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Accounting Issues for Low-Income Housing Tax Credit Partnerships

Low-income housing tax credit (“LIHTC”) partnerships have unique accounting challenges. Recording transactions such as developer’s fees and equity contributions are not in the normal monthly transactions encountered by most partnership accountants. In addition, reporting in accordance with the state allocating agency can be tricky. Understanding how to handle construction and lease up period activity is an important aspect of making sure a partnership is maintaining its books correctly.

Developer’s Fees

Developer’s fees should be recorded when earned, not necessarily when paid. The Development Services Agreement (the “Agreement”) should spell out a clear timeline for when the fee is earned such as a certain percentage upon execution of the Agreement, a certain percentage during construction, and a certain percentage upon receipt of the IRS Form 8609.

Capital Contributions

Capital contributions should be recorded on the partnership’s books when received. Sometimes legal or other syndication fees are netted against a capital contribution from an investor. Partnership accountants should be on the lookout for this and be sure to record the gross capital contribution and the syndication fees in the proper accounts.

Reporting in Accordance with State Allocating Agency Guidelines

State allocating agencies typically have financial guides that indicate how they want to see certain expenses presented in financial statements. For example, in Pennsylvania the housing finance agency requires that expensed items paid with development cash be classified as “entity expenses” on the statement of profit and loss. These expenses typically consist of items such as bridge loan interest incurred after the construction ends, rent up expenses, and organizational expenses.

McKonly & Asbury is available to perform training on various LIHTC topics including accounting for development stage partnerships. For more information on these services and more be sure to visit our affordable housing page, and don’t hesitate to reach out to our team at


About the Author

Elizabeth Harriger

Elizabeth is a Partner with McKonly & Asbury as well as the Director of our firm’s Affordable Housing Services. She has over twenty years of extensive audit, tax, and consulting experience in the affordable housing industry. Elizabe… Read more

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