When may state investors and purchasers join a Georgia low-income-housing project structure and receive Georgia housing tax credits?

Plain-English summary

This official PDF combines LR IT-2013-02, issued December 11, 2013, and its clarification, LR IT-2014-01, issued March 17, 2014. The applicant invested through a state-investor entity in limited partnerships owning qualified Georgia low-income housing projects. It wanted to allocate Georgia housing tax credits through that tiered structure to one or more purchasers.

The Department approved the proposed allocation mechanics subject to specific status and timing requirements:

• The state investor could be admitted to the project partnership after the project was placed in service, as long as admission occurred before the end of the project partnership's taxable year, all credit requirements were met, and the state investor was recognized as a partner under federal tax law.
• A purchaser could be admitted to the state investor at any time before the end of the state investor's taxable year -- even on its last day -- and receive credits for that year if it was validly a member or partner under applicable state law when the allocation occurred.
• Multiple purchasers could receive credits, including different purchasers in different years or a split allocation within one year, if each satisfied the state-law membership requirement at allocation.

The 2014 clarification made the federal/state distinction explicit: the state investor had to be a federal-tax partner of the project partnership, but a downstream purchaser did not have to be treated as a federal-tax partner of the state investor and did not have to maintain its state-law interest for a minimum period.

The Department did not decide whether the proposed transactions should be treated as taxable sales of credits. It said that characterization depended on federal treatment and IRS action, but even sale treatment would not change its answers allowing the downstream allocations in Issues 2 and 3.

What this means for you

Housing project owners and state-credit investors

The structure's upper tier and lower tier have different qualification tests. The state investor's interest in the project owner must be respected for federal tax purposes. A purchaser receiving credits through the state investor needs valid state-law membership or partnership status at the time of allocation.

Purchasers entering late in the year

The ruling allowed admission as late as the final day of the state investor's taxable year for credits relating to that year. It also said no minimum state-law holding period applied, but the purchaser still had to be a member or partner under state law when the allocation occurred.

Tax professionals

Keep the credit-allocation question separate from sale characterization. Georgia confirmed the allocation mechanics under O.C.G.A. § 48-7-29.6(b)(4), but expressly declined to determine how the IRS and federal law would characterize the purchaser transactions as sales or partnership arrangements.

Common questions

Q: Must the state investor join the project partnership before the project is placed in service?

A: No. It may join after the placed-in-service date if it is admitted before the end of the project partnership's taxable year, meets all credit requirements, and is recognized as a federal-tax partner.

Q: Must a purchaser join the state investor at the beginning of the credit year?

A: No. The Department allowed admission any time before year-end, including the last day, if the purchaser was validly a state-law member or partner when the credit was allocated.

Q: Must the purchaser be treated as a partner for federal tax purposes?

A: No. LR IT-2014-01 clarified that federal partnership status was required for the state investor at the project-partnership level, not for the downstream purchaser at the state-investor level.

Q: Is there a minimum period the purchaser must keep its interest?

A: The clarification said no minimum state-law holding period was required, so long as the purchaser was a valid member or partner under state law at the time of allocation.

Q: Can more than one purchaser receive credits?

A: Yes. Multiple valid state-law members or partners may receive allocations, whether divided within one year or assigned to different purchasers in different years.

Q: Did Georgia decide whether the arrangement was a taxable sale of credits?

A: No. The Department said its treatment depended on federal treatment and IRS action. It nevertheless said sale treatment would not affect its allocation rulings for purchasers.

Q: Can another investor rely on these rulings?

A: No. Each ruling says it has no precedential value except for the recipient and specific transaction and may become invalid if the circumstances materially change.

