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Twinning 9% and 4% Low-Income Housing Tax Credits in the Same Development

Twinning 9% and 4% Low-Income Housing Tax Credits in the Same Development

As you likely already know, a Low-Income Housing Tax Credits (LIHTC) development can be very competitive, and it can oftentimes be difficult to get a deal to pencil out.

A creative solution that could be employed to help a prospective deal get to the finish line is twinning 9% and 4% tax credits.

What is a Hybrid Deal?

A hybrid LIHTC transaction is one that could have been structured as a single 9% tax credit project or a single 4% one, but instead is structured as two related, but independently, financed projects using 9% tax credits on one portion of the project and 4% tax credits on the other portion.

It is important to note that this is different than a phased project in which you might receive a 9% allocation to construct a project, and then in a later cycle construct a second phase to the project with another 9% allocation or perhaps with 4% credits.

What Does the Tax Code Say?

Let’s take a quick look at the Internal Revenue Code to see what kind of barrier we are up against when trying to make this structure work. According to Section 42, a new building will be treated as federally subsidized if, in this example, tax-exempt bond proceeds are used “directly or indirectly” with respect to the building or its operation.

Basically, per the Internal Revenue Code, the building would only qualify for the 4% tax credit, not the 9% tax credit. So if you are receiving tax-exempt bond proceeds, and using those proceeds to build the building, the Internal Revenue Code says that building is to be treated as federally subsidized, which then means the building is not eligible for 9% credits.

If that is the case, how do we combine the 9% and the 4% together? What is the workaround to get this structure to work? We will need to separate the deal into two distinct projects.

This is a complex topic. Our eGuide, Twinning 9% and 4% Low-Income Housing Tax Credits, covers how to structure the deal, potential benefits, and challenges.



There are a lot of calculations, analysis, and strategic decisions required when using the twinning tax credit strategy. It’s not something you want to take on without a team of experts to guide you through the process.

SVA has in-depth knowledge and experience working with all the tax credits available. Take the time to reach out to SVA and let us help you navigate the options.

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Biz Tip Topic Expert: Adam Kleinmaus, CPA

Adam Kleinmaus, CPA

Adam is a Principal with SVA Certified Public Accountants with focused expertise in the real estate and nonprofit industries. In his role, he supervises and performs audits for owners of affordable multifamily housing projects receiving Section 42 Low-Income Housing Tax Credits.

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