QAPs and LEED / by Admin

In October 2023, USGBC's Advocacy team hosted a Quarterly Webinar regarding the QAP (Qualified Allocation Plan) topic. Link here for the session recording.

Who were there?

  • Moderator: Gracie Timan, Advocacy Partnerships Associate, USGBC

  • Speakers: Liz Beardsley, Senior Policy Counsel, USGBC

What is the "QAP"?  

QAP stands for Qualified Allocation Plan. It was intended to allocate LIHTC (Low-Income Housing Tax Credits) to projects meeting federal requirements. These allocation procedures control how LIHTC projects are awarded, ensure the selected projects comply with federal mandates, and address the tax credit allocation on a priority basis.  

This tax credit is conditioned based on whether the project meets specific requirements listed on the intended QAP. They are provided to project owners in equal annual installments over a ten-years period. The reservation of tax credits is made after the state or local authority reviews the project budget to determine its feasibility.

What is LIHTC?

The LIHTC (Low-Income Housing Tax Credit) program is the most important resource for creating affordable housing in the United States.The LIHTC credits are awarded to developers to offset construction costs upfront in exchange for low-income household units. It was created by the Tax Reform Act in 1986 and stated in 26 U.S. Code 42-Low Income Housing Credit. The LIHTC program gives State and local housing credit agencies the equivalent of $9 billion in annual budget authority to issue Tax Credits for the acquisition, rehabilitation, or new construction of rental housing for lower-income households. Between 1997 and 2019, 90% of affordable housing development was supported by this LIHTC program. 

Who can apply for QAP?

Both experienced for-profit and non-profit developers in good standing with the local jurisdiction can apply for a reservation of LIHTC (Low-Income Housing Tax Credit) to fund the residential development.

What does QAP have to do with Energy Efficiency?

Under U.S. Code § 42 (m)Responsibilities of Housing Credit Agencies, it laid out "(C) certain selection criteria must be used " in a qualified allocation plan, such as the project location, the project characteristics, the tenant population with special housing needs, etc. One of the "must" selection criteria is the "(ix) energy efficiency of the project." 

In many cases, the green home could often be a competitive criterion for affordable housing projects. According to national studies, the average U.S. household bears 3.5% of the energy burden. This percentage goes up to 7.2% among low-income households, which means 7.2% of their income has to pay the energy bill. By offering these families green home constructions, the money saved on energy can help the household buy groceries, fill the needed prescriptions, or spend on other necessities. 

How do USGBC and LEED fit into QAP?

Many energy-efficient products and standards are already in the market, from Energy Star appliances to fully-equipped Zero-energy homes. Those energy-efficient approaches solely focus on what's inside the individual unit. LEED guideline offers a more holistic approach to energy efficiency. Because LEED requires a certified project to meet criteria from location, transportation, and sustainable sites to regional priority, not only focusing on single energy-saving source (or products). 

What are other project incentives related to energy efficiency?

  • Sec 45L New Energy Efficient Home Tax Credit

  • Sec 48 Clean Electricity Investment Tax Credit (IRA)

  • Sec. 30C EV Charging, Alternative Fuel Vehicle Fueling (IRA)

  • Tax Deduction for Energy Efficient Commercial Buildings Sec. 179D

  • DOE Home Energy Rebates, whole building (IRA 50121)

  • DOE Home Electrification and Appliance Rebate, income-based (IRA 50122)

  • HUD Green and Resilient Retrofit Program, Affordable housing only (sec.30002)

Note: IRA stands for Inflation Reduction Act

By the way,

What is the method of discounting in LIHTC?

There are two types of federal LIHTC: a 9% Tax Credit from the local per capita state ceiling and a 4% Tax credit issued to qualified projects financed with tax-exempt bonds. Generally, a Low-Income Housing project is awarded only 9% or 4% of the Tax Credit. It is still possible for projects to receive both types of Tax Credits under specific circumstances. 
*A State Ceiling was announced at the end of FY 2022. for 9% LIHTC, the state ceiling is greater than $2.75 multiplied by the state population, or $3,185,000. 

What does it mean when a project is "placed in service"?

Place in service means the property is first used for accounting, primarily to calculate depreciation or grant a tax credit. The date the property is placed in service marks the beginning of the depreciation period. The state or local credit agency will perform a financial evaluation at the time of placement in service to determine the final amount of tax credit allocation, which is the lesser tax credit necessary to make the development feasible or the amount of the earlier carryover allocation. 
IRS also considers the property place in service when the following conditions are met:

  1. Readiness (i.e., the construction is substantially complete, or the building receives a certification of occupancy.)

  2. Availability (i.e., when the building is available)

  3. Capability to perform its intended function 

What is Form 8609?

It is the document that the local housing credit agency gives to the project sponsor/ developer after their financial evaluation. As the name implies, Form 8609, Low-Income Housing Credit Allocation and Certification, is the IRS document as the evidence showing that the property owners are eligible to claim Low-Income Housing Tax Credit.