When several financial institutions jointly fund a loan to refinance affordable housing in Tennessee, which of them can claim the franchise & excise community investment tax credit, and how is it divided?

Plain-English summary

A Tennessee affordable-housing entity that built and operates multifamily rental units wants to refinance its first mortgage. No single lender will fund the whole thing, so several lenders would chip in — either through a syndicated loan or a loan participation, on a pari passu (equal-footing) basis. The question: can each lender claim Tennessee's community investment tax credit (CITC), and how is it divided?

Background — the CITC. Tennessee charges financial institutions a franchise tax ($0.25 per $100 of net worth) and an excise tax (6.5% of net earnings). The CITC (§ 67-4-2109(h)) lets a financial institution take a credit against that combined liability when it makes qualified loans, qualified long-term investments, grants, or contributions to eligible housing entities for eligible activities — and a financial institution that makes a new loan refinancing an eligible housing entity's existing debt can claim the credit too (even if a prior lender already claimed one on the old loan). The statute offers two forms of credit, and the choice drives everything:

• One-time credits: 5% of a qualified loan (a loan at least 2% below prime) under (h)(1)(A), or 10% of a qualified low-rate loan (at least 4% below prime), grant, or contribution under (h)(2)(A) — with up to a 15-year carryforward of unused credit.
• Annual credits: 3% per year of a qualified loan's unpaid principal balance (as of December 31) under (h)(1)(B), or 5% for a qualified low-rate loan under (h)(2)(B) — for the life of the loan or 15 years, whichever is earlier, with no carryforward.

Ruling 1 — syndicated loan: every originating lender can claim. In a syndicated loan, the borrower signs a single credit agreement with two or more lenders, each lender has a direct relationship with the borrower and its own promissory note, and repayments are pro rata. So each financial institution that is an originating lender may claim the CITC on its own share of the loan (one-time credits based on the amount owed under its individual note; annual credits based on its Dec. 31 balance). Critically, all of the originating lenders must use the same credit-computation method — either everyone takes the one-time credit, or everyone takes the annual credit (all (h)(1)(A) or all (h)(1)(B) for a qualified loan; all (h)(2)(A) or all (h)(2)(B) for a low-rate loan).

Ruling 2 — loan participation: it depends on which credit the originator picks. In a loan participation, one originating lender makes the loan and then sells ownership interests to participating lenders, while keeping its own interest. The participants are not parties to the credit agreement, have no direct relationship with the borrower, and hold no claim against the borrower or collateral; the originator holds the documentation, services the loan, and deals with the borrower for everyone. Given that structure:

• If the originator takes the one-time credit ((h)(1)(A) or (h)(2)(A)), only the originating lender may claim it — based on the loan amount in the credit agreement, with a 15-year carryforward. Participating lenders get nothing. Why? Because § 67-4-2109(e)(1) says a credit carryforward may only be taken by the taxpayer that generated it, and the participants weren't part of the loan at origination (when the total loan amount — and thus the one-time credit — was fixed), so they never generated the credit.
• If the originator takes the annual credit ((h)(1)(B) or (h)(2)(B)), then both the originator and all participating lenders may claim it — each based on its percentage of ownership in the loan applied to the Dec. 31 unpaid principal balance.

The clock runs from origination. Because the annual credit lasts only the earlier of 15 years or the life of the loan, that window is measured from the date the loan originated, not from when a participant later bought in. Example: a loan originates in 2019; the originator takes the annual credit; it sells a participation interest in 2021 — that participant can claim the annual credit only through 2033 (or the life of the loan, if earlier).

What the Department did NOT decide. This ruling assumes (but does not rule) that the lenders are "financial institutions" and that the loan is a qualified or qualified low-rate loan to an eligible housing entity for an eligible activity. It only resolves how the credit is allocated if those conditions are met.

What this means for you

Affordable-housing developers and owners refinancing in Tennessee

The community investment tax credit can make your project more attractive to lenders, and it survives a refinancing — a new lender on the refinanced loan can claim it even if a prior lender claimed one on the old loan. If you need multiple lenders, know that the deal structure (syndication vs. participation) changes who can claim the credit, which affects how lenders price your loan.

