Housing opportunity tax credit program.

Sec. 22e. (1) The authority, in cooperation with the department of treasury, shall establish, implement, and administer a housing opportunity tax credit program to encourage the development of qualified projects in this state. (2) For award cycles beginning on and after January 1, 2027, the authority shall, in conjunction with applications received under section 22b, accept applications for housing opportunity tax credits under this section. The authority shall not issue an award for an annual housing opportunity tax credit under this program for a qualified project that exceeds the lesser of the following: (a) The amount necessary for the financial feasibility of the qualified project. (b) The adjusted annual federal credit amount for the qualified project. (3) A person seeking a housing opportunity tax credit under this section shall submit an application in a form and manner as prescribed by the authority. In a process determined by the authority that considers the impact on total development costs, the authority shall give preference to qualified projects that use building components during construction or rehabilitation that are manufactured in this state. The authority shall review completed applications for housing opportunity tax credits received for 4% qualified projects on a first-come, first-served basis. The authority shall treat all complete applications received on the same day as having been received simultaneously. If the applications received for 4% qualified projects exceed the portion of the award cycle cap set aside under subsection (4)(b) and (c) on any day, the authority shall establish an evaluation methodology to determine which of the 4% qualified projects applications are approved and issued an approval notice for a housing opportunity tax credit. Except as otherwise provided under this subsection, the evaluation methodology required under this subsection must be limited to factors that maximize efficient unit production, including, but not limited to, each of the following: (a) The amount of the housing opportunity tax credit requested for each unit under the proposed qualified project. (b) The number of units to be preserved or created under the proposed qualified project. (c) The estimated development period of the proposed qualified project from the initial approval notice to placing the proposed qualified project in service. (4) For the 2027 award cycle, the authority shall not issue approval notices for a total of more than the base annual amount of $42,000,000.00 for housing opportunity tax credits under this section. For each award cycle after the 2027 award cycle, to determine the award cycle cap for that award cycle, the base annual amount for the immediately preceding award cycle must be adjusted annually by the percentage increase in the United States Consumer Price Index for the immediately preceding calendar year. The total amount of all housing opportunity tax credits for which an approval notice is issued under this section must not exceed the award cycle cap for any award cycle. For each application window, the authority shall approve and allot not less than 45% of the award cycle cap set aside under subdivisions (b) and (c) to 4% qualified projects to the extent that the authority receives a sufficient number of applications. If, at the end of the final application window of each award cycle, the authority has not received a sufficient number of completed applications to allot the amount set aside under subdivision (b) or (c), the authority may reapportion the unallotted credit amounts to other qualified projects in accordance with the qualified allocation plan or other alternative competitive processes. Except as otherwise provided under this subsection, the authority must set aside the following amounts of the award cycle cap as follows: (a) Up to 50% to any qualified project at the authority's discretion. (b) Not less than 25% shall be available during application windows to 4% qualified projects that are new construction. (c) Not less than 25% shall be available during application windows to 4% qualified projects that are preservation. (d) To the extent the authority receives a sufficient number of completed applications for projects that are located in rural areas, not less than 30% of the amounts set aside under subdivisions (a) to (c) during each award cycle shall be designated for qualified projects that are located in a rural area. (5) If the authority approves an application for a housing opportunity tax credit, the authority shall send an approval notice to the applicant that states the amount of the housing opportunity tax credit approved for each year of the qualified project's credit period. The approval notice must clearly stipulate that the housing opportunity tax credit approved is contingent on the authority's approval of a final cost certification and the issuance of an eligibility statement, and for the purposes of the housing opportunity tax credit only, the exception under section 42(h)(6)(E)(i)(II) of the internal revenue code, 26 USC 42, does not apply. The owner and the authority shall use a regulatory agreement that gives preference to maximizing long-term affordability. On completion of a qualified project, as determined by the authority, the owner shall submit a final cost certification and a request for the issuance of an eligibility statement to the authority. On approval of the final cost certification, the authority shall issue an eligibility statement to the owner for the qualified project. The eligibility statement must state the amount of the housing opportunity tax credit that may be claimed against an applicable tax each year of the credit period. Except as otherwise provided under section 281 or 678 of the income tax act of 1967, 1967 PA 281, MCL 206.281 and 206.678, or under section 476a of the insurance code of 1956, 1956 PA 218, MCL 500.476a, whichever is applicable, for each calendar year of the credit period, an owner claiming a housing opportunity tax credit shall claim the credit for that calendar year against an applicable