What's Happening?
The Treasury Department has announced the allocation of unused housing credit carryovers to various states for the calendar year 2025. This allocation is part of the Internal Revenue Code Section 42(h)(3)(D),
which allows states to receive unused credit authority from a national pool. The amounts vary significantly, with California receiving approximately $2.4 million and Texas about $1.9 million. Smaller allocations include $44,851 for Alaska and $39,297 for Vermont. The guidance for state housing credit agencies on requesting these allocations will be published in the Internal Revenue Bulletin on January 20, 2026. The timing of this publication means that any unused credit carryover not allocated by the end of 2025 will not be considered for the following year's allocation.
Why It's Important?
The allocation of housing credit carryovers is crucial for states as it provides additional resources to support affordable housing projects. These credits can help states address housing shortages and support low-income families by incentivizing the development of affordable housing units. The distribution of these credits can significantly impact states' abilities to meet housing demands, particularly in high-cost areas like California and Texas. The process ensures that unused credits are not wasted and are instead redirected to states that can utilize them effectively, thereby maximizing the impact of federal housing policies.
What's Next?
State housing agencies will need to act promptly to allocate their share of the housing credit carryovers before the end of 2025 to ensure they qualify for future allocations. This requires efficient planning and coordination with developers to identify and support eligible housing projects. The upcoming publication of the Internal Revenue Bulletin will provide further guidance on the allocation process, which states will need to follow closely to maximize their benefits from these credits.