Banks and other financial institutions lending into these deals

If you want the credit and you're coming in as a participant (not an originator), the one-time credit is off-limits to you — only the originator can take it. To share in the benefit, the deal needs to use the annual credit, which the originator and participants split by ownership percentage. In a syndicated structure, by contrast, you're an originating lender on your own note and can claim either credit on your share — but coordinate, because all syndicate members must pick the same credit method.

Timing matters for late-joining participants

Even when participants can claim the annual credit, the credit period is fixed from loan origination. Buy into a seasoned loan and you inherit only the remaining years — there's no fresh 15-year clock. Factor the shortened window into your yield math.

Accountants and tax professionals

The credit is § 67-4-2109(h): one-time credits (h)(1)(A)/(2)(A) at 5%/10% with a 15-year carryforward under (h)(8); annual credits (h)(1)(B)/(2)(B) at 3%/5% of the Dec. 31 unpaid balance for life-of-loan-or-15-years with no carryforward. The participation result is driven by § 67-4-2109(e)(1) (carryforward only by the generating taxpayer). Definitions live in (h)(3): eligible activity (A), eligible housing entity (B) (Tennessee 501(c)(3) nonprofit, THDA, public housing authority, or development district), qualified loan (E) (≥2% below prime), qualified long-term investment (F), qualified low-rate loan (G) (≥4% below prime). "Financial institution" is § 67-4-2004(17).

Common questions

Q: What is the Tennessee community investment tax credit?
A: A credit against a financial institution's franchise & excise tax for making qualified loans, long-term investments, grants, or contributions to eligible affordable-housing entities for eligible activities (§ 67-4-2109(h)).

Q: We're refinancing an affordable-housing loan with several banks. Can each bank get the credit?
A: In a syndicated loan, yes — each originating lender claims on its own share (all using the same method). In a loan participation, only the originating lender can claim the one-time credit; the annual credit can be shared by the originator and the participants by ownership percentage.

Q: Why can't a loan participant claim the one-time credit?
A: Because the one-time credit is generated at origination based on the total loan amount, and § 67-4-2109(e)(1) lets only the taxpayer that generated a carryforward credit claim it. Participants weren't in the loan at origination, so they didn't generate it.

Q: If I buy into a loan years after it started, how long can I claim the annual credit?
A: Only for the remainder of the original 15-year (or life-of-loan) window measured from when the loan originated — not a new period from your buy-in date.

Q: Can I rely on this ruling?
A: No. A Tennessee letter ruling binds the Department only as to the taxpayer and exact facts it addressed and cannot be relied on by anyone else. It also did not decide whether the lenders or loan actually qualify. Confirm your facts with a tax professional.

Citations and references

Tennessee statutes (Tenn. Code Ann.):
- § 67-4-2109(h) (community investment tax credit); (h)(1)(A) & (h)(2)(A) (one-time credits, 5% / 10%); (h)(1)(B) & (h)(2)(B) (annual credits, 3% / 5% of Dec. 31 unpaid principal balance, life-of-loan-or-15-years); (h)(8) (carryforward rules)
- § 67-4-2109(h)(3)(A) (eligible activity), (B) (eligible housing entity — Tennessee 501(c)(3) nonprofit, THDA, public housing authority, or development district), (E) (qualified loan, ≥2% below prime), (F) (qualified long-term investment, >5-year equity investment), (G) (qualified low-rate loan, ≥4% below prime)
- § 67-4-2109(e)(1) (a credit carryforward may only be taken by the taxpayer that generates it)
- § 67-4-2007(a) (excise tax, 6.5% of net earnings); § 67-4-2105(a), § 67-4-2106(a) (franchise tax, $0.25 per $100 of net worth); § 67-4-2004(17) ("financial institution"); § 67-4-2004(38) (persons subject to franchise & excise tax)

Federal:
- I.R.C. § 501(c)(3) (referenced in the eligible-housing-entity definition)

Source

• Landing page: https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rulings.html
• Original PDF: https://www.tn.gov/content/dam/tn/revenue/documents/rulings/fae/19-05fe.pdf

Original ruling text

Letter rulings are binding on the Department only with respect to the individual taxpayer
being addressed in the ruling. This ruling is based on the particular facts and circumstances
presented, and is an interpretation of the law at a specific point in time. The law may have
changed since this ruling was issued, possibly rendering it obsolete. The presentation of this
ruling in a redacted form is provided solely for informational purposes, and is not intended as
a statement of Departmental policy. Taxpayers should consult with a tax professional before
relying on any aspect of this ruling.