Citations and references

Statutes and official guidance:

• O.C.G.A. § 48-7-29.6(b)(1) -- Georgia housing tax credit for qualified Georgia projects
• O.C.G.A. § 48-7-29.6(b)(4) -- agreed allocation among partners, members, or shareholders of the project-owning entity
• O.C.G.A. § 33-1-18 -- insurance-premium-tax credit referenced in the combined statutory cap
• I.R.C. § 42 -- federal low-income housing credit referenced in the project facts and Georgia statute
• Georgia Housing & Finance Authority Carryover Allocation of 2007 Housing Credit Authority Addendum -- no state minimum ownership percentage if the partner is recognized under federal tax law

Source

• Landing page: Georgia Income Tax Letter Rulings
• Original PDF: LR IT-2013-02 and LR IT-2014-01

Original ruling text

Date Issued:
Georgia Letter Ruling:
Topic:

December 11, 2013
LR IT-2013-02
Low-Income Housing Tax Credit

This letter is in response to your letter requesting a ruling regarding Taxpayer 1 and Georgia’s Low-Income Housing
Tax Credit, O.C.G.A. § 48-7-29.6.
Facts As Presented by the Taxpayer
Your letter to the Department states: “Applicant is a authorized to do business in the State of Georgia
(‘Georgia’). . Applicant is also able to make certain, transferable state tax credits available to
investors through , Taxpayer 2, . Since that time, Taxpayer 2 has
invested in or participated as syndicator in a number of Georgia tax credit programs.
“Applicant has entered into a series of agreements pursuant to which Applicant has become or will become the tax
credit investor in certain limited partnerships, each of which is organized to own a “qualified Georgia project,” as
such term is defined in the Georgia Housing Credit Program (Ga. Code Ann. § 48-7-29.6) and as more specifically
identified below.
Transaction 1

1. The qualified Georgia project is known as and is located in , Georgia.
2. The legal name of the limited partnership owning is Project Partnership 1.
3. As authorized by the Georgia Department of Community Affairs (the ‘DCA’), is projected to receive
   an allocation of federal low-income housing tax credits (the ‘Federal Credits’) under section 42 of the Internal
   Revenue Code of 1986, as amended (the ‘Code’) in the amount of approximately annually during
   the applicable 10-year credit period.
4. is also projected to receive an allocation of Georgia low-income housing tax credits under Ga. Code
   Ann. § 48-7-29.6 (the ‘State Credits’) in the amount of approximately annually during the
   applicable 10-year credit period.
5. Pursuant to limited partnership agreement (<Project Agreement 1?), the Applicant
   owns a % interest in and will be entitled to % of the annual
   allocation of Federal Credits generated by .
6. Also pursuant to , a wholly-owned subsidiary of Applicant, Taxpayer 3, a
   limited liability company formed for this purpose (the ‘State Investor’), owns a % interest in and is entitled to of the annual allocations of State Credits generated by .
   Applicant is the manager and sole member of State Investor.
   Transaction 2
7. The qualified Georgia project is known as and is located in , Georgia.
8. The legal name of the limited partnership that will own is anticipated to be .
9. As authorized by the DCA, is projected to receive an allocation of Federal Credits under section 42
   of the Code in the amount of approximately annually during the applicable 10-year credit period.
10. is also projected to receive an allocation of State Credits in the amount of approximately annually during the applicable 10-year credit period.

