rules and promulgate any regulations necessary to administer this section.