The application of the Tennessee franchise and excise community investment tax credit provisions
under TENN. CODE ANN. § 67-4-2109(h) (Supp. 2018).

This letter ruling is an interpretation and application of the tax law as it relates to a specific set of
existing facts furnished to the Department by the taxpayer. The rulings herein are binding upon the
Department, and are applicable only to the individual taxpayer being addressed.
This letter ruling may be revoked or modified by the Commissioner at any time. Such revocation or
modification shall be effective retroactively unless the following conditions are met, in which case
the revocation shall be prospective only:
(A)

The taxpayer must not have misstated or omitted material facts involved in the
transaction;

(B)

Facts that develop later must not be materially different from the facts upon
which the ruling was based;

(C)

The applicable law must not have been changed or amended;

(D)

The ruling must have been issued originally with respect to a prospective or
proposed transaction; and

(E)

The taxpayer directly involved must have acted in good faith in relying upon the
ruling; and a retroactive revocation of the ruling must inure to the taxpayer’s
detriment.

[TAXPAYER] (the “Housing Entity”) was formed in [DATE] for the purpose of building and operating
[REDACTED] units of affordable multifamily rental housing in [CITY], Tennessee. The project consists
of two sites whose construction was completed in [DATE], one in [REDACTED] and one in
[REDACTED].

1

Since [DATE], the Housing Entity has been pursuing a refinancing of its current first mortgage.
During this process, several prospective lenders have indicated that although they could not provide
the full proceeds required for a refinancing [REDACTED], they would be willing to provide part of the
required loan proceeds through syndicated lending or loan participation. In this case, any loan
1
participations would be made on pari-passu basis with equal risk sharing for all participating
lenders.

1.

If the Housing Entity refinances its existing mortgage loan and enters into a new mortgage
such that a number of financial institutions are parties to a syndicated loan, may each lender
claim the community investment tax credit under TENN. CODE ANN. § 67-4-2109(h) for
purposes of Tennessee franchise and excise taxes, and if so, how are credits awarded?
Ruling: If the syndicated loan is a qualified loan or a qualified low-rate loan to an eligible
housing entity that engages in an eligible activity, then each financial institution that is an
originating lender under the loan syndication agreement may claim the community
investment tax credit under TENN. CODE ANN. § 67-4-2109(h) with respect to its share of the
loan.
There are alternative statutory mechanisms for computing the amount of each originating
lender’s credit, which are explained below. All of the taxpayers must utilize the same credit
computation methodology.

2.

If the Housing Entity refinances its existing mortgage loan and enters into a new mortgage
such that a number of financial institutions participate in a participation loan to the Housing
Entity whereby the originating lender transfers interests in the loan to the participating
lenders, may each lender claim the community investment tax credit under TENN. CODE ANN.
§ 67-4-2109(h) for purposes of Tennessee franchise and excise taxes, and if so, how are
credits awarded?
Ruling: There are alternative statutory mechanisms for computing the amount of a lender’s
credit. Which lenders may claim the credit depends on the statutory mechanism chosen by
the originating lender(s).
Only the financial institution(s) that originated the loan may claim the one-time credit set
forth in TENN. CODE ANN. § 67-4-2109(h)(1)(A) for a qualified loan, or the one-time credit set
forth in TENN. CODE ANN. § 67-4-2109(h)(2)(A) for a qualified low-rate loan. The participating
financial institutions are not entitled to claim any credit when the originating financial
institution chooses to utilize the credit under TENN. CODE ANN. § 67-4-2109(h)(1)(A) or 2109(h)(2)(A).
However, if the financial institution(s) that originated the loan claims the annual credit under
TENN. CODE ANN. § 67-4-2109(h)(1)(B) for a qualified loan, or the annual credit in TENN. CODE

1

Pari passu is Latin for “on equal footing.” Loans that are pari passu have equal rights in payment or equal seniority.