December 11, 2013
LR IT-2013-02
Low-Income Housing Tax Credit
Page 2 of 5

5. Pursuant to limited partnership agreement (), the Applicant is to
   own a % interest in and will be entitled to % of the annual
   allocation of Federal Credits generated by .
6. Also pursuant to , State Investor is to own a % interest in and is entitled to % of the annual allocations of State Credits generated by .
   “For purposes of the rulings requested herein, and are collectively referred to as the
   ‘Project’, and are collectively referred to as the ‘Project
   Partnership’ and and are collectively referred to as the ‘Project
   Agreement’.
   “Although Applicant and/or some of its other affiliates will be able to use the State Credits allocated by the Project
   to the State Investor (that will be transferred by the State Investor to Applicant or their other affiliates) to offset their
   Georgia income tax liabilities, Applicant may have an opportunity to transfer the State Credits for either
   or to one or more unrelated purchasers with Georgia income tax or insurance premium tax liabilities (a
   ‘Purchaser’). This would provide Applicant with additional capacity to invest in other projects generating additional
   Georgia income tax credits.”
   Your letter further states: “The parties. The following parties are involved in or related to the Transactions.
7. Applicant: Taxpayer 1.
8. State Investor: Taxpayer 3, a limited liability company.
9. Purchaser(s): Undetermined at this time.
   Applicant is the only taxpayer requesting a private letter ruling. Applicant makes no representations for, or on
   behalf of, either Project Partnership or any other parties to the Transaction.”
   Issue
10. Whether a State Investor may be admitted to Project Partnership at any time before the end of the taxable year in
    which the project is placed in service? Your letter states the following regarding this issue: “State Investor will be
    eligible for an allocation of all or a portion of the State Credits generated by the Project provided that State Investor
    is admitted as a member of the Project Partnership before the end of the taxable year in which the Project is placed
    in service (and may be admitted to the Project Partnership after the date on which the Project is placed in service as
    long as such admission takes place before the end of the taxable year of the placed in service date, as determined by
    the taxable year end of the Project Partnership).”
11. Whether Purchasers may be admitted to State Investor at any time before the end of the taxable year to which
    state credits relate? Your letter states the following regarding this issue: “State Investor may admit a Purchaser as a
    member of State Investor at any time, and may amend its operating agreement to provide for the allocation of all or
    part of the remaining, unutilized State Credits to such Purchaser, provided the Purchaser is admitted to State Investor
    before the end of the taxable year of State Investor to which such allocation of State Credits pertains. In other
    words, a Purchaser intending to utilize State Credits for the 2014 taxable year must be admitted to State Investor at
    any time before the end of the State Investor’s 2014 taxable year.”
12. Whether State Investor may allocate state credits generated by a project to multiple Purchasers? Your letter
    states the following regarding this issue: “[s]ame facts as in ruling request #2 above except that in the following
    year, State Investor may admit a new Purchaser in the same manner for the purpose of allocating such following
    year’s State Credits to such new Purchaser, and may allocate a portion of the State Credits generated in such
    following year to the new Purchaser and the remaining portion of State Credits generated in that year to the original
    Purchaser.

December 11, 2013
LR IT-2013-02
Low-Income Housing Tax Credit
Page 3 of 5

The following examples illustrate the requested rulings in Nos. 1, 2, and 3:
Example 1.
Project Partnership and State Investor are each calendar year taxpayers for Federal and Georgia income tax
purposes. On , 2013, Project Partnership places the Project in service. On , 2013, State
Investor is admitted as a member of Project Partnership, after the Project is placed in service but before the end of
the Project Partnership’s taxable year. State Investor may be allocated State Credits generated for 2013 by the
Project Partnership. On , 2014, Purchaser 1 is admitted as a member of State Investor. Purchaser 1 is
allocated all or a portion of the State Credits generated by the Project Partnership for the 2014 taxable year of the
Project Partnership, and which State Credits are allocated first to State Investor and subsequently to Purchaser 1. On
, 2015, Purchaser 2 is admitted as a member of State Investor. Purchaser 2 may be allocated all or a
portion of the State Credits generated by the Project Partnership for 2015 in the same manner.
Example 2.
Same facts as in Example 1 except that Purchaser 2 is allocated % of the State Credits generated for
2015 and Purchaser 1 is allocated the remaining % of the State Credits for 2015.”

