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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
AMENDED
low-income housing; tax exemption
Purpose
Modifies conditions for qualification as tax exempt low-income housing.
Background
Laws 2006, Chapter 392 exempts certain rental property and related facilities from property taxation so long as the property is not used for profit and is operated by a nonprofit organization. This exemption also applies to properties that are wholly-owned subsidiaries of a nonprofit organization, including those in limited partnerships where the nonprofit organization is the managing general partner.
The
Low-Income Housing Tax Credit provides funding for the development costs of
low-income housing by allowing an investor to take a federal tax credit equal
to a percentage of the cost incurred for development of the low-income units in
a rental housing project. Development capital is raised by syndicating the federal
tax credit to an investor or, more commonly, a group of investors.
There is no anticipated fiscal impact to the state General Fund associated with this legislation, but there may be a shift in assessment of property tax if additional exemptions are claimed.
Provisions
1. Exempts property from taxation if it is used exclusively for affordable rental housing pursuant to the Internal Revenue Code (IRC) or another recorded restrictive covenant imposed by financing for affordable housing.
2. Requires that the property is owned and operated by a corporation that is qualified pursuant to the IRC, a limited partnership or limited liability company, in which the general partner or the managing member, as applicable, is an eligible nonprofit corporation or a single-purpose entity that is wholly owned by one or more eligible nonprofit corporations.
3. Requires that property must qualify under either of the following conditions:
a) the acquisition, rehabilitation, development or operation of the property is financed with tax exempt mortgage revenue bonds or general obligation bonds or is financed by local, state or federal loans or grants, and the amount of rent paid by or on behalf of the occupants does not exceed the amount of rent that is prescribed by deed restriction or regulatory agreement; or
b) the owner of the property is eligible for and receives federal tax credits for low-income or moderate-income section 42 residential housing, and the amount of rent paid by or on behalf of the occupants does not exceed the amount that is prescribed by deed restriction or regulatory agreements.
4. Requires that the qualifying properties cannot exceed 200 units.
5. Removes the requirement that the property is used as an assisted-living facility for low-income elderly residents.
6. Defines eligible nonprofit corporation.
7. Makes technical and conforming changes.
8. Becomes effective on the general effective date.
Amendments Adopted by Committee
· Limits qualifying properties to 200 units, rather than 200 residents.
Amendments Adopted by Committee of the Whole
1. Conforms the language to reference the specific IRC provisions that define the U.S. Internal Revenue System Affordable Housing Program and to include language that is consistent with the IRC.
2. Includes various types of ownership structures that are used for these types of projects so that the statute does not arbitrarily favor one form of ownership structure over another.
3. Eliminates redundant language in the existing statute for clarity.
Senate Action
FIN 2/13/19 DPA 10-0-0
Prepared by Senate Research
March 1, 2019
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