2

ANN. § 67-4-2109(h)(2)(B) for a qualified low-rate loan, then both the originating lender and
all participating lenders are entitled to claim the annual credit under TENN. CODE ANN. § 67-42109(h)(1)(B) or -2109(h)(2)(B). The statutory mechanisms for computing the amount of each
lender’s credit are explained below.

Tennessee imposes an excise tax at the rate of 6.5% on the net earnings of all persons doing
2
business within Tennessee. Tennessee also imposes a franchise tax at the rate of $0.25 per $100, or
3
major fraction thereof, on the net worth of a person doing business in Tennessee. Persons subject
to Tennessee franchise and excise taxes include, but are not limited to, business trusts,
corporations, and financial institutions (including state-chartered or national banks, and state4
chartered or federally chartered savings and loan associations).
Tennessee allows credits against a taxpayer’s liability for franchise and/or excise taxes in certain
circumstances. For example, TENN. CODE ANN. § 67-4-2109(h) sets forth the community investment
5
tax credit and provides that a financial institution may take a credit against its total liability for
6
7
franchise and excise taxes when it makes qualified loans, qualified long-term investments, grants,
8
9
or contributions to eligible housing entities for any eligible activity.
The community investment tax credits provided for in TENN. CODE ANN. § 67-4-2109(h)(1)(A) and
(h)(2)(A) are applied one time, and any unused credit under those subsections can be carried
2

TENN. CODE ANN. § 67-4-2007(a) (Supp. 2018).

3

TENN. CODE ANN. §§ 67-4-2105(a) and -2106(a) (2013 & Supp. 2018).

4

TENN. CODE ANN. § 67-4-2004(38) (Supp. 2018).

5

A “financial institution” is defined for franchise and excise tax purposes as “a holding company, any regulated financial
corporation, a subsidiary of a holding company or a regulated financial corporation, an investment entity that is indirectly
more than fifty percent (50%) owned by a holding company or a regulated financial corporation, or any other person that is
carrying on the business of a financial institution.” TENN. CODE ANN. § 67-4-2004(17).
6

The statute setting forth the credits distinguishes between qualified loans and qualified low-rate loans. TENN. CODE ANN. § 674-2109(h)(3)(E) (Supp. 2018) defines a qualified loan as a loan that is at least two percent (2%) below the prime rate at the time
of loan approval. TENN. CODE ANN. § 67-4-2109(h)(3)(G) defines a qualified low-rate loan as a loan that is at least four percent
(4%) below the prime rate at the time of loan approval.
7

TENN. CODE ANN. § 67-4-2109(h)(3)(F) defines a qualified long-term investment as an equity investment made for a period of
more than five (5) years to an eligible housing entity.
8

Pursuant to TENN. CODE ANN. § 67-4-2109(h)(3)(B), an eligible housing entity is any Tennessee nonprofit corporation with
I.R.C. § 501(c)(3) status, the Tennessee Housing Development Agency (“THDA”), a public housing authority, or a development
district.
9

According to TENN. CODE ANN. § 67-4-2109(h)(3)(A), an eligible activity is “an activity that creates or preserves affordable
housing for low-income Tennessean, an activity to help low-income Tennesseans obtain sale and affordable housing, an
activity that builds the capacity of an eligible nonprofit to provide housing opportunity to low-income Tennesseans, and any
other activities approved by the executive director of the Tennessee housing development agency and the commissioner of
revenue.”

3

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forward for fifteen (15) years after the tax year in which the credit originated. According to TENN.
CODE ANN. § 67-4-2019(h)(1)(A), the amount of the credit is equal to five percent (5%) of a qualified
loan or qualified long-term investment to an eligible housing entity for an eligible activity. According
to TENN. CODE ANN. § 67-4-2019(h)(2)(A), the amount of the credit is equal to ten percent (10%) of a
qualified low-rate loan, grant, or contribution to an eligible housing entity for an eligible activity.
The community investment tax credits provided for in TENN. CODE ANN. § 67-4-2109(h)(1)(B) and
(h)(2)(B) are generated annually and are computed based on the unpaid principal balance of the
loan as of December 31 of each year for the earlier of the life of the loan or fifteen (15) years. A
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taxpayer cannot carry forward those credits beyond the tax year in which the credits originated.
According to TENN. CODE ANN. § 67-4-2019(h)(1)(B), the amount of the credit is equal to three percent
(3%) annually of the unpaid principal balance of a qualified loan made to an eligible housing entity
for any eligible activity as of December 31 of each year for the life of the loan or fifteen (15) years,
whichever is earlier. According to TENN. CODE ANN. § 67-4-2109(h)(2)(B), the amount of the credit is
equal to five percent (5%) annually of the unpaid principal balance of a qualified low-rate loan made
to an eligible housing entity for any eligible activity as of December 31 of each year for the life of the
loan or fifteen (15) years, whichever is earlier.

