Form 3521 - Low-Income Housing Credit 2011 - California Page 3
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4Instructions for Form FTB 3521
Low-Income Housing Credit
References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2009, and to the California Revenue and Taxation Code (R&TC).
General Information
B CA and Federal Differences
credit) is 30 consecutive years, instead of the
15-year period allowed under federal law. This
. California Tax Credit Allocation Committee
You are not required to attach form CTCAC 3521A,
period begins with the first taxable year of the
authorization. The Committee must authorize
Certificate of Final Award of California
credit period.
the amount of the credit allocated to any low-
Low-Income Housing Tax Credits, to your tax
6. Recapture of credit. California law contains
income housing project. California requires that
return. However, you must retain the certificate
no provision for recapture of the credit. See
the credit be allocated based on a project’s need
and make a copy available to the Franchise Tax
R&TC Sections 17058(i) and 23610.5(i).
for the credit for economic viability.
Board (FTB) upon request.
The low-income housing project must be located
Allocations to Partners – Low income housing
C Basis
in California and must either:
projects receiving a preliminary reservation
from the California Tax Credit Allocation
• Have been allocated a federal low-income
Generally, the eligible basis of a building for its
Committee (CTCAC) between January 1, 2009,
housing credit.
entire 30-year compliance period is figured as
and December 31, 2015, will now be able to
• Qualify for the credit under IRC
of the date it is placed in service. For housing
allocate the California low income housing tax
Section 42(h)(4)(B), the special rule where
projects consisting of two or more buildings,
credits among partners based upon the terms of
50% or more of the building is financed with
figure the credit separately for each building.
the partnership agreement and without regard to
exempt bonds subject to a volume cap.
For new buildings, the eligible basis is generally
any other requirements of Subchapter K of the
The Committee must certify to the owner the
the cost of construction.
Internal Revenue Code (IRC).
amount of California credit to which the owner
For existing buildings, the eligible basis is
Farmworker Housing Credit – For taxable
is entitled each year. To apply for the certificate,
the cost of acquisition plus any rehabilitation
years beginning on or after January 1, 2009,
write to:
expenses incurred before the close of the first
the farmworker housing credit has been
CALIFORNIA TAX CREDIT ALLOCATION
year of the credit period. The owner must have
consolidated into the low-income housing tax
COMMITTEE
acquired the building by purchase from an
credit.
915 CAPITOL MALL RM 485
unrelated person, and it must have been at least
Important: Only credits received by an affiliated
SACRAMENTO CA 95814
10 years since the building was last placed in
corporation, allocated under California Revenue
Telephone: 916.654.6340
service or substantially improved.
and Taxation Code (R&TC) Section 23610.5(q)
2. Applicable percentage. For a new building
When figuring the eligible basis of a new or
for Low-Income Housing credits, are entered on
not federally subsidized that received
existing building, do not include the cost of
this form. See specific instructions for line 3.
an allocation after 1989, the applicable
land. You must reduce the basis by the amount
percentage is:
of any federal grants received and by any basis
A Purpose
allocable to units that are not low-income units
• For each of the first three years, the
and are above the average quality standard of
percentage prescribed by the Secretary of
Use form FTB 3521, Low-Income Housing
the low-income units in the building.
the Treasury for such buildings.
Credit, if you are an owner of a residential
• For the 4th year, the difference between 30%
Residential rental property may qualify for
rental project providing low-income housing in
and the sum of the applicable percentages
the credit even though part of the building in
California.
for the first three years.
which the residential units are located is used
Also use form FTB 3521 to claim a credit that
for commercial purposes. To figure the eligible
For a new building that is federally subsidized
was:
basis of such property, do not include the cost
or an existing building that is “at risk of
• Allocated from an affiliated corporation.
of the nonresidential rental property. You may
conversion” that receives an allocation after
• Passed through from S corporations, estates
generally include the basis of common areas
1989, the applicable percentage is:
or trusts, partnerships, or limited liability
or tenant facilities, such as swimming pools or
• For each of the first three years, the
companies (LLCs) classified as partnerships.
parking areas.
percentage prescribed by the Secretary
The meaning of an affiliated corporation is
of the Treasury for new buildings that are
provided in R&TC Section 25110(b), except
D Limitations
federally subsidized.
substitute “100%” for “more than 50%” and
• For the 4th year, the difference between 13%
S corporations may claim only 1/3 of the credit
“voting common stock” for “voting stock”
and the sum of the applicable percentages
against the 1.5% entity-level tax (3.5% for
wherever they appear in R&TC Section 25110.
for the first three years.
financial S corporations). The remaining 2/3
S corporations, estates or trusts, partnerships,
The credit percentage will be adjusted monthly
must be disregarded and may not be used as
and LLCs classified as partnerships should
to reflect the present value at the time the
carryover. S corporations can pass through
complete form FTB 3521 to figure the amount
building is placed in service. See the IRS
100% of the credit to their shareholders.
of credit to pass through to shareholders,
revenue ruling published monthly dealing with
If a C corporation had unused credit carryovers
beneficiaries, partners, or members. Attach this
federal interest rates.
when it elected S corporation status, the
form to Form 100S, California S Corporation
3. Credit period. California uses a 4-year period
carryovers were reduced to 1/3 and transferred
Franchise or Income Tax Return; Form 541,
instead of the 10-year period allowed under
to the S corporation. The remaining 2/3 were
California Fiduciary Income Tax Return;
federal law. California does not apply the federal
disregarded. The allowable carryovers may
Form 565, Partnership Return of Income; or
special rule for the first year of the credit period
be used to offset the 1.5% tax on net income
Form 568, Limited Liability Company Return of
under IRC Section 42(f)(2).
in accordance with the respective carryover
Income. Show the pass-through credit for each
rules. These C corporation carryovers may
shareholder, beneficiary, partner, or member on
4. Accelerated credit election. California
not be passed through to shareholders. For
Schedules K-1 (100S, 541, 565, or 568), Share
law contains no provision for acceleration
more information, get Schedule C (100S),
of Income, Deductions, Credits, etc.
of the credit. See R&TC Sections 17058(p)
S Corporation Tax Credits.
and 23610.5(p).
Under IRC Section 42(a), as adopted by
If a taxpayer owns an interest in a disregarded
California, the low-income housing credit for any
5. Compliance period. The compliance period
business entity, [a single member limited
year is the applicable percentage of the qualified
(during which a housing project remains
liability company (SMLLC) not recognized by
basis of each qualified low-income building. See
subject to the set-aside and rent requirements
California, and for tax purposes treated as a
R&TC Sections 17058 and 23610.5.
that qualified it for the low-income housing
FTB 3521 Instructions 2011 Page
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