Community Investment Tax Credit

The Community Investment Tax Credits offers credit against franchise and excise taxes for financial institutions that invest in affordable housing, such as:

Financial institutions may obtain a credit against the sum total of taxes imposed by the Franchise and Excise Tax Laws when qualified loans, qualified investments, grants or contributions are extended to eligible housing entities for engaging in eligible low income housing activities. The amount of the credit shall be applied one time and will be based on the total amount of the loan, investment, grant, or contribution; or the credit may be applied annually for qualified loans and qualified low rate loans and will be based on the unpaid principal balance of the loan. The amount of the credit shall be as follows:

  • Five percent (5%) of a qualified loan or qualified long term-term investment; OR three percent (3%) annually of the unpaid principal balance of a qualified loan as of December 31 of each year for the life of the loan, OR fifteen (15) years, whichever is earlier. 
  • Ten percent (10%) of a qualified low rate loan, grant, or contribution; OR five percent (5%) annually of the unpaid principal balance of a qualified low rate loan as of December 31 of each year for the life of the loan, OR fifteen (15) years, whichever is earlier. 

The program is administered in cooperation with The Tennessee Department of Revenue. THDA will certify the housing entity and activity as eligible to receive the tax credits. TDoR will award the tax credits to the financial institutions. The eligible housing entity will be required to maintain records as requested by THDA to ensure that affordable housing opportunities are being provided.

Eligible Activities

  • Activities that create or preserve affordable housing for low income Tennesseans. 
  • Activities that assist low income Tennesseans in obtaining safe and affordable housing. 
  • Activities that build the capacity of an eligible non-profit organization to provide housing opportunities for low-income Tennesseans. 
  • Any other low-income housing related activity approved by the THDA Executive Director and the Commissioner of Revenue. 

Low income Tennesseans are defined as those who are at or below 80% of the area median income as adjusted for family size. Applicable income limits are the current income limits produced by the Department of Housing and Urban Development for the Section 8 Programs. Tennessee limits may be found at www.huduser.org/datasets/il.html.

Eligible Housing Entities

  • Tennessee based non-profit organizations with an Internal Revenue Code 501 (C)(3) status 
  • Public Housing Authorities 
  • Development Districts 
  • Tennessee Housing Development Agency 

Participating financial institutions will receive tax credits for extending the following to eligible housing entities

  • Qualified loans defined as a loan at least 2% below the prime rate 
  • Qualified low-rate loans defined as a loan at least 4% below the prime rate 
  • Qualified long term investments extending for a period of more than 5 years 
  • Grants or contributions 

Qualified long term investments are defined as equity investments where repayment is not expected to begin for a period of more than 5 years. Tax credits may be available to financial institutions retroactively for funds extended to eligible housing entities for eligible activities back to the date the bill was signed into law, June 22, 2005. Unused tax credits that are applied one time may be carried forward for a period of 15 years after the tax year in which the credit originated. Unused tax credits that are applied annually may not be carried forward beyond the tax year in which the credit originated.

Contributed By: 
National Housing Trust

Other Items of Interest