Opinion ID: 2377818
Heading Depth: 3
Heading Rank: 2

Heading: Other Jurisdictions' Property Tax Treatment Of LIHTC Properties

Text: Rental restrictions and federal tax credits pose difficult questions in property tax assessments of LIHTC properties, and courts are not in agreement in resolving these questions. Courts differ on whether and why rental restrictions must be considered. Arizona, Kansas, South Dakota, and Washington all assess property value based on standards similar to Alaska's statutory full and true value standard, [11] and their courts have held that rental restrictions on LIHTC properties must be considered. [12] The Supreme Courts of Idaho and Oregon, basing their decisions on statutes dissimilar to Alaska's, [13] likewise have held LIHTC rental restrictions must be considered. [14] The Ohio Supreme Court has held that LIHTC rental restrictions must be considered because they are police power restrictions enacted under the General Welfare Clause of the Federal Constitution. [15] Reaching the opposite conclusion, the North Carolina Supreme Court reasoned that because taxpayers choose to participate in the LIHTC program, the taxing authority does not need to consider the rental restrictions. [16] That court noted that the unfavorable rental restrictions are balanced by the favorable federal tax credits. [17] Courts also differ on whether LIHTC tax credits should be considered. The Arizona Tax Court, Washington and Missouri intermediate courts of appeal, and Ohio and Oregon Supreme Courts have determined that regardless of whether rental restrictions are taken into account in property tax assessments, the tax credits should not be considered. [18] The Arizona court reasoned that the tax credits (1) are intangible property in that they are paid by the federal government as an incentive to invest in the project and are not income flowing from the rental of the property and (2) do not significantly affect the marketability of the property because a buyer of a limited partner's interest receives only the remainder of the credits, which are subject to recapture. [19] The Missouri, Ohio, and Washington courts focused on the tax credits' intangibility in concluding they must not be considered. [20] The Oregon court reasoned that the tax credits would not affect the most probable price for the property because the credits would be recaptured if the property were not maintained as low-income housing. [21] Reaching the opposite conclusion, courts in Georgia, Idaho, Illinois, Indiana, Michigan, Pennsylvania, South Dakota, and Tennessee have held that LIHTC tax credits cannot be ignored when rental restrictions are taken into account in the absence of contrary statutory authority. [22] The Georgia court rejected the argument that tax credits should be ignored as valueless because they are allocated to a limited partner and expire before the rental restriction period ends. [23] Illinois and Michigan courts rejected the argument that tax credits should be ignored as intangible. [24]