tax for the owner's tax year beginning with or within that calendar year. (6) If an owner that is a qualified taxpayer is a flow-through entity, the owner may, in a form and manner as prescribed by the authority, allocate all or a portion of the housing opportunity tax credit attributable to a qualified project to some or all of its members in any manner agreed to by its members, regardless of whether that member is allocated or allowed any portion of any federal low-income housing tax credit with respect to the same qualified project, whether the allocation of the housing opportunity tax credit under the terms of the agreement has substantial economic effect within the meaning of section 704(b) of the internal revenue code, 26 USC 704, and whether the member is deemed a partner for federal income tax purposes. A flow-through entity that receives an allocation of the housing opportunity tax credit under this subsection, either from the owner of the qualified project or from another flow-through entity, may further allocate the housing opportunity tax credit among some or all of its members in the same manner as the owner. A member of a flow-through entity that is allocated or receives a pass-through of a housing opportunity tax credit under this subsection may assign all or any part of its interest in the flow-through entity and the assignee may subsequently be allocated credits from the flow-through entity. Except as otherwise provided under section 281 or 678 of the income tax act of 1967, 1967 PA 281, MCL 206.281 and 206.678, or under section 476a of the insurance code of 1956, 1956 PA 218, MCL 500.476a, whichever is applicable, a qualified taxpayer that has been allocated all or a portion of a housing opportunity tax credit under this subsection shall claim that credit against an applicable tax for the qualified taxpayer's tax year beginning with or within the calendar year in which the allocation was made. Any flow-through entity allocating all or a portion of a housing opportunity tax credit for a qualified project under this subsection shall provide the recipient with a copy of the eligibility statement or, if the authority has not yet issued an eligibility statement, the approval notice for that qualified project. If a copy of the approval notice is provided to the recipient and an eligibility statement is subsequently issued, the person who allocated the credit shall provide the recipient with a copy of the eligibility statement. (7) The owner of a qualified project that is awarded a housing opportunity tax credit shall report any recapture event described in section 281(3) or 678(3) of the income tax act of 1967, 1967 PA 281, MCL 206.281 and 206.678, or section 476a(10) of the insurance code of 1956, 1956 PA 218, MCL 500.476a, to the designated reporter, the department of treasury, and the authority in the same manner as required for the recapture of federal low-income housing tax credits. If the owner of the qualified project is not the only qualified taxpayer that claimed the housing opportunity tax credit attributable to that qualified project against an applicable tax, the designated reporter shall also report the recapture event to each qualified taxpayer that was allocated a housing opportunity tax credit attributable to that same qualified project. (8) A designated reporter shall do both of the following: (a) For each calendar year, provide the department of treasury, in the form prescribed by the department of treasury, an allocation report for the qualified project containing all of the following information: (i) The name, address, and taxpayer identification number of the owner and each qualified taxpayer that has been allocated all or a portion of the annual credit listed on the eligibility statement or approval notice, whichever is applicable, for that year. (ii) The amount of the annual credit retained by or allocated to each person listed under subparagraph (i) for that year and the person's tax year under the applicable tax. (iii) The total of the amounts listed for each person under subparagraph (ii), demonstrating that the total does not exceed the amount listed on the eligibility statement or approval notice, whichever is applicable, for that year. (iv) Any other information required by the department of treasury. (b) If any of the information reported under subdivision (a) changes after the designated reporter has provided the allocation report to the department of treasury, including, but not limited to, changes resulting from a reduction or increase in the amount of the annual credit approved in the approval notice, provide the department of treasury and any affected qualified taxpayer an updated allocation report for the calendar year in the time and manner as prescribed by the department of treasury. (9) As used in this section: (a) "Adjusted annual federal credit amount" means 1/6 of the aggregate amount of the federal credit allocated to a qualified project on federal income tax form 8609 over its federal credit period. (b) "Allocation report" means the annual report submitted by a designated reporter to the department of treasury under subsection (8). (c) "Applicable tax" means a tax imposed under the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.847, or under section 476a of the insurance code of 1956, 1956 PA 218, MCL 500.476a. (d) "Application window" means the first quarter, January 1 through March 31, or the third quarter, July 1 through September 30, of the award cycle. If either the first or last day of the application window falls on a nonbusiness day, then the starting or ending date is the next business day. (e) "Approval notice" means a binding reservation letter issued by the authority for a housing opportunity tax credit attributable to a qualified project during an award cycle, setting forth the amount of the housing opportunity tax credit to be claimed in each year of the credit period. (f) "Award" or "awarded" means the issuance or receipt of an eligibility statement under subsection (5) for a qualified project. (g) "Award cycle" means each calendar year for which the authority approves and issues