DELAWARE -A bill introduced in the Delaware Senate seeks to create a consistent framework for payments in lieu of taxes for low-income housing tax credit properties. It allows for property tax exemptions in exchange for annual payments based on a property’s net income.
Senate Bill 149 amends Title 9 and Title 14 of the Delaware Code. Counties and municipalities can adopt ordinances exempting the properties from traditional taxes. Instead, qualifying properties would pay 5 percent of their annual net income, as reported to the Delaware State Housing Authority in lieu of taxes.
Lewes Senator Russ Huxtable (D-District 6) is the bill's sponsor. If enacted, this exemption would also extend to school district taxes, removing both county and school-related property tax burdens from tax credit developments that opt into the program.
Background on low-income housing tax credit properties
The federal Low-Income Housing Tax Credit program, created in 1986 by the Internal Revenue Service, is a tool for financing affordable housing nationwide. In Delaware, the State Housing Authority awards these tax credits through a competitive process based on its Qualified Allocation Plan, which includes criteria such as income restrictions, rent limits, and long-term affordability requirements.
Tax credit projects must adhere to detailed regulations:
Rent and income restrictions for tenants
Long-term affordability enforced through a land use covenant
Compliance with deadlines from tax credit award to the placement of a building in service