4. Whether the allocation of state credits to Purchaser is treated as a sale for Georgia income tax purposes? Your
   letter states the following regarding this issue: “State Investor intends to treat the admission of a Purchaser as a new
   member in the following manner:
   a.
   capital investment - in exchange for admission, the Purchaser would pay a nominal amount for its
   capital interest in State Investor which would entitle the Purchaser to receive an allocation of a specific amount of
   State Credits; and
   b.
   sale of State Credits - the Purchaser would provide to State Investor a payment reflecting the fair
   market value of the State Credits.
   Applicant proposes to treat the transaction described in (4.a.) as [a] capital contribution for the membership interest
   in State Investor and the transaction described in (4.b.) as, in substance, a taxable sale of the State Credits to the
   Purchaser. State Investor would recognize 100% of the gain from the sale of the State Credits for federal and
   Georgia income tax purposes, and the Purchaser would receive basis both in its capital contributed to State Investor
   and in the State Credits, each reflecting its fair market value. Applicant proposes to treat the transactions described
   in this request in this manner because Applicant believes it is likely that the Internal Revenue Service (“IRS”) would
   not recognize the members of State Investor as partners in a partnership [for] federal income tax purposes and would
   likely treat these transactions as “disguised sales” for federal income tax purposes under the holding of Virginia
   Historic Tax Credit Fund 2001 LLC, et. Al, v. Commissioner of Internal Revenue, (Ct. App. 4th Cir, Docket Nos.
   10-1333, 10-1334 and 10-1336, March 29, 2011) (the “Virginia Case”). Applicant desires certainty in its treatment
   of the Transactions for both federal income tax purposes and Georgia income tax purposes.”
5. Whether the transfer by applicant of % of State Investor interest to Purchaser is treated as a sale of
   state credits? Your letter states the following regarding this issue: “[i]f Applicant transfers its entire interest in State
   Investor to one Purchaser, Applicant proposes to treat such a transaction as a sale of the State Credits to such
   Purchaser, again, to reflect the substance of the transaction in the following manner:
   a.
   State Investor would admit an unrelated Purchaser as a member of State Investor, for a nominal
   contribution to State Investor’s capital, and would amend its operating agreement to provide that % of
   the State Credits would be allocated to Purchaser; and
   b.
   because both Applicant and Purchaser would be members of State Investor, Applicant would then
   sell to such Purchaser Applicant’s remaining interest in State Investor, which interest would include the fair market

December 11, 2013
LR IT-2013-02
Low-Income Housing Tax Credit
Page 4 of 5

value of the aggregate amount of State Credits allocated to the State Investor from the Project Partnership over the
entire 10-year credit period for an agreed-upon purchase price.
Applicant proposes to treat the first transaction as [a] capital contribution for the membership interest in State
Investor and the second transaction as, in substance, a taxable sale of the State Credits to the Purchaser. State
Investor would recognize 100% of the gain from the sale of the State Credits (i.e., the sale of the Applicant’s
remaining interest in State Investor) for federal and Georgia income tax purposes, and the Purchaser would receive
basis both in its capital contributed to State Investor and in the State Credits, each reflecting its fair market value.
Applicant proposes to treat the transactions in this manner because Applicant believes that the IRS would not
recognize the members of State Investor as partners in a partnership or would treat these transactions as “disguised
sales” anyway. Applicant desires certainty in its treatment of these transactions. See the Virginia Case, above.”
Analysis
O.C.G.A. § 48-7-29.6(b)(1) provides that:
“(b)(1) A state tax credit against the tax imposed by this article, to be termed the Georgia housing tax
credit, shall be allowed with respect to each qualified Georgia project placed in service after January 1,
2001. The amount of such credit shall, when combined with the total amount of credits authorized
under Code Section 33-1-18, in no event exceed an amount equal to the federal housing tax credit
allowed with respect to such qualified Georgia project.”
O.C.G.A. § 48-7-29.6(b)(4) provides that:
“(b)(4) The tax credit allowed under this Code section, and any recaptured tax credit, shall be allocated
among some or all of the partners, members, or shareholders of the entity owning the project in any
manner agreed to by such persons, whether or not such persons are allocated or allowed any portion of
the federal housing tax credit with respect to the project.”
Georgia Housing & Finance Authority Carryover Allocation of 2007 Housing Credit Authority Addendum Georgia
Housing Tax Credit provides in part:
“In a joint effort to facilitate the effective and efficient use of the GHTC, DCA, DOR and OCI have
determined and wish to make public the following points:
 There is no State minimum percentage of a general partner or limited partner’s interest in the
ownership entity, as long as the partner would be recognized under federal tax law.”

