California Form 3521 - Low-Income Housing Credit - 2013 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
Under IRC Section 42(a), as adopted by
5. Compliance period. The compliance period
California, the low-income housing credit for any
(during which a housing project remains
You are not required to attach form CTCAC 3521A,
year is the applicable percentage of the qualified
subject to the set-aside and rent requirements
Certificate of Final Award of California Low-Income
basis of each qualified low-income building. See
that qualified it for the low-income housing
Housing Tax Credits, to your tax return. However,
R&TC Sections 17058 and 23610.5.
credit) is 30 consecutive years, instead of the
you must retain the certificate and make a copy
15-year period allowed under federal law. This
available to the Franchise Tax Board (FTB) upon
period begins with the first taxable year of the
B CA and Federal Differences
request.
credit period.
1. California Tax Credit Allocation Committee
Allocations to Partners – Low-income housing
6. Recapture of credit. California law contains no
authorization. The Committee must authorize the
projects receiving a preliminary reservation from
provision for recapture of the credit. See R&TC
amount of the credit allocated to any low-income
the California Tax Credit Allocation Committee
Sections 17058(i) and 23610.5(i).
housing project. California requires that the credit
(CTCAC) between January 1, 2009, and
If the Farm Worker Housing Credit (FHWC)
be allocated based on a project’s need for the
December 31, 2015, will now be able to allocate
was allocated under the former R&TC
credit for economic viability.
the California low income housing tax credits
Sections 17053.14 and 23608.2 prior to
among partners based upon the terms of the
The low-income housing project must be located
January 1, 2009, and the property is disposed
partnership agreement and without regard to
in California and must either:
of or stops operating, with respect to the costs
any other requirements of Subchapter K of the
• Have been allocated a federal low-income
of constructing or rehabilitating farm worker
Internal Revenue Code (IRC).
housing credit.
housing, within 360 months after completion,
Farmworker Housing Credit – For taxable years
• Qualify for the credit under IRC Section 42(h)
the portion of the credit claimed that represents
beginning on or after January 1, 2009, the
(4)(B), the special rule where 50% or more
the portion of the 360-month period must be
farmworker housing credit has been consolidated
of the building is financed with exempt bonds
recaptured. See form FTB 3540 to recapture
into the low-income housing tax credit. You may
subject to a volume cap.
FWHC amount.
claim a credit carryover for the eligible costs to
The Committee must certify to the owner the
construct or rehabilitate qualified farmworker
amount of California credit to which the owner
C Basis
housing under former R&TC Sections 17053.14
is entitled each year. To apply for the certificate,
and 23608.2 only if a carryover is available from
Generally, the eligible basis of a building for its
write to:
taxable years 1997 through 2008. See form
entire 30-year compliance period is figured as
CALIFORNIA TAX CREDIT ALLOCATION
FTB 3540 for more information.
of the date it is placed in service. For housing
COMMITTEE
projects consisting of two or more buildings,
Important: Only credits received by an affiliated
915 CAPITOL MALL RM 485
figure the credit separately for each building.
corporation, allocated under California Revenue
SACRAMENTO CA 95814
and Taxation Code (R&TC) Section 23610.5(q) for
For new buildings, the eligible basis is generally
Telephone: 916.654.6340
Low-Income Housing credits, are entered on this
the cost of construction.
2. Applicable percentage. For a new building not
form. See specific instructions for line 3.
For existing buildings, the eligible basis is the cost
federally subsidized that received an allocation
of acquisition plus any rehabilitation expenses
after 1989, the applicable percentage is:
A Purpose
incurred before the close of the first year of the
• For each of the first three years, the
credit period. The owner must have acquired the
Use form FTB 3521, Low-Income Housing Credit,
percentage prescribed by the Secretary of the
building by purchase from an unrelated person,
if you are an owner of a residential rental project
Treasury for such buildings.
and it must have been at least 10 years since the
providing low-income housing in California.
• For the 4th year, the difference between 30%
building was last placed in service or substantially
and the sum of the applicable percentages for
Also use form FTB 3521 to claim a credit that
improved.
the first three years.
was:
When figuring the eligible basis of a new or
For a new building that is federally subsidized or
• Allocated from an affiliated corporation.
existing building, do not include the cost of land.
an existing building that is “at risk of conversion”
• Passed through from S corporations, estates,
You must reduce the basis by the amount of any
that receives an allocation after 1989, the
trusts, partnerships, or limited liability
federal grants received and by any basis allocable
applicable percentage is:
companies (LLCs) classified as partnerships.
to units that are not low-income units and are
• For each of the first three years, the
The meaning of an affiliated corporation is
above the average quality standard of the low-
percentage prescribed by the Secretary of the
income units in the building.
provided in R&TC Section 25110(b), except
Treasury for new buildings that are federally
substitute “100%” for “more than 50%” and
Residential rental property may qualify for the
subsidized.
“voting common stock” for “voting stock”
credit even though part of the building in which
• For the 4th year, the difference between 13%
wherever they appear in R&TC Section 25110.
the residential units are located is used for
and the sum of the applicable percentages for
S corporations, estates, trusts, partnerships,
commercial purposes. To figure the eligible basis
the first three years.
and LLCs classified as partnerships should
of such property, do not include the cost of the
The credit percentage will be adjusted monthly to
complete form FTB 3521 to figure the amount
nonresidential rental property. You may generally
reflect the present value at the time the building
of credit to pass through to shareholders,
include the basis of common areas or tenant
is placed in service. See the IRS revenue ruling
beneficiaries, partners, or members. Attach this
facilities, such as swimming pools or parking
published monthly dealing with federal interest
form to Form 100S, California S Corporation
areas.
rates.
Franchise or Income Tax Return; Form 541,
California Fiduciary Income Tax Return;
3. Credit period. California uses a 4-year period
D Limitations
Form 565, Partnership Return of Income; or
instead of the 10-year period allowed under
S corporations may claim only 1/3 of the credit
Form 568, Limited Liability Company Return of
federal law. California does not apply the federal
against the 1.5% entity-level tax (3.5% for
Income. Show the pass-through credit for each
special rule for the first year of the credit period
financial S corporations). The remaining 2/3 must
shareholder, beneficiary, partner, or member on
under IRC Section 42(f)(2).
be disregarded and may not be used as carryover.
Schedules K-1 (100S, 541, 565, or 568), Share of
4. Accelerated credit election. California
S corporations can pass through 100% of the
Income, Deductions, Credits, etc.
law contains no provision for acceleration
credit to their shareholders.
of the credit. See R&TC Sections 17058(p)
and 23610.5(p).
FTB 3521 Instructions 2013 Page 1
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