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Compliance Period vs. Credit Period vs. Extended Use Period for Low-Income Housing Tax Credit Developments

When talking with people about low-income housing tax credits, we are often asked what the difference is between the “credit period” and the “compliance period”. Both periods begin in the same year, and they are easily confused. In addition to those two timeframes, there is also the “extended use period” to consider.

Credit Period

The credit period is the 10-year period over which the low-income housing tax credits are claimed by the owner of the tax credit development. This period can begin in the year the building is placed in service or can be deferred until the year after the building is placed in service.

Compliance Period

The compliance period is the 15-year period over which a development must continue to comply with various low-income housing tax credit requirements to avoid tax credit recapture. This period begins in the same year as the credit period mentioned above but continues an additional five years past the end of the credit period.

Extended Use Period

The extended use period is the period of time after the compliance period during which the low-income housing tax credit development must continue to remain affordable. This period is a minimum of 15 additional years beyond the compliance period for a total of at least 30 years of affordability. The tax credit allocating agency will continue monitoring for tax credit program compliance during the extended use period, however noncompliance is unlikely to trigger tax credit recapture during this period because it is not reported to the IRS. Owners should be familiar with their state’s requirements during the extended use period.

McKonly & Asbury is a leader in accounting for affordable housing partnerships. Our team has the specialized knowledge to help you ensure you comply with IRS and tax credit allocating agency reporting requirements. For more information on these services and more be sure to visit our affordable housing page, and don’t hesitate to contact us.

About the Author

McKonly & Asbury

McKonly & Asbury is a Certified Public Accounting Firm serving companies across Pennsylvania including Camp Hill, Lancaster, Bloomsburg, and Philadelphia. We serve the needs of affordable housing, construction, family-owned businesses, healthcare, manufacturing and distribution, and nonprofit industries. We also assist service organizations with the full suite of SOC services (including SOC 2 reports), ERTC claims, internal audits, SOX compliance, and employee benefit plan audits.

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