Key Takeaways
- The Minnesota Housing tax credit allows individuals, corporations, and pass-through entities to receive a tax credit equal to 85% of their contribution to the State Housing Tax Credit (SHTC) Program, with contributions ranging from $1,000 to $2 million per tax year.
- The SHTC Program is funded entirely by taxpayer contributions and provides loans for eligible housing projects throughout Minnesota.
- The credit can be carried forward for 10 years if it exceeds the taxpayer's liability.
A new Minnesota Housing tax credit will allow individuals and businesses to receive a state tax credit by contributing to the State Housing Tax Credit (SHTC) Program and Contribution Fund. The tax credit starts in 2024 and runs through 2028.
The SHTC Program and Contribution Fund aims to help finance affordable housing throughout Minnesota. Eligible Minnesota taxpayers can contribute to the contribution fund and, in return, receive a state Tax Credit Certificate (TCC).
Contributions will provide funding for eligible housing project loans in communities across the state. The loans are funded entirely by taxpayer contributions — there are no state appropriations or other funding sources for the program.
Who is eligible to receive the Minnesota Housing tax credit?
Individuals, corporations, and pass-through entities who pay Minnesota taxes are eligible to receive a Minnesota SHTC.
How much is the credit?
The SHTC is equal to 85% of the amount contributed to the fund, with a minimum contribution amount of $1,000 and a maximum contribution of $2 million per tax year.
The credit is distributed in the order applications are received, and the yearly aggregate credit amount is $9.9 million. If the credit is greater than the individual or business tax liability, the credit can be carried forward for 10 years.
How will this credit impact pass-through entities?
Pass-through entities can utilize this credit to pay their minimum fee. The additional credit will be passed on to the owners to utilize on their individual returns. This credit will not affect Minnesota Pass-Through Entity Tax elections.
How do I contribute to the Minnesota State Housing Tax Credit?
Contributions are made through an online application. Applicants can designate funds to an approved organization or the general fund.
Once the application has been approved, the state will send a certificate and signature page for the taxpayer to sign. When the taxpayer signs the signature page and funds are received, the MN Housing Department will issue a TCC that can be utilized to claim the tax credit on the 2024 tax return.
Professional guidance can help you understand and address your own state and local tax situation. Eide Bailly’s state and local tax team can help you take a proactive approach to managing your taxation issues.
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