For tax years beginning on or after January 1, 2001 an income tax credit is available for owners of qualified low-income housing developments that receive a credit allocation from the Colorado Housing and Finance Authority.
(“CHFA”) before December 31, 2002. [§39-22-2102, C.R.S.]
Computation of the Credit:
The credit is allocated by CHFA. The credit will not exceed 30% of the qualified basis of the development and will be allocated only to the extent necessary for the financial feasibility of the development.
All credits must be allocated by CHFA by December 31, 2002. A copy of the Colorado State Low Income Housing Tax Credit Allocation Certificate that is issued by CHFA must be attached to the Colorado income tax return that claims the credit.
CLAIMING THE CREDIT
The credit that is allocated will be claimed over a period of four tax years beginning with the tax year in which the qualified development is placed in service. If a qualified development is comprised of more than one building, the development is deemed to have been put in service in the taxable year during which the last building is placed in service. Example: A $5,000 credit is allocated in 2001 and the development is placed in service in 2002. The taxpayer may claim a $5,000 credit in 2002, 2003, 2004 and 2005 for a total credit of $20,000.
The low-income housing credit is claimed in each year of the credit period, which is the four-year period starting with the year the development is placed in service. The owners of the development during each of those four years must claim the allocated credit (25% of the overall credit) each year. If the credit claimed by any owner exceeds their tax liability, then that taxpayer can carry the excess credit forward to future tax returns through 2012. That excess credit cannot be sold, transferred, reassigned or claimed by another taxpayer at any time.
If the ownership changes during years two through four, then the credit for each of those years will be claimed by the taxpayers that own the development during the applicable year. If a new owner is added in year five, no credit can be allocated to that taxpayer even if prior or current owners have a credit carryforward from earlier tax years.
For more information, please see FYI Publication 46