approval notices for housing opportunity tax credits for qualified projects. (h) "Award cycle cap" means the sum of the following: (i) The base annual amount as determined under subsection (4) for each calendar year of the credit period. (ii) The amount, if any, by which the award cycle cap prescribed under this section for the preceding award cycle exceeds the total of all housing opportunity tax credits approved by the authority in that award cycle. (iii) The amount of housing opportunity tax credits recaptured or otherwise disallowed under subsection (7) in the preceding calendar year or otherwise returned to the authority since the prior award cycle. (i) "Credit period" means the period of 6 calendar years beginning with the calendar year in which a building that is part of a qualified project is placed in service. If a qualified project consists of more than 1 building, then the owner may elect to either treat all buildings as 1 project and begin the credit period when the last building is placed in service or treat each building's credit period independently on a building-by-building basis. For purposes of the housing opportunity tax credit under this section, the special rule for the first year of the credit period under section 42(f)(2) of the internal revenue code does not apply. (j) "Designated reporter" means the owner of the qualified project or a person designated by the owner to prepare the allocation report for the qualified project. (k) "Eligibility statement" means a statement issued by the authority to the owner of a qualified project certifying that the project is a qualified project and specifying the amount of the housing opportunity tax credit that may be claimed each year of the credit period, the years that comprise the credit period, the name, address, and taxpayer identification number of the owner, the date of issuance, and any additional information prescribed by the authority. (l) "Federal credit period" means the 10-year period described under section 42(f)(1) of the internal revenue code, 26 USC 42. (m) "Federal low-income housing tax credit" or "federal credit" means the credit allowed under section 42 of the internal revenue code, 26 USC 42. (n) "Flow-through entity" means an entity that for the relevant tax year is treated as a subchapter S corporation under section 1362(a) of the internal revenue code, 26 USC 1362, a general partnership, a trust, a limited partnership, a limited liability partnership, or a limited liability company, and that for the tax year is not taxed as a corporation for federal income tax purposes. Flow-through entity does not include any entity treated as a corporation under section 699 of the income tax act of 1967, 1967 PA 281, MCL 206.699. (o) "4% qualified project" means a qualified project that is eligible for both of the following: (i) A federal low-income housing tax credit under section 42(h)(4) of the internal revenue code, 26 USC 42. (ii) A bond issued under section 44c in which the authority is not the bondholder with respect to the bond proceeds. (p) "Housing opportunity tax credit" means a tax credit authorized to be claimed against an applicable tax. (q) "Internal revenue code" means the United States internal revenue code of 1986, 26 USC 1 to 9834. (r) "Manufactured in this state" means the following: (i) For iron or steel products, all manufacturing processes, from the initial melting stage through the application of coatings, occurred in this state. (ii) For manufactured products, the final point of manufacture for the finished product is a facility physically located within the borders of this state, regardless of the origin of the subcomponents or raw materials used in the assembly or production of said product. (iii) For construction materials, all manufacturing processes for the construction material occurred in this state. (s) "Member", when used in reference to a flow-through entity, means a shareholder of a subchapter S corporation, a partner in a general partnership, a limited partnership, or a limited liability partnership, a member of a limited liability company, or a beneficiary of a trust that is a flow-through entity, as long as the shareholder, partner, member, or beneficiary, as applicable, is considered a shareholder, partner, member, or beneficiary under applicable state law governing such flow-through entity. (t) "New construction" means newly constructed housing units and does not include the rehabilitation or acquisition of existing buildings or adaptive reuse projects. New construction includes the demolition necessary for the construction of new housing units. (u) "Owner" means a person holding a fee simple interest in a qualified project or a leasehold interest pursuant to a ground lease in the land on which a qualified project is located. (v) "Person" means an individual, bank, financial institution, insurance company, association, corporation, flow-through entity, receiver, estate, trust, or any other group or combination of groups acting as a unit. (w) "Preservation" means projects that involve rehabilitation of existing housing units or the adaptive re-use of an existing building. (x) "Qualified project" means a qualified low-income building as defined in section 42(c) of the internal revenue code, 26 USC 42, that is located in this state, is eligible for the federal low-income housing tax credit, and is placed in service on or after January 1, 2027. (y) "Qualified taxpayer" means that term as defined in section 281 or 678 of the income tax act of 1967, 1967 PA 281, MCL 206.281 and 206.678, or in section 476a of the insurance code of 1956, 1956 PA 218, MCL 500.476a, as applicable. (z) "Rural area" means a city, village, or township with a population of 35,000 or less, or an area designated as rural as defined by the United States Department of Agriculture or the United States Census Bureau. (aa) "Taxpayer" means a person subject to an applicable tax. (bb) "United States Consumer Price Index" means the United States Consumer Price Index for all urban consumers as defined and reported by the United States Department of Labor, Bureau of Labor Statistics.