Form 3521 - California Low-Income Housing Credit - 2015 Page 3
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42015 Instructions for Form FTB 3521
Low-Income Housing Credit
References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2015, 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)
period begins with the first taxable year of the
B CA and Federal Differences
upon 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 FWHC was allocated under the former
be allocated based on a project’s need for the
December 31, 2015, will now be able to allocate
R&TC Sections 17053.14 and 23608.2 prior to
credit for economic viability.
the California low income housing tax credits
January 1, 2009, and the property is disposed
among partners based upon the terms of the
The low-income housing project must be located
of or stops operating, with respect to the costs
partnership agreement and without regard to
in California and must either:
of constructing or rehabilitating farmworker
any other requirements of Subchapter K of the
• Have been allocated a federal low-income
housing, within 360 months after completion,
Internal Revenue Code (IRC).
housing credit.
the portion of the credit claimed that represents
Farmworker Housing Credit (FWHC) –
• Qualify for the credit under IRC Section 42(h)
the portion of the 360-month period must be
For taxable years beginning on or after
(4)(B), the special rule where 50% or more
recaptured. See form FTB 3540 to recapture
January 1, 2009, the farmworker housing credit
of the building is financed with exempt bonds
FWHC amount.
has been consolidated into the low-income
subject to a volume cap.
housing tax credit. You may claim a credit
The Committee must certify to the owner the
C Basis
carryover for the eligible costs to construct or
amount of California credit to which the owner
rehabilitate qualified farmworker housing under
Generally, the eligible basis of a building for its
is entitled each year. To apply for the certificate,
former California Revenue and Taxation Code
entire 30-year compliance period is figured as
write to:
(R&TC) Sections 17053.14 and 23608.2 only
of the date it is placed in service. For housing
CALIFORNIA TAX CREDIT ALLOCATION
if a carryover is available from taxable years
projects consisting of two or more buildings,
COMMITTEE
1997 through 2008. See form FTB 3540, Credit
figure the credit separately for each building.
915 CAPITOL MALL RM 485
Carryover and Recapture Summary, for more
For new buildings, the eligible basis is generally
SACRAMENTO CA 95814
information.
the cost of construction.
Telephone: 916.654.6340
Important: Only credits received by an
For existing buildings, the eligible basis is the cost
2. Applicable percentage. For a new building not
affiliated corporation, allocated under R&TC
of acquisition plus any rehabilitation expenses
federally subsidized that received an allocation
Section 23610.5(q) for Low-Income Housing
incurred before the close of the first year of the
after 1989, the applicable percentage is:
credits, are entered on this form. See specific
credit period. The owner must have acquired the
instructions for line 3.
• For each of the first three years, the
building by purchase from an unrelated person,
percentage prescribed by the Secretary of the
and it must have been at least 10 years since the
Treasury for such buildings.
A Purpose
building was last placed in service or substantially
• For the 4th year, the difference between 30%
improved.
Use form FTB 3521, Low-Income Housing Credit,
and the sum of the applicable percentages for
When figuring the eligible basis of a new or
if you are an owner of a residential rental project
the first three years.
existing building, do not include the cost of land.
providing low-income housing in California.
For a new building that is federally subsidized or
You must reduce the basis by the amount of any
Also use form FTB 3521 to claim a credit that was:
an existing building that is “at risk of conversion”
federal grants received and by any basis allocable
that receives an allocation after 1989, the
• Allocated from an affiliated corporation.
to units that are not low-income units and are
applicable percentage is:
• Passed through from S corporations, estates,
above the average quality standard of the low-
trusts, partnerships, or limited liability
• For each of the first three years, the
income units in the building.
companies (LLCs) classified as partnerships.
percentage prescribed by the Secretary of the
Residential rental property may qualify for the
Treasury for new buildings that are federally
The meaning of an affiliated corporation is
credit even though part of the building in which
subsidized.
provided in R&TC Section 25110(b), except
the residential units are located is used for
• For the 4th year, the difference between 13%
substitute “100%” for “more than 50%” and
commercial purposes. To figure the eligible basis
and the sum of the applicable percentages for
“voting common stock” for “voting stock”
of such property, do not include the cost of the
the first three years.
wherever they appear in R&TC Section 25110.
nonresidential rental property. You may generally
The credit percentage will be adjusted monthly
S corporations, estates, trusts, partnerships,
include the basis of common areas or tenant
to reflect the present value at the time the
and LLCs classified as partnerships should
facilities, such as swimming pools or parking areas.
building is placed in service. See the IRS revenue
complete form FTB 3521 to figure the amount
ruling published monthly dealing with federal
of credit to pass through to shareholders,
D Limitations
interest rates.
beneficiaries, partners, or members. Attach this
S corporations may claim only 1/3 of the credit
form to Form 100S, California S Corporation
3. Credit period. California uses a 4-year period
against the 1.5% entity-level tax (3.5% for
Franchise or Income Tax Return; Form 541,
instead of the 10-year period allowed under
financial S corporations). The remaining 2/3 must
California Fiduciary Income Tax Return;
federal law. California does not apply the federal
be disregarded and may not be used as carryover.
Form 565, Partnership Return of Income; or
special rule for the first year of the credit period
S corporations can pass through 100% of the
Form 568, Limited Liability Company Return of
under IRC Section 42(f)(2).
credit to their shareholders.
Income. Show the pass-through credit for each
4. Accelerated credit election. California
shareholder, beneficiary, partner, or member on
If a C corporation had unused credit carryovers
law contains no provision for acceleration
Schedules K-1 (100S, 541, 565, or 568), Share of
when it elected S corporation status, the
of the credit. See R&TC Sections 17058(p)
Income, Deductions, Credits, etc.
carryovers were reduced to 1/3 and transferred
and 23610.5(p).
FTB 3521 Instructions 2015 Page 1
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