Ruling for Issue #1
O.C.G.A. § 48-7-29.6 provides an income tax credit for taxpayers owning developments receiving the federal lowincome housing tax credit that are placed in service on or after January 1, 2001. O.C.G.A. § 48-7-29.6(b)(4)
specifies that the credit shall be allocated among some or all of the partners, members, or shareholders of the entity
owning the project in any manner agreed to by such persons, whether or not such persons are allocated or allowed
any portion of the federal housing tax credit with respect to the project. There is no state minimum percentage of a
general partner or limited partner’s interest in the ownership entity, as long as the partner would be recognized under
federal tax law.
Based on the facts stated herein, it is the opinion of this Department that if all requirements of the low-income
housing tax credit are satisfied and State Investor is admitted to Project Partnership before the end of Project
Partnership’s taxable year then State Investor will be eligible for allocation of all or a portion of the state tax credits
generated by Project Partnership as long as State Investor is considered a partner under federal law.

December 11, 2013
LR IT-2013-02
Low-Income Housing Tax Credit
Page 5 of 5

Ruling for Issue #2
Since State Investor is receiving the credit from an ownership entity, Project Partnership, then a member
(Purchaser), who is admitted to State Investor as a member under applicable state limited liability company law or a
partner under applicable state partnership law, may be admitted to State Investor at any time before the end of State
Investor’s taxable year, even if they only become a member as of the last day of State Investor’s taxable year, and
receive the credit for the taxable year to which the credits relate. The credit may be allocated as provided by
O.C.G.A. § 48-7-29.6(b)(4).
Ruling for Issue #3
Since State Investor is receiving the credit from an ownership entity, Project Partnership, then multiple members
(Purchasers), who are admitted to State Investor as members under applicable state limited liability company law or
as partners under applicable state partnership law, may be admitted to State Investor at any time before the end of
State Investor’s taxable year, even if they only become a member as of the last day of State Investor’s taxable year,
and receive the credit for the taxable year to which the credits relate. The credit may be allocated as provided by
O.C.G.A. § 48-7-29.6(b)(4).
Ruling for Issue #4
The Department’s treatment would depend on federal treatment and action by the Internal Revenue Service;
therefore the Department cannot specify how the sale would be treated. However, even if it is treated as a sale, the
rulings provided for issues #2 and 3 would not be affected.

Ruling for Issue #5
The Department’s treatment would depend on federal treatment and action by the Internal Revenue Service;
therefore the Department cannot specify how the sale would be treated. However, even if it is treated as a sale, the
rulings provided for issues #2 and 3 would not be affected.

The opinions expressed in this ruling are based upon the information contained in your request and are limited to the
specific transactions and taxpayer in question. A ruling has no precedential value except to the person to whom the
ruling was issued and then only for the specific transaction addressed in the ruling. Should the circumstances
regarding this transaction change, or differ materially from those represented, then this ruling may become
invalid. In addition, please be advised that subsequent statutory or administrative rule changes or judicial
interpretations of the statutes and rules upon which this advice is based may subject similar future transactions to a
different tax treatment than those expressed in this response.
Note: See related Georgia Letter Ruling No IT-2014-01 below.

Date Issued:
Georgia Letter Ruling:
Topic:

March 17, 2014
LR IT-2014-01
Low-Income Housing Tax Credit

This letter is in response to your letter requesting clarification of Georgia Letter Ruling No. IT-2013-02 regarding
Taxpayer 1 and Georgia’s Low-Income Housing Tax Credit, O.C.G.A. § 48-7-29.6.
Facts As Presented by the Taxpayer
Your letter to the Department states: “Request for Clarification of Ruling #2: Please confirm that, under Ruling

2, as long as State Investor is a partner of the project owner (the ‘Project Partnership’) for federal income tax

purposes, and State Investor is allocated all or a portion of the State Credits generated by the Project Partnership, a
Purchaser may be admitted to State Investor under applicable State limited liability company law or State limited
partnership law and may be allocated all or a portion of the State Credits from State Investor. Please also confirm
that, under Ruling #2, as long as State Investor qualifies as a partner of Project Partnership for federal income tax
purposes, the Purchaser (or member of the State Investor) is not required to be treated as a partner of State Investor
for federal income tax purposes, and is not required to maintain its interest in State Investor for State law purposes
for any minimum period of time.
The following modification to Example 1 of our Ruling Request illustrates the requested clarification:
•

State Investor qualifies as a partner for federal and State income tax purposes and is entitled to receive an
allocation of % of the State Credits generated by the Project Partnership for the 2014-2023
calendar years.

