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

FORM N-586

(REV. 2015)

Page 3

The credit allowed shall be claimed

Low-Income Housing Tax

a reduction in qualified basis for which

against net income tax liability for the tax-

credits were allowable.);

Credit Loan

able year. For the purpose of deducting this

•

The credit did not reduce your tax liabil-

tax credit, net income tax liability means

ity; or

In lieu of the low-income housing tax

net income tax liability reduced by all other

credit, the taxpayer owning the qualified

•

The qualified basis is reduced because

credits allowed the taxpayer under chapter

low-income building placed in service after

of a casualty loss, provided the property

235, HRS.

December 31, 2011, may make a request

is restored or replaced within a reason-

to the HHFDC for a loan. If the taxpayer

A tax credit which exceeds the taxpay-

able period.

elects to receive the loan, the taxpayer shall

er’s income tax liability may be used as a

Specific Instructions

not be eligible for the low-income housing

credit against the taxpayer’s income tax li-

tax credit.

ability in subsequent years until exhausted.

Part II

The deadline to claim the credit, includ-

Recapture of Credit

ing amended claims, is 12 months after

Tax Liability Limitations

the close of your taxable year. You cannot

There is a 15-year compliance period

NOTE: For the purpose of this tax cred-

claim the credit after the deadline. Failure

during which the residential rental building

it, net income tax liability means net income

to properly and timely claim the credit shall

must meet certain requirements.

tax liability reduced by all other credits, ex-

constitute a waiver of the right to claim the

Note: If the decrease in qualified basis is

cept for the high technology business

credit. A taxpayer may claim a credit only

because of a change in the amount for which

investment tax credit and the carryover

if the building or project is a qualified low-

you are financially at risk on the building,

of the technology infrastructure reno-

income housing building or a qualified low-

then you must first recalculate the amount

vation tax credit allowed under chapter

income housing project under section 42.

of credit taken in prior years pursuant to

235, HRS. If you are also claiming the

If a subaward under section 1602 of

section 42(k) before you calculate the

high technology business investment

the American Recovery and Reinvestment

recapture amount on this form.

tax credit (Form N-318) or the carryover

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

of the technology infrastructure renova-

Generally, recapture applies if:

issued for a qualified low-income building

tion tax credit (Form N-323), complete

placed in service after December 31, 2011,

•

You dispose of a building or an owner-

this form first, then Form N-318, then

the amount of the low-income housing tax

ship interest in it;

Form N-323.

credit that may be claimed by a taxpayer

•

There is a decrease in the qualified ba-

Line 8 — Enter the tax liability after refund-

shall be equal to fifty percent of the amount

sis of the building from one year to the

able credits from the appropriate line of

of the federal low-income housing tax

next; or

your tax return.

credit that would have been allocated to

•

The building no longer meets the mini-

the qualified low-income building pursuant

Line 9 — The law requires that ALL other

mum set-aside requirements of section

to section 42(b) had a subaward not been

credits, except for the high technology busi-

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

awarded with respect to the qualified low-

ness investment tax credit and the carryover

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

income building.

of the technology infrastructure renovation

ments for the units which are set-aside.

tax credit, offset a taxpayer’s tax liability

Recapture does not apply if:

BEFORE allowing a credit for low-income

The Hawaii Housing Finance and Devel-

housing. Complete the Credit Worksheet

•

You disposed of the building or an own-

opment Corporation (HHFDC), under the

on page 4 and enter the result on line 9.

ership interest in it after July 30, 2008,

Department of Business, Economic Devel-

and it is reasonably expected that the

Line 11 — Compare the amounts on lines

opment and Tourism, is designated as the

building will continue to be operated as

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

State housing credit agency to carry out

a qualified low-income building for the

here, rounded to the nearest dollar. This is

section 42(h) (with respect to limitation on

remainder of the building’s compliance

your maximum credit allowed for this tax-

aggregate credit allowable with respect to

period;

able year.

projects located in the State). As the State

•

You disposed of an ownership interest in

housing credit agency, the corporation shall

Part III

a building that you held through an elect-

determine the eligibility basis for a quali-

ing large partnership;

fied low-income building, make the alloca-

To complete Part III of Form N-586 you

•

The decrease in qualified basis does not

tion of housing credit dollar amounts with

will need copies of all the following feder-

exceed the additions to qualified basis

the State, and determine the portion of the

al forms that you have filed: Form 8586,

for which credits were allowable in years

State’s housing credit ceiling set aside for

Low-Income Housing Credit, Form 8609,

after the year the building was placed in

projects involving qualified nonprofit organi-

Low-Income Housing Credit Allocation Cer-

service;

zations.

tification, Form 8609-A Annual Statement

•

You correct a noncompliance within a

for Low-Income Housing Credit, and Form

All claims for allocation of the low-in-

reasonable period after it is discovered

8611, Recapture of Low-Income Housing

come housing credit under section 235-

or should have been discovered. (How-

Credit.

110.8, HRS, shall be filed with the HHFDC

ever, recapture applies if any vacant unit

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

Lines 1 through 7 — If the tax credit is

of comparable or smaller size to the low-

96813. The HHFDC shall determine the

recaptured from more than two buildings,

income units is rented to other than a

amount of the credit allocation, if necessary,

attach a schedule and enter the totals in the

low-income tenant (on other than a tem-

and return the claim to the taxpayer. The

third column.

porary basis) during any period when

taxpayer shall file a credit allocation form is-

the project does not comply with the set-

If the tax credit recapture is only from a

sued by the HHFDC with the taxpayer’s tax

aside requirement or has experienced

flow-through entity (partnership, S corpora-

return with the Department of Taxation.

Form N-586 - Tax Credit For Low-Income Housing - 2015 Page 3

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