12

If an eligible housing entity refinances an existing debt obligation, the financial institution that
makes the new loan is permitted to claim the community investment tax credit set forth in TENN.
CODE ANN. § 67-4-2109(h) against its total liability for franchise and excise taxes if the loan is a
13
14
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qualified loan or a qualified low-rate loan for an eligible activity. A financial institution may claim
the community investment tax credit either in the form of one time credits set forth in TENN. CODE
ANN. § 67-4-2109(h)(1)(A) and (h)(2)(A) or annual credits set forth in TENN. CODE ANN. § 67-42109(h)(1)(B) and (h)(2)(B) regardless of the type of community investment tax credit a financial
institution may have claimed on a prior loan to the eligible housing entity on the same eligible
activity.
Because the Housing Entity in this case only can refinance the mortgage through financial
institutions that will provide the loan proceeds through syndicated lending or loan participation,
further analysis is necessary as to whether each financial institution involved is eligible for the
community investment tax credit set forth in TENN. CODE ANN. § 67-4-2109(h).

10

TENN. CODE ANN. § 67-4-2109(h)(8).

11

Id.

12

TENN. CODE ANN. § 67-4-2109(h)(3)(B).

13

TENN. CODE ANN. § 67-4-2109(h)(3)(E).

14

TENN. CODE ANN. § 67-4-2109(h)(3)(G).

15

TENN. CODE ANN. § 67-4-2109(h)(3)(A).

4

With a syndicated loan, a borrower enters a single credit agreement with two or more originating
lenders. All of the lenders participate jointly in the origination and lending process. Each lender has
a direct relationship with the borrower and receives its own promissory note from the borrower. In
most instances, one or more lenders act as the arranger of the loan and as the agent of the lenders,
whereby they collect all payments and fees and distribute them to each syndicated lender. The
syndicated lending relationship is pari-passu, and loan repayments are paid pro rata in accordance
with the amount of each lender's claim.
The credits set forth in TENN. CODE ANN. § 67-4-2109(h)(1)(A) for a qualified loan and in TENN. CODE
ANN. § 67-4-2109(h)(2)(A) for a qualified low-rate loan are one-time credits and are based upon the
total amount of the loan. According to TENN. CODE ANN. § 67-4-2109(h)(8), a taxpayer claiming the
credits in TENN. CODE ANN. § 67-4-2109(h)(1)(A) or TENN. CODE ANN. § 67-4-2109(h)(2)(A) can carry
forward unused credits for fifteen years from the year in which the credit originated. As such, each
originating lender financial institution may claim the one-time credits based upon the amount the
Housing Entity owes each financial institution under its individual promissory note with that lender.
An originating lender financial institution may carry forward any unused portion of the credit for a
period of fifteen years beyond the tax year in which the credit originated.
The credits set forth in TENN. CODE ANN. § 67-4-2109(h)(1)(B) for a qualified loan and in TENN. CODE
ANN. § 67-4-2109(h)(2)(B) for a qualified low-rate loan are annual credits and are based upon the
unpaid principal balance of the loan. According to TENN. CODE ANN. § 67-4-2109(h)(8), a taxpayer
claiming the credits in TENN. CODE ANN. § 67-4-2109(h)(1)(B) or TENN. CODE ANN. § 67-4-2109(h)(2)(B)
cannot carryforward unused credits beyond the tax year in which the credit originated. As such,
each originating lender financial institution may claim the annual credits based upon the balance
owed to each originating lender under its individual promissory note as of December 31 of each
year. Each originating lender can take the credit for each year of the loan for the life of the loan for a
maximum of fifteen years.
All originating lenders must claim the same type of credit. Thus, if the loan is a qualified loan, all
originating lenders must claim the credit set forth in in TENN. CODE ANN. § 67-4-2109(h)(1)(A), or they
must all claim the credit set forth in in TENN. CODE ANN. § 67-4-2109(h)(1)(B). If the loan is a qualified
low-rate loan, all lenders must claim the credit in TENN. CODE ANN. § 67-4-2109(h)(2)(A), or they must
all claim the credit set forth in in TENN. CODE ANN. § 67-4-2109(h)(2)(B).
See Appendix A for an illustration of the community investment tax credit with regard to a
syndicated loan.

