Individual income tax: credit; low income housing tax credit; provide for, the official text

Act No. 23

Public Acts of 2026

Approved by the Governor

July 21, 2026

Filed with the Secretary of State

July 21, 2026

EFFECTIVE
DATE: July 21, 2026

state of michigan

103rd Legislature

Regular session of 2026

Introduced by Senator Irwin

ENROLLED SENATE BILL No. 966

AN ACT to amend 1966 PA 346,
entitled “An act to create a state housing development authority; to define the
powers and duties of the authority; to establish a housing development
revolving fund; to establish a land acquisition and development fund; to
establish a rehabilitation fund; to establish a conversion condominium fund; to
create certain other funds and provide for the expenditure of certain funds; to
authorize the making and purchase of loans, deferred payment loans, and grants
to qualified developers, sponsors, individuals, mortgage lenders, and
municipalities; to establish and provide acceleration and foreclosure
procedures; to provide tax exemption; to authorize payments instead of taxes by
nonprofit housing corporations, consumer housing cooperatives, limited dividend
housing corporations, mobile home park corporations, and mobile home park associations; and to prescribe criminal penalties
for violations of this act,” by amending section 22 (MCL 125.1422), as
amended by 2012 PA 327, and by adding section 22e.

The People of the State of
Michigan enact:

Sec. 22. The authority possesses all
powers necessary or convenient to carry out this act, including the following
powers in addition to other powers granted by other provisions of this act:

(a) To sue and to be
sued; to have a seal and to alter the seal at pleasure; to have perpetual
succession; to make and execute contracts and other instruments necessary or
convenient to the exercise of the powers of the authority; and to make, amend,
and repeal bylaws and rules.

(b) To undertake and
carry out studies and analyses of housing needs within this state and ways of
meeting those needs, including data with respect to population and family
groups, the distribution of population and family groups according to income,
and the amount and quality of available housing and its distribution according
to rentals and sales prices, employment, wages, and other factors affecting
housing needs and the meeting of housing needs; to make the results of those
studies and analyses available to the public and the housing and supply
industries; and to engage in research and disseