What is the Kansas Housing Investor Tax Credit and who can claim it?

Plain-English summary

Kansas Notice 23-07 explains the Kansas Housing Investor Tax Credit Act, created by 2022 House Bill 2237 (Sections 7-12, now K.S.A. 79-32,310 through 79-32,315). The stated purpose (K.S.A. 79-32,310(a)) is to bring housing-investment dollars to communities that lack adequate housing.

The program. K.S.A. 79-32,312 places the Housing Investor Tax Credit program within the Kansas Housing Resources Corporation, administered by the Director of Housing. The Director issues credits to qualified investors who put cash into qualified housing projects, and to project builders and developers, and is required to give priority to Kansas investors.

The credit. K.S.A. 79-32,313(a) creates, for tax year 2022 and after, a credit that can be claimed against (1) Kansas income tax, (2) the privilege tax on national banking associations, state banks, trust companies, or savings and loan companies, or (3) the insurance premium tax. It is claimed on Schedule K-27. If the credit exceeds the tax due, it carries forward until used, but no credit may be claimed more than four tax years after issuance.

How much. Under K.S.A. 79-32,313(b), credits per residential unit may not exceed:

• $35,000 in a county with population of 8,000 or fewer;
• $32,000 in a county over 8,000 but not more than 25,000; and
• $30,000 for all other qualified projects.

A project is limited to 40 residential units per year, and the total credits issued statewide may not exceed $13,000,000 per tax year (with set-asides for smaller counties and unused amounts carried to the next year).

Transferability. During the 2023 session, Senate Bill 17 (Section 9) amended K.S.A. 79-32,313(d) so a qualified investor may transfer the credit to one or more persons, who claim it the same way the transferor would. There is no limit on the number of transfers; the four-year claim window still applies, and the credit is not refundable.

Loss of credit. If a project falls out of substantial compliance, the Director notifies the builder/developer, who has 120 days to cure or the project loses its qualified designation. A builder/developer who loses the designation must repay credits it claimed, but other qualified investors who lawfully invested do not lose their credits solely because the project lost designation.

What this means for you

Investors and developers

• A cash investment in an approved qualified housing project can earn a Kansas credit worth up to $30,000-$35,000 per unit, depending on county size.
• The credit offsets income tax, bank privilege tax, or insurance premium tax, and can be carried forward -- but only for four tax years after issuance.
• Since 2023, you can sell or transfer the credit; the buyer claims it against their Kansas liability.
• Apply through the Director of Housing at the Kansas Housing Resources Corporation; Kansas investors get priority.

Tax professionals

• The credit is claimed on Schedule K-27. Confirm the client's allocation from the Director of Housing and track the four-year expiration carefully.

Common questions

Who can claim it? A qualified investor, or a project builder or developer, who makes a cash investment in a qualified housing project approved by the Director of Housing.

Against what taxes? Kansas income tax, the bank privilege tax, or the insurance premium tax.

How large is the credit? Up to $35,000, $32,000, or $30,000 per residential unit depending on county population, subject to a 40-unit-per-year project limit and a $13 million statewide annual cap.

Can it be transferred? Yes -- since 2023 Senate Bill 17, with no limit on the number of transfers.

What if I don't use it all? It carries forward, but cannot be claimed more than four tax years after issuance; any remainder is forfeited.

Citations and references

• House Bill 2237 (2022), Sections 7-12 -- created the Kansas Housing Investor Tax Credit Act.
• Senate Bill 17 (2023), Section 9 -- made the credit transferable.
• K.S.A. 79-32,310 -- purpose of the Act.
• K.S.A. 79-32,312 -- establishes the program within the Kansas Housing Resources Corporation.
• K.S.A. 79-32,313 -- creates the credit, sets per-unit and aggregate caps, and (as amended) allows transfer.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 23-07

Original ruling text

Policy and Research
109 SW 9th Street Phone: 785-368-8222
PO Box 3506 Fax: 785-296-1279
Topeka KS 66601-3506 www.ksrevenue.gov
Mark A. Burghart, Secretary Laura Kelly, Governor

                                         NOTICE 23-07

                      KANSAS HOUSING INVESTOR TAX CREDIT ACT

                                    (SEPTEMBER 6, 2023)

   During the 2022 Legislative Session House Bill 2237 was passed and signed into law. New

Sections 7 – 12 of the Bill, now K.S.A. 2022 Supp. 79-32,310 through 79-32,315, create the Kansas
Housing Investor Tax Credit Act. K.S.A. 2022 Supp. 79-32,310(a) provides, "The purpose of the
Kansas housing investor tax credit act is to bring housing investment dollars to communities that
lack adequate housing. Development of suitable residential housing will complement economic
development of rural and urban areas that lack adequate housing resources and enable such
communities to attract businesses, employees and new residents."

Credit Program Established

   K.S.A. 2022 Supp. 79-32,312(a) and (b) establish the Housing Investor Tax Credit program

within the Kansas Housing Resources Corporation, to be administered by the Director of Housing.
The Director is authorized to issue tax credits to qualified investors who make cash investments in
qualified housing projects, and to project builders and developers. The Director is to determine
and issue tax credits to the projects that are most likely to provide the greatest economic benefit
to, and best meet the needs of, the community lacking adequate housing where the project is
located. The Director is required to give priority to Kansas investors when issuing tax credits.

   To be designated a qualified housing project, K.S.A. 2022 Supp. 79-32,312(c) requires the

project builder or developer to apply to the Director of Housing on a form approved by the
Director. K.S.A. 2022 Supp. 79-32,312(j) requires the Director to provide information regarding
the qualified housing projects and qualified investors to the Secretary of Revenue.