•

Purchaser 1 is properly admitted under State law to State Investor on , 2014.

•

Purchaser 1 is allocated all or a portion of the State Credits generated by the Project Partnership for the
2014 taxable year of the Project Partnership.

•

2014 State Credits are allocated: first, by Project Partnership to State Investor and subsequently, by State
Investor to Purchaser 1.

•

Purchaser 1 claims such State Credits on its 2014 Georgia income tax return that is filed on April 15, 2015.

•

As noted above, for federal and State income tax purposes, State Investor qualifies as a partner of Project
Partnership.

•

For federal income tax purposes, Purchaser 1 does not qualify as a partner of State Investor, but Purchaser
1 does qualify as owning an interest in State Investor under State law, that entitles Purchaser 1 to receive an
allocation of the State Credits. That is, for federal income tax purposes, the allocation of State Credits from
State Investor to Purchaser 1, which is recognized for State law purposes, is treated as a taxable sale of the
State Credits from State Investor to Purchaser 1 for State income tax purposes.

•

The allocation of the 2014 State Credits to State Investor will be recognized for federal and State income
tax purposes.

•

State Investor will recognize gain on the “sale” of the 2014 State Credits when Purchaser 1 purchases from
the State Investor the 2014 State Credits in 2014.

•

Purchaser 1 will recognize gain (i.e. the difference between the purchase price and the face value of the
State Credits allocated) when it files its returns for 2014 and uses the State Credits to pay its State income
tax liability for 2014 in 2015. Purchaser 1 will report that short-term capital gain on its 2015 federal and
State income tax returns.

March 17, 2014
LR IT-2014-01
Low-Income Housing Tax Credit
Page 2 of 3

•

Purchaser 1 exits the State Investor on , 2015, and will be entitled to claim on its 2015
federal and State income tax returns, a short-term capital loss equal to the payment it made to State Investor
with respect to the 2014 State Credits on , 2014.

Accordingly, Applicant requests clarification that provided State Investor qualifies as a partner of Project
Partnership for federal income tax purposes, it is sufficient, for purposes of subsequently allocating the State Credits
to Purchaser 1, that Purchaser 1 be validly admitted as a member or partner of State Investor under State law but
Purchaser 1 is not required to be treated as a partner for federal income tax purposes or to maintain such interest in
State Investor for any minimum period of time under State law.
Request for Clarification of Ruling #3: Under Ruling #3, State Investor may allocate all or a portion of the State
Credits to more than one Purchaser either on a year-by-year basis (i.e., Purchaser 1 is allocated % of
the State Credits for 2014 by State Investor, Purchaser 2 is allocated % of the State Credits for 2015
by State Investor, provided that each is validly admitted as a member of State Investor at the time of allocation under
State law) or on a split-year basis (i.e., as in Example 2 of the Ruling Request, Purchaser 1 is allocated % of the State Credits for 2015 and Purchaser 2 is allocated the remaining % of the State Credits
for 2015, provided that each is validly admitted as a member of State Investor at the time of allocation under State
law).
Applicant requests clarification that as long as State Investor qualifies as a partner for federal income tax purposes
of Project Partnership, it is sufficient for purposes of subsequently allocating State Credits to Purchaser 1 and/or
Purchaser 2 under facts presented in Example 2 of the Ruling Request, that Purchaser 1 and Purchaser 2 are validly
admitted as members of State Investor under State law and are not required to be treated as partners for federal
income tax purposes or to maintain their interests in State Investor for any minimum period of time under State
law.”
Issue
See the above request for clarification regarding Rulings #2 and 3 from Georgia Letter Ruling No. IT-2013-02.
Analysis
O.C.G.A. § 48-7-29.6(b)(1) provides that:

“(b)(1) A state tax credit against the tax imposed by this article, to be termed the Georgia housing tax
credit, shall be allowed with respect to each qualified Georgia project placed in service after January 1,
2001. The amount of such credit shall, when combined with the total amount of credits authorized
under Code Section 33-1-18, in no event exceed an amount equal to the federal housing tax credit
allowed with respect to such qualified Georgia project.”
O.C.G.A. § 48-7-29.6(b)(4) provides that:
“(b)(4) The tax credit allowed under this Code section, and any recaptured tax credit, shall be allocated
among some or all of the partners, members, or shareholders of the entity owning the project in any
manner agreed to by such persons, whether or not such persons are allocated or allowed any portion of
the federal housing tax credit with respect to the project.”
Georgia Housing & Finance Authority Carryover Allocation of 2007 Housing Credit Authority Addendum Georgia
Housing Tax Credit provides in part:
“In a joint effort to facilitate the effective and efficient use of the GHTC, DCA, DOR and OCI have
determined and wish to make public the following points:
• There is no State minimum percentage of a general partner or limited partner’s interest in the
ownership entity, as long as the partner would be recognized under federal tax law.”

March 17, 2014
LR IT-2014-01
Low-Income Housing Tax Credit
Page 3 of 3

Clarification of Ruling on Issue #2 (from Georgia Letter Ruling No. IT-2013-02)
O.C.G.A. § 48-7-29.6 provides an income tax credit for taxpayers owning developments receiving the federal lowincome housing tax credit that are placed in service on or after January 1, 2001. O.C.G.A. § 48-7-29.6(b)(4)
specifies that the credit shall be allocated among some or all of the partners, members, or shareholders of the entity
owning the project in any manner agreed to by such persons, whether or not such persons are allocated or allowed
any portion of the federal housing tax credit with respect to the project. There is no state minimum percentage of a
general partner or limited partner’s interest in the ownership entity, as long as the partner would be recognized under
federal tax law.
Based on the facts stated herein and the facts in Georgia Letter Ruling No. IT-2013-02, it is the opinion of this
Department that yes, under Ruling #2, as long as State Investor is a partner of the project owner (the “Project
Partnership”) for federal income tax purposes, and State Investor is allocated all or a portion of the State Credits
generated by the Project Partnership, a Purchaser may be admitted to State Investor under applicable State limited
liability company law or State limited partnership law and may be allocated all or a portion of the State Credits from
State Investor, so long as the Purchaser is a member or partner under State law at the time of the allocation. And
yes, under Ruling #2, as long as State Investor qualifies as a partner of Project Partnership for federal income tax
purposes, the Purchaser (or member of the State Investor) is not required to be treated as a partner of State Investor
for federal income tax purposes, and is not required to maintain its interest in State Investor for State law purposes
for any minimum period of time.
Clarification on Ruling for Issue #3 (from Georgia Letter Ruling No. IT-2013-02)
Yes, as long as State Investor qualifies as a partner for federal income tax purposes of Project Partnership, it is
sufficient for purposes of subsequently allocating State Credits to Purchaser 1 and/or Purchaser 2 under facts
presented in Example 2 of the Ruling Request, that Purchaser 1 and Purchaser 2 are validly admitted as members of
State Investor under State law and are not required to be treated as partners for federal income tax purposes or to
maintain their interests in State Investor for any minimum period of time under State law, so long as Purchaser 1
and/or Purchaser 2 are a member or partner under State law at the time of the allocation.
The opinions expressed in this ruling are based upon the information contained in your request and are limited to the
specific transactions and taxpayer in question. A ruling has no precedential value except to the person to whom the
ruling was issued and then only for the specific transaction addressed in the ruling. Should the circumstances
regarding this transaction change, or differ materially from those represented, then this ruling may become
invalid. In addition, please be advised that subsequent statutory or administrative rule changes or judicial
interpretations of the statutes and rules upon which this advice is based may subject similar future transactions to a
different tax treatment than those expressed in this response.