760 CMR 54.12 - Recapture
(1)
Recapture;
Disallowance. Whenever an event or circumstance occurs with respect to
a Qualified Massachusetts Project that results in any recapture of federal
low-income housing tax credit or if, in the judgment of the Department, the project
would meet the condition for recapture of federal low-income housing tax credit
under Section 42(j) of the Code and the regulations thereunder, if, at the time of
the allocation of the Massachusetts low-income tax credit, the project had, instead,
been allocated a federal low-income tax credit, then any Massachusetts low-income
housing tax credit claimed with respect to the project shall be subject to recapture
in the amount described below, subject to the standards and requirements of Section
42(j) of the Code and the regulations thereunder, and any Massachusetts low-income
housing tax credit allocated to such project and not yet claimed as of the date of
the recapture event shall be disallowed. With respect to any recapture of standard
LIHTC, notwithstanding any agreement between transferor and transferee, each
taxpayer who has claimed any portion of the standard LIHTC allocated to the project
in question shall be liable for payment of his, her or its respective recapture
amount as specified in 760 CMR 54.12(3). In the case of a donation LIHTC, repayment
of any recapture amount shall be the sole liability of the DTC sponsor.
(2)
Recapture Period.
Massachusetts low-income housing tax credit allocated with respect to a project is
subject to recapture (and disallowance to the extent not yet claimed) at any time
during the 15-year compliance period.
(3)
Recapture Fraction.
(a) With respect to projects that have an
allocation of federal low-income housing tax credits, a fraction in which the
numerator is the amount of all federal low-income housing tax credit recaptured with
respect to the project and the denominator is the amount of all federal low-income
housing tax credit previously claimed with respect to the project.
(b) With respect to projects that do not have an
allocation of federal low-income housing tax credit, a fraction calculated according
to the standards and requirements of Section 42(j) of the Code, as if a federal
low-income housing tax credit had been allocated to the project instead of a
Massachusetts low-income housing tax credit.
(4)
Amount of Recapture.
The amount of Massachusetts low-income housing tax credit to be recaptured from any
taxpayer upon the occurrence of a recapture event equals the product of:
(a) the Massachusetts low-income housing tax
credit claimed by such taxpayer prior to the recapture event times;
(b) the recapture fraction.
(5)
Timing of Recapture.
The amount of recapture of the Massachusetts low-income housing tax credit shall be
reported and shall be subject to tax in the taxable year during which the recapture
event takes place.
(6)
Examples.
(a) The
following example illustrates the application of 760 CMR 54.12 to a recapture of
standard LIHTC. Assume, the owner of a Qualified Massachusetts Project is a calendar
year taxpayer. The annual credit amount allocated to the project is $20,000. The
project meets the requirements of
760 CMR
54.08 on October 1, 2001. Taxpayer makes an early
credit election and takes a $20,000 credit for tax year 2001. Taxpayer takes a
second $20,000 credit for tax year 2002. On April 1, 2003, the project goes out of
compliance and becomes subject to federal recapture, or would become subject to
federal recapture if federal credits had been awarded instead of state credits. No
credit is available to taxpayer for tax years 2003, 2004 and 2005. The $40,000
credit previously taken by the taxpayer is subject to recapture according to the
formula in 760 CMR 54.12(4).
(b) The
following example illustrates the application of 760 CMR 54.12 to a recapture of
donation LIHTC. Assume, the owner of property to be donated to a DTC sponsor as a
Qualified Donation is a calendar year taxpayer. The donation credit amount allocated
to the project is $100,000 (1/5 of which counts towards the annual sum that the
Department is authorized to allocate annually). The taxpayer makes the qualified
donation required under
760 CMR 54.05(b)
on October 1, 2001 and takes a $100,000 credit
for tax year 2001. The project meets the requirements of
760 CMR
54.08 on October 1, 2002. On April 1, 2004, the
project goes out of compliance and becomes subject to federal recapture, or would
become subject to federal recapture if federal credits had been awarded instead of
state credits. The entire $100,000 credit previously taken by the taxpayer is
subject to recapture from the sponsor according to the formula in 760 CMR
54.12(4).
(7) 1/5 of the
dollar amount of any Massachusetts low-income housing tax credit recaptured or
forfeited shall be counted as part of the Massachusetts low-income housing tax
credits returned to the department by a Qualified Massachusetts Project for purposes
of
760 CMR
54.03(1)(c).
Notes
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