This Act allows taxpayers to carry back unused low-income housing tax credits for up to five prior years to offset past tax liabilities.
Mike Carey
Representative
OH-15
The Affordable Housing Credit Carryback Act amends the Internal Revenue Code to allow taxpayers to carry back unused Low-Income Housing Tax Credits for up to five years. This change enables businesses to apply these credits against taxes paid in prior years. The legislation specifically expands the five-year carryback provision, which was previously limited primarily to the marginal oil and gas well production credit.
Affordable Housing Credit Carryback Act: Developers Get 5-Year Tax Refund Window to Fuel New Projects
The Affordable Housing Credit Carryback Act simplifies a specific corner of the tax code to help get more apartments built. Currently, if a developer earns Low-Income Housing Tax Credits (LIHTC) but doesn't have enough tax liability to use them all in a single year, those credits often just sit on the books. This bill changes that by allowing businesses to carry those unused credits back five years to offset taxes they already paid in the past. By amending Section 39(a)(3) of the Internal Revenue Code, the government is essentially offering a retroactive refund for builders who commit to affordable housing, providing them with immediate cash flow rather than a promise of future savings.
Cashing In on the Past
Under the current rules, most business credits have a very limited rearview mirror. This bill puts the affordable housing credit in an elite category—previously reserved mostly for oil and gas production—that allows for a five-year lookback. For a developer who just finished a complex project in a high-cost city, this means they don't have to wait for next year's tax filing to see a benefit. They can effectively say to the IRS, 'I have extra credits from my 2024 project; please apply these to the taxes I paid back in 2019 and send me the difference.' This liquidity can be the difference between a developer starting their next project immediately or waiting years to scrape together the necessary capital.
From Tax Forms to Front Doors
This technical tweak has a direct line to the local housing market. Consider a mid-sized construction firm that hits a lean year due to rising interest rates but has a massive backlog of unused housing credits. Under this Act, they could recoup cash from their more profitable years to keep their crews employed and their current job sites active. By making these credits more flexible and 'liquid,' the bill aims to make affordable housing projects more attractive to investors who usually shy away from deals where the financial payoff is buried in the distant future. For the average person looking for a place to live, this is designed to speed up the pipeline of available units by ensuring the money stays moving in the construction sector.