2023 Vermont Statutes › Title 32 - Taxation and Finance › Chapter 151 - Income Taxes › § 5830c. Tax credits; charitable investments in housing

§ 5830c. Tax credits; charitable investments in housing
(a) Credit authorized. A charitable investment approved by the Commissioner of Housing and Community Affairs in an eligible housing charity shall entitle a Vermont taxpayer to a credit against the tax imposed by sections 5822 (individual income), 5832 (corporate income), 5836 (banks and financial institutions), or 8551 (insurance companies) of this title. The credit may be claimed for any year in which a charitable investment is made and for each year thereafter until the principal is repaid, or the investment is transferred, or the taxpayer is notified or agrees or the Commissioner of Housing and Community Affairs determines that the principal is not likely to be repaid, or until the end of the year in which the housing charity ceases to be eligible, whichever is earlier.
(b) Amount of credit. The amount of the credit shall be equal to the difference between the net income that would have been received by the taxpayer at the charitable threshold rate during the taxable year and the actual net income received by or credited to the taxpayer from a charitable investment in an eligible housing charity. However, the credit shall not exceed three percent of the average outstanding principal balance of the investment during the taxable year.
(c) Definitions. As used in this section:
(1) “Affordable housing” shall be defined by rule adopted by the Department of Housing and Community Affairs. The rule shall include the following provisions:
(A) At least 50 percent of the units shall be occupied by households whose income does not exceed 100 percent of the greater of State or area median income.
(B) The goal shall be to provide housing at a cost of no more than 30 percent of a household’s gross income.
(C) The affordability of the unit shall be protected for a period of time not less than the term of any loan made pursuant to subdivision (d)(4) of this section for the unit or units or at least 15 years, whichever is greater, through a housing subsidy covenant or other legally binding instrument, which shall terminate upon the issuance of a judgment of foreclosure or a transfer of the property in lieu of foreclosure. This rule may also include additional provisions consistent with this section.
(2) “Bank prime loan rate” means the March average prime loan rate, as of March 31 each year, used by insured U.S. chartered commercial banks to price short-term business loans, as published in the Federal Reserve Board’s statistical release.
(3) “Charitable investment” means a loan or deposit made to an eligible housing charity, on which the actual annual rate of return is at or below the charitable threshold rate.
(4) The “charitable threshold rate” means, for each year beginning July 1, a rate that is the greater of: two percentage points below the most recent bank prime loan rate or one percent.
(5) “Eligible housing charity” means a governmental agency or private nonprofit organization determined eligible by the Commissioner of Housing and Community Affairs according to subsection (d) of this section.
(6) “Net income” means interest income received or credited to the taxpayer.
(d) Eligibility. Any organization seeking eligibility shall apply to the Commissioner of Housing and Community Affairs, who is authorized to issue certificates of eligibility for tax credits to eligible housing charities in specific amounts. In no event shall certificates of eligibility for tax credits for charitable investments be issued in excess of $5,000,000.00 in the aggregate for any fiscal year. The Commissioner by rule shall establish procedures and criteria for application to ensure the equitable distribution of tax credit certificates among eligible applicants. Subject to this limit, the Commissioner shall issue a certificate of eligibility to receive tax credit investments to an organization if it meets all of the following criteria:
(1) It is either an agency or instrumentality of the State, or a private not-for-profit organization that has applied for and has not been denied tax-exempt status by the U.S. Internal Revenue Service.
(2) It has as a major purpose to provide affordable housing.
(3) It can demonstrate that as of the date of its application, it had loaned or invested at least $50,000.00 for the provision of affordable housing.
(4) At least 70 percent of all investments subject to this section are disbursed within 12 months for:
(A) the acquisition, rehabilitation, or construction of affordable housing in Vermont by the eligible housing charity; or
(B) loans for affordable housing in Vermont; or
(C) loans to individual borrowers in Vermont having no more than 100 percent of median income of the State or area, whichever is greater.
(5) Loans of charitable investments made pursuant to subdivision (4) of this subsection shall be at an average rate of interest not more than two percent above the bank prime loan rate.
(6) It can demonstrate that it has the administrative capacity to segregate funds to comply with and account for the requirements of subdivision (4) of this subsection.
(e) Revocation. The Commissioner of Housing and Community Affairs may revoke the eligibility of any organization under this section after a hearing, upon a finding that it fails to meet substantially all of the criteria required for eligibility. Such organization shall immediately notify all investors of the revocation. Such organization shall reimburse the State for the full amount of any tax credits allowed its investors after revocation of eligibility, and shall pay to investors the full amount of any tax credits claimed by an investor but disallowed by the Commissioner due solely to revocation of eligibility. Any person aggrieved by the denial or revocation of eligibility may appeal to Superior Court.
(f) Procedure for claiming tax credit.
(1) Each eligible housing charity accepting investment funds for which a tax credit may be claimed by the investor under this section shall furnish investors with a copy of its certificate of eligibility to receive tax credit investments, plus a statement of the amount and terms of the investment on a form to be provided by the Commissioner of Taxes. The eligible housing charity shall keep a current list of the names, current addresses, and taxpayer identification numbers of all investors who may claim a tax credit under this section.
(2) On or before January 31 of each year, the eligible housing charity shall furnish all investors who may claim a tax credit under this section with three copies of a tax credit statement, in a form specified by the Commissioner of Taxes, showing the principal balance of the investment at the beginning of the previous calendar year or at the date of the investment if made during that year, the principal balance at the end of the calendar year, the average outstanding principal balance during the year, the income that would have been received at the charitable threshold rate, the actual income received by or credited to the investor from the eligible housing charity during the calendar year and the amount of the tax credit.
(3) On or before January 31 of each year, the eligible housing charity shall furnish the Commissioner of Taxes with a list of all investors who may claim a tax credit under this section, in a form specified by the Commissioner, showing the principal balance of the investment at the beginning of the previous calendar year or at the date of the investment if made during that year, the principal balance at the end of the calendar year, the average outstanding principal balance during the year, the income that would have been received at the charitable threshold rate, the actual income received by or credited to the investor from the eligible housing charity during the calendar year and the amount of the tax credit.
(4) Each investor who claims a tax credit under this section shall claim the credit on a form to be provided by the Commissioner, which may be combined with the tax credit statement furnished by the eligible housing charity pursuant to subdivision (2) of this subsection. Each claimant shall also submit with his or her tax return a copy of the certificate of eligibility of the eligible housing charity and a copy of the tax credit statement furnished by the eligible housing charity.
(5) If the amount of allowed tax credit exceeds the taxpayer’s income tax liability for the taxable year, the amount thereof that exceeds such tax liability may be carried over for deduction from the taxpayer’s income tax liability in the next succeeding taxable year or years until the total amount of the tax credit has been deducted from tax liability; provided, however, that no tax credit shall be carried over for deduction after the third taxable year succeeding the taxable year in which the credit was earned.
(6) Investors in an eligible housing charity whose eligibility to receive tax credit investments is revoked during any calendar year may receive the credit for the year during which the revocation occurs, but not for any succeeding year unless eligibility is reinstated by the Commissioner of Housing and Community Affairs. (Added 1989, No. 240 (Adj. Sess.), § 2; amended 2001, No. 144 (Adj. Sess.), §§ 39, 40, eff. June 21, 2002; 2005, No. 116 (Adj. Sess.), §§ 3, 4, eff. April 26, 2006.)