Fillable Form N-586 - Tax Credit For Low-Income Housing

FORM N-586

(REV. 2014)

Page 3

net income tax liability reduced by all other

Low-Income Housing Tax

a reduction in qualified basis for which

credits allowed the taxpayer under chapter

credits were allowable.);

Credit Loan

235, HRS.

•

The credit did not reduce your tax liabil-

ity; or

In lieu of the low-income housing tax

A tax credit which exceeds the taxpay-

credit, the taxpayer owning the qualified

er’s income tax liability may be used as a

•

The qualified basis is reduced because

low-income building placed in service after

credit against the taxpayer’s income tax li-

of a casualty loss, provided the property

December 31, 2011, may make a request

ability in subsequent years until exhausted.

is restored or replaced within a reason-

to the HHFDC for a loan. If the taxpayer

All claims for a tax credit must be filed on or

able period.

elects to receive the loan, the taxpayer shall

before the end of the twelfth month following

Specific Instructions

not be eligible for the low-income housing

the close of the taxable year for which the

tax credit.

credit may be claimed. Failure to properly

Part II

and timely claim the credit shall constitute a

Recapture of Credit

waiver of the right to claim the credit. A tax-

Tax Liability Limitations

payer may claim a credit only if the building

There is a 15-year compliance period

NOTE: For the purpose of this tax cred-

or project is a qualified low-income housing

during which the residential rental building

it, net income tax liability means net income

building or a qualified low-income housing

must meet certain requirements.

tax liability reduced by all other credits, ex-

project under section 42.

Note: If the decrease in qualified basis is

cept for the high technology business

If a subaward under section 1602 of

because of a change in the amount for which

investment tax credit and the carryover

the American Recovery and Reinvestment

you are financially at risk on the building,

of the technology infrastructure reno-

Act of 2009, Public Law 111-5, has been

then you must first recalculate the amount

vation tax credit allowed under chapter

issued for a qualified low-income building

of credit taken in prior years pursuant to

235, HRS. If you are also claiming the

placed in service after December 31, 2011,

section 42(k) before you calculate the

high technology business investment

the amount of the low-income housing tax

recapture amount on this form.

tax credit (Form N-318) or the carryover

credit that may be claimed by a taxpayer

of the technology infrastructure renova-

Generally, recapture applies if:

shall be equal to fifty percent of the amount

tion tax credit (Form N-323), complete

of the federal low-income housing tax

•

You dispose of a building or an owner-

this form first, then Form N-318, then

credit that would have been allocated to

ship interest in it;

Form N-323.

the qualified low-income building pursuant

•

There is a decrease in the qualified ba-

Line 8 — Enter the tax liability after refund-

to section 42(b) had a subaward not been

sis of the building from one year to the

able credits from the appropriate line of

awarded with respect to the qualified low-

next; or

your tax return.

income building.

•

The building no longer meets the mini-

Line 9 — The law requires that ALL other

mum set-aside requirements of section

credits, except for the high technology busi-

42(g)(1), the gross rent requirements of

The Hawaii Housing Finance and Devel-

ness investment tax credit and the carryover

section 42(g)(2), or the other require-

opment Corporation (HHFDC), under the

of the technology infrastructure renovation

ments for the units which are set-aside.

Department of Business, Economic Devel-

tax credit, offset a taxpayer’s tax liability

opment and Tourism, is designated as the

Recapture does not apply if:

BEFORE allowing a credit for low-income

State housing credit agency to carry out

housing. Complete the Credit Worksheet

•

You disposed of the building or an own-

section 42(h) (with respect to limitation on

on page 4 and enter the result on line 9.

ership interest in it after July 30, 2008,

aggregate credit allowable with respect to

and it is reasonably expected that the

Line 11 — Compare the amounts on lines

projects located in the State). As the State

building will continue to be operated as

7 and 10. Enter the smaller of line 7 or 10

housing credit agency, the corporation shall

a qualified low-income building for the

here, rounded to the nearest dollar. This is

determine the eligibility basis for a quali-

remainder of the building’s compliance

your maximum credit allowed for this tax-

fied low-income building, make the alloca-

period;

able year.

tion of housing credit dollar amounts with

•

You disposed of an ownership interest in

the State, and determine the portion of the

Part III

a building that you held through an elect-

State’s housing credit ceiling set aside for

ing large partnership;

projects involving qualified nonprofit organi-

To complete Part III of Form N-586 you

•

The decrease in qualified basis does not

zations.

will need copies of all the following feder-

exceed the additions to qualified basis

al forms that you have filed: Form 8586,

All claims for allocation of the low-in-

for which credits were allowable in years

Low-Income Housing Credit, Form 8609,

come housing credit under section 235-

after the year the building was placed in

Low-Income Housing Credit Allocation Cer-

110.8, HRS, shall be filed with the HHFDC

service;

tification, Form 8609-A Annual Statement

at 677 Queen St., Suite 300, Honolulu, HI

•

You correct a noncompliance within a

for Low-Income Housing Credit, and Form

96813. The HHFDC shall determine the

reasonable period after it is discovered

8611, Recapture of Low-Income Housing

amount of the credit allocation, if necessary,

or should have been discovered. (How-

Credit.

and return the claim to the taxpayer. The

ever, recapture applies if any vacant unit

taxpayer shall file a credit allocation form is-

Lines 1 through 7 — If the tax credit is

of comparable or smaller size to the low-

sued by the HHFDC with the taxpayer’s tax

recaptured from more than two buildings,

income units is rented to other than a

return with the Department of Taxation.

attach a schedule and enter the totals in the

low-income tenant (on other than a tem-

third column.

porary basis) during any period when

the project does not comply with the set-

If the tax credit recapture is only from a

aside requirement or has experienced

flow-through entity (partnership, S corpora-

Form N-586 - Tax Credit For Low-Income Housing - 2014 Page 3

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