Tax Credit

   K.S.A. 2022 Supp. 79-32,313(a) creates, for tax year 2022 and all tax years thereafter, a tax

credit to be claimed against: (1) Kansas income tax; (2) the privilege tax liability imposed upon
any national banking association, state bank, trust company, or savings and loan company; or (3)
the premium tax liability imposed upon an insurance company.

   The tax credit shall be allowed to:

   ●     A qualified investor for a cash investment in a qualified housing project that has been
         approved and issued a tax credit by the Director of Housing;

   ●     A project builder or developer for a cash investment in a qualified housing project of
         the project builder or developer that has been approved and issued a tax credit by the
         Director of Housing.

  To claim such tax credit, the qualified investor, or project builder or developer, must provide

all information or documentation as required by the Secretary of Revenue by completing and
submitting Schedule K-27 Kansas Housing Investor Credit. If the credit amount exceeds the
taxpayer's tax liability in a taxable year, the remaining credit may be carried forward in the
succeeding taxable years until the total credit amount is used, except that no credit may be claimed
more than four taxable years after issuance, and any remaining credit will be forfeited.

Amount of Credit

 K.S.A. 2022 Supp. 79-32,313(b) sets out how credits may be issued by the Director of

Housing. The subsection provides:

       (b) (1) Tax credits may be issued by the director for a qualified housing project
 as follows:
       (A) For qualified housing projects located in a county with a population of not
 more than 8,000, in an amount not to exceed $35,000 per residential unit;
       (B) for qualified housing projects located in a county with a population of more
 than 8,000 but not more than 25,000, in an amount not to exceed $32,000 per
 residential unit; and
       (C) for all other qualified housing projects, in an amount not to exceed $30,000.
       (2) A qualified housing project shall be limited to a total of 40 such residential
 units per year for both single-family and multi-family dwellings.
       (3) Tax credits may be issued to a qualified investor in the amount of a cash
 investment of up to the total amount that may be issued by the director under this
 subsection for the qualified housing project, or as provided in the agreement required
 by K.S.A. 2022 Supp. 79-32,312, and amendments thereto. Project builders or
 developers may apply to the director each year for tax credits for additional units or
 phases of a project. Qualified investors may be issued tax credits for cash investments
 in multiple qualified housing projects. Project builders or developers may apply and
 be approved for multiple qualified housing projects in the same tax year.
       (4) The aggregate amount of tax credits that may be issued under this section
 shall not exceed $13,000,000 each tax year, except that if the director issues an
 aggregate amount of tax credits in one tax year that is less than $13,000,000, then the
 director may carry forward the difference and issue such amount of tax credits in the
 immediately succeeding tax year in addition to the statutory amount that may be issued
 under this section. Of the aggregate amount of tax credits issued in one tax year, the
 director shall allocate:
       (A) Not less than $2,500,000 in tax credits for qualified housing projects located
 in counties with a population of not more than 8,000;
       (B) not less than $2,500,000 in tax credits for qualified housing projects located
 in counties with a population of more than 8,000 but not more than 25,000; and
       (C) up to $8,000,000 in tax credits for qualified housing projects located in
 counties with a population of more than 25,000 but not more than 75,000.

Transferability of Tax Credit

  During the 2023 Legislative Session, Senate Bill 17 was passed and signed into law. Section

9 of the Bill amended K.S.A. 2022 Supp. 79-32,313(d), to provide a qualified investor who
receives a tax credit under the Kansas Housing Investors Tax Credit Act may transfer such credit.
All or a portion of such credit may be transferred by the qualified investor or any subsequent
transferee to one or more persons whether or not such transferee is then a qualified investor and
may be claimed as a credit against the transferee's Kansas tax liability in the same manner as the
transferor, beginning in the year the credit is transferred. The credit may be carried forward in the
succeeding taxable years until the total credit amount is used, except that no credit may be claimed
more than four taxable years after issuance, and any remaining credit will be forfeited; it is not
refundable. There is no limit on the number of times a credit or portion thereof can be transferred.
The provisions regarding the transfer of credits apply to credits issued for tax year 2022 and all
tax years thereafter.

  The taxpayer claiming such credit will be responsible for providing documentation verifying

the acquisition to the Secretary of Revenue. The transferor of the credit will be required to provide
the Director of Housing and the Secretary of Revenue with the name, address, taxpayer
identification number, and other information as required of each transfer recipient.

Loss of Credit

 If the Director of Housing determines a project is not in substantial compliance with the

Kansas Housing Investors Tax Credit Act or the project agreement, the Director must inform the
project builder or developer in writing that the project will lose designation as a qualified housing
project in 120 days from the date of mailing, unless the project is brought into compliance.

  If the project is still non-compliant after the 120-day period, the Director must send a notice

of loss of designation to the project builder or developer, the Secretary of Revenue, and all known
qualified investors. Loss of designation will preclude the issuance of any additional tax credits for
the project, and the Director is prohibited from approving any subsequent application for the
project to be a qualified housing project. Upon loss of the designation as a qualified housing
project, the project builder or developer will be required to repay any tax credits they have claimed.

  Qualified investors other than the project builder or developer who have lawfully made a

cash investment in a qualified and approved housing project will not have their tax credits
disallowed solely due to the project losing its designation as a qualified housing project.

                               TAXPAYER ASSISTANCE

 Additional copies of this notice, forms or publications are available from our web site,

www.ksrevenue.gov. If you have questions about this Notice, please contact:

                            Taxpayer Assistance Center
                           Kansas Department of Revenue
                           Scott Office Building, 1st Floor
                                  120 SE 10th Ave
                                   P. O. Box 3506
                              Topeka, KS 66601-3506
                                Phone: 785-368-8222
                                 Fax: 785-291-3614