Loan Participation involves the transfer of ownership of a loan (or portion of a loan) between two or
more lenders. An originating lender originates the loan and then transfers ownership interests in
the loan to one or more participating lenders while retaining an interest in the loan. The
participating lenders do not become parties to the credit agreement and do not have any direct
contractual relationship with the borrower. As such, the participating lenders do not maintain a
claim against the borrower or collateral securing the loan. The originating lender holds loan

5

documentation in its own name, holds all original documentation, services the loan, and deals with
the borrower on behalf of all participating lenders. Loan participation can be made on a
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senior/subordinated basis or a pari-passu basis.
The credits set forth in TENN. CODE ANN. § 67-4-2109(h)(1)(A) for a qualified loan and in TENN. CODE
ANN. § 67-4-2109(h)(2)(A) for a qualified low-rate loan are one-time credits and are based upon the
total amount of the loan.
According to TENN. CODE ANN. § 67-4-2109(h)(8), a taxpayer claiming the credits in TENN. CODE ANN.
§ 67-4-2109(h)(1)(A) or TENN. CODE ANN. § 67-4-2109(h)(2)(A) can carry forward unused credits for
fifteen years from the year in which the credit originated. As such, only the financial institution that
originated the loan may claim the one-time credits based upon the loan amount set forth in the
credit agreement. The originating lender financial institution may carry forward any unused portion
17
of the credit for a period of fifteen years beyond the tax year in which the credit originated.
TENN. CODE ANN. § 67-4-2109(e)(1) states that “a credit carryforward may only be taken by the
taxpayer that generates it.” Accordingly, only the financial institution(s) that originated the loan may
claim the one-time credit set forth in TENN. CODE ANN. § 67-4-2109(h)(1)(A) for a qualified loan, or the
one-time credit set forth in TENN. CODE ANN. § 67-4-2109(h)(2)(A) for a qualified low-rate loan. The
participating lender financial institutions are not entitled to claim any credit when the originating
lender financial institution chooses to utilize the one-time credit under TENN. CODE ANN. § 67-42109(h)(1)(A) or -2109(h)(2)(A). The participating lender financial institutions are not part of the loan
at origination when the total amount of the loan is determined and did not themselves generate the
credits. As such, the participating lender financial institutions are not entitled to claim any credit
when the originating financial institution chooses to utilize the credit under TENN. CODE ANN. § 67-42109(h)(1)(A) or -2109(h)(2)(A).
The credits set forth in TENN. CODE ANN. § 67-4-2109(h)(1)(B) for a qualified loan and in TENN. CODE
ANN. § 67-4-2109(h)(2)(B) for a qualified low-rate loan are annual credits and are based upon the
unpaid principal balance of the loan. According to TENN. CODE ANN. § 67-4-2109(h)(8), a taxpayer
claiming the credits in TENN. CODE ANN. § 67-4-2109(h)(1)(B) or TENN. CODE ANN. § 67-4-2109(h)(2)(B)
cannot carryforward unused credits beyond the tax year in which the credit originated. Accordingly,
if the originating lender financial institution claims the annual credit under TENN. CODE ANN. § 67-42109(h)(1)(B) for a qualified loan or the annual credit in TENN. CODE ANN. § 67-4-2109(h)(2)(B) for a
qualified low-rate loan, then both the originating lender and all participating lenders are entitled to
claim the credit under TENN. CODE ANN. § 67-4-2109(h)(1)(B) or -2109(h)(2)(B).
If the loan is a qualified loan or a qualified low-rate loan made to an eligible housing entity for an
18
eligible activity, the Department will award credits to each financial institution that is part of the
loan participation pursuant to TENN. CODE ANN. § 67-4-2109(h)(1)(B) or TENN. CODE ANN. § 67-416

The senior lender is paid first, and the subordinate loan participation is paid only if there are sufficient funds left over to
make the payments.
17

See TENN. CODE ANN. § 67-4-2109(h)(8).

