Section 30. General description

The state code was amended by adding sections numbered 58.1-339 and 58.1-339.9 relating to a tax credit for owners providing rent reduction for eligible tenants.

For taxable years beginning on or after January 1, 1991, through December 31, 2010, any individual or corporation receiving an allocation of tax credits pursuant to § 58.1-339 or § 58.1-339.9, as applicable, of the Code of Virginia shall, subject to the provisions of the state code and these rules and regulations, be entitled to a credit against the tax levied pursuant to § 58.1-320 or § 58.1-400 of the Code of Virginia, provided that the following requirements are satisfied:

1. The individual or corporation is engaged in the business of the rental of dwelling units (as hereinafter specified) and is subject to the Virginia Residential Landlord and Tenant Act, § 55-248.2 et seq. of the Code of Virginia, either by virtue of the provisions thereof or by virtue of the owner's providing for the applicability thereof pursuant to § 55-248.5 B of the Code of Virginia;

2. The owner provides a reduced rent to eligible tenants;

3. The rent charged to the eligible tenants is at least 15% less than the market rent;

4. To claim a credit under § 58.1-339 of the Code of Virginia for reduction of rents charged to a tenant on or after July 1, 1996, and before January 1, 2000: (i) a credit for rental reductions must have been validly claimed on the tax credit unit for all or part of the month of June 1996 and such tenant must have been an occupant of such tax credit unit on June 30, 1996, or (ii) the tenant must have been previously homeless;

5. To claim a credit under § 58.1-339.9 of the Code of Virginia for reduction of rents charged to a tenant on or after January 1, 2000, and prior to January 1, 2006, on a dwelling unit, a credit for rental reductions must have been validly claimed on such dwelling pursuant to § 58.1-339 of the Code of Virginia for all or part of the month of December 1999; and

6. To claim a credit under § 58.1-339.9 of the Code of Virginia for reduction of rents charged to a tenant on or after January 1, 2006, and prior to January 1, 2010, on a dwelling unit, a credit for rental reductions must have been validly claimed on such dwelling unit pursuant to § 58.1-339 of the Code of Virginia for all or part of the month of December 1999, and such tenant must have been an occupant of such dwelling unit on December 31, 2005.

The allowable tax credit amount shall be 50% of the total rent reductions allowed during the taxable year to the eligible tenants occupying the tax credit units. The amount of the rent reduction shall be equal to the market rent minus the tax credit rent. For this purpose, the tax credit rent shall include any rental subsidy payable on behalf of the eligible tenant under any governmental or private program.

If there are comparable units (other than tax credit units) in the same property, the market rent shall be determined by the authority to be the rent charged to other tenants for such comparable units. For the purpose of determining the amount of rent charged to other tenants for comparable units in the same property, the authority shall assume that the other tenants commenced and, if applicable, renewed their leases as of the same date or dates, and for the same term or terms as the eligible tenants and at the rents in effect on such date or dates.

If there are no other such comparable units in the same property, then the market rent shall be determined by the authority to be the rent charged for comparable units in the same market area. Such rent shall be (i) the rent most recently charged for the tax credit unit to a person (who may be the eligible tenant to be assisted) unrelated to the owner within the one-year period prior to the date of filing of the application, plus a rental increase in an amount determined by the authority to reflect increases in rents in the market area of such tax credit unit since the date such rent was last charged, or (ii) if no rental history as described in (i) exists, the HUD fair market rent allowed for a comparable unit in the same market area (as reduced, to the extent determined by the authority, for any utilities which are not to be included in the tax credit rent under the terms of the lease); provided, however, that the owner may demonstrate to the authority that the rent for a comparable unit in the same market area is higher than (i) or (ii) above, as applicable, and to the extent so demonstrated to the satisfaction of the authority, such higher rent shall be used.

Notwithstanding anything to the contrary herein, the market rent shall in no event exceed 150% of the HUD fair market rent allowed for comparable units in the same market area (as reduced, to the extent determined by the authority, for any utilities which are not to be included in the tax credit rent under the terms of the lease).

If the tax credit unit is subsidized or assisted under any governmental or private program, the comparable units in the same property or market area, as applicable, shall include only those units similarly subsidized or assisted.

Because the intent of the state code is to provide tax credits for the rental of dwelling units only, tax credits shall not be allocated or claimed for the leasing of land only, including without limitation mobile home lots. Tax credits may be allocated and claimed for the leasing of both a mobile home lot and the mobile home located thereon.

To be eligible for the program, a dwelling unit must contain separate and complete facilities for living, sleeping, eating, cooking and sanitation. Such accommodations may be served by centrally located equipment such as air conditioning or heating. Thus, for example, an apartment containing a living area, a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink, all of which are separate and distinct from other apartments, would constitute a unit.

In order to satisfy the requirement in § 58.1-339 or 58.1-339.9, as applicable, of the state code that the owner be an individual or corporation engaged in the business of the rental of dwelling units, the owner must intend or have intended at the time of application and must intend at all times thereafter to report, for federal income tax purposes, all rental and other income and any related expenses of the tax credit unit with respect to each tax year for which the tax credits are to be claimed for such tax credit unit.

The amount of credit for each individual or corporation for each taxable year shall not exceed $10,000 or the total amount of tax imposed by Chapter 3 (§ 58.1-300 et seq.) of Title 58.1 of the Code of Virginia, whichever is less. If the amount of such credit exceeds the taxpayer's tax liability for such taxable year, the amount which exceeds the tax liability may be carried over for credit against income taxes of such individual or corporation in the next five taxable years until the total amount of the tax credit has been taken.

Credits granted to a partnership or an electing small business corporation (S corporation) shall be passed through to the individual partners or shareholders in proportion to their ownership or interest in the partnership or S corporation.

The total amount of tax credits which may be approved by the authority in any fiscal year prior to fiscal year 1996-1997 shall not exceed $1,000,000. Commencing in fiscal year 1996-1997, the total amount of tax credits which may be approved by the authority in any fiscal year shall not exceed $250,000. Commencing in fiscal year 2000-2001, the total amount of tax credits which may be approved by the authority in any fiscal year shall not exceed $50,000. With the exception of tax credits claimed for units occupied by previously homeless tenants, no tax credits will be approved for a unit for any period after June 30, 1996, and before January 1, 2000, unless a tax credit was validly claimed for such unit for all or part of the month of June 1996. No tax credits will be approved for a unit for any period on or after January 1, 2000, and prior to January 1, 2006, unless a tax credit was validly claimed for such unit for all or part of the month of December 1999. No tax credits will be approved for a unit for any period on or after January 1, 2006, unless a tax credit was validly claimed for such unit for all or part of the month of December 1999 and unless the tenant was an occupant of such unit on December 31, 2005. No tax credits may be claimed for taxable years after December 31, 2010.

The authority may charge to each owner fees in such amount as the executive director shall determine to be necessary to cover the administrative costs to the authority. Such fees shall be payable at such time or times as the executive director shall require.

Historical Notes

Derived from VR400-02-0016 § 3, eff. November 21, 1990; amended, Volume 08, Issue 21, eff. July 1, 1992; Volume 12, Issue 23, eff. July 17, 1996; Volume 13, Issue 21, eff. July 1, 1997; Volume 16, Issue 26, eff. September 1, 2000; Volume 22, Issue 07, eff. December 1, 2005.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.