Taxation of Grants For Low Income Housing Projects

The federal American Recovery and Reinvestment Tax Act of 2009 (Public Law 111-5) was signed by the President on February 17, 2009. One of the provisions of this Act authorized the Secretary of the Treasury to make a grant to each state's housing credit agency in an amount equal to the low-income housing grant election amount (sec. 1602(a) of P.L. 111-5).

In general, a state housing credit agency receiving a grant under this provision must use it to make sub-awards to finance the construction or acquisition and rehabilitation of qualified low-income buildings.

Internal Revenue Service Notice 2010-18 (March 17, 2010) provides that sub-awards are excluded from the gross income of recipients and are exempt from taxation. In addition, sub-awards under sec. 1602 of the Act do not reduce the depreciable or eligible basis of the building.

The federal tax treatment of the sub-awards also applies for Wisconsin income and franchise tax purposes.

Page last updated May 19, 2010