18

This ruling does not address whether any of the lenders are financial institutions under the Tennessee franchise and excise
statutes or whether the loan is a qualified loan or a qualified low-rate loan to an eligible housing entity for eligible activity.

6

2109(h)(2)(B) based upon the unpaid principal balance that the eligible housing entity owes each
financial institution as of December 31, according to each financial institution’s percentage of
ownership in the loan.
Because the credits in TENN. CODE ANN. § 67-4-2109(h)(1)(B) and TENN. CODE ANN. § 67-4-2109(h)(2)(B)
are limited to the earlier of fifteen years or the life of the loan, the period for claiming the credit is
measured from the date that the loan originated rather than the date that a financial institution
became a participating lender. For example, if a loan originates in 2019, and the originating lender
takes the credit pursuant to TENN. CODE ANN. § 67-4-2109(h)(1)(B) or TENN. CODE ANN. § 67-42109(h)(2)(B) but sells a portion of the loan to a participating lender in 2021, the participating lender
is only entitled to take the credit pursuant to TENN. CODE ANN. § 67-4-2109(h)(1)(B) or TENN. CODE ANN.
§ 67-4-2109(h)(2)(B) through 2033 or the life of the loan, whichever is earlier.
See Appendix B for an illustration of the community investment tax credit with regard to loan
participation.
See Appendix C for an illustration of the application of community investment tax credit to multiple
lenders that make a qualified loan to an eligible housing entity for eligible activity.

APPROVED:

David Gerregano
Commissioner of Revenue

DATE:

8/29/19

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Appendix A
Syndicated Loan

All lenders take
one time credit
in TENN. CODE
ANN. § 67-42109(h)(1)(A) or
-2109(h)(2)(A)

All lenders are
part of loan at
origination

OR
All lenders take
annual credit in
TENN. CODE ANN.
§ 67-42109(h)(1)(B) or
-2109(h)(2)(B)

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Appendix B
Loan Participation

Originating lender
takes one time
credit in TENN.
CODE ANN. § 67-42109(h)(1)(A) or 2109(h)(2)(A)
Ownership
interest is
transferred to
participating
lenders

Participating
lenders that
join later are
not eligible for
the one time or
annual credit

OR
Originating
lender takes
annual credit in
TENN. CODE ANN. §
67-4-2109(h)(1)(B)
or -2109(h)(2)(B)

Participating
lenders that join
later take the
annual credit in
in TENN. CODE
ANN. §§ 67-42109(h)(1)(B) or
-2109(h)(2)(B)

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Appendix C
Application of the community investment tax credit to multiple lenders that make a qualified
loan to an eligible housing entity for eligible activity

Statutory
Reference for
Credit

Amount of
Credit

Length of Credit

Syndicated Loan

Loan Participation

67-4-2019(h)(1)(A)

5% of a
qualified loan or
a qualified longterm
investment

One time credit with
carryforward of 15 years
after tax year in which
credit was generated

All lenders can
claim this credit

If originating lender takes this
credit, participating lenders that
join later are not eligible to claim
this credit.

67-4-2019(h)(1)(B)

3% annually of
unpaid principal
balance as of
December 31

Annual Credit based on
unpaid principal balance
as of December 31 of
each year for the earlier
of the life of the loan or
15 years

All lenders can
claim this credit

Originating lender and
participating lenders that join
later can claim this credit

67-4-2019(h)(2)(A)

10% of a
qualified loan or
a qualified longterm
investment

One time credit with
carryforward of 15 years
after tax year in which
credit was generated

All lenders can
claim this credit

If originating lender takes this
credit, participating lenders that
join later are not eligible to claim
this credit

67-4-2019(h)(2)(B)

5% annually of
unpaid principal
balance as of
December 31

Annual Credit based on
unpaid principal balance
as of December 31 of
each year for the earlier
of the life of the loan or
15 years

All lenders can
claim this credit

Originating lender and
participating lenders that join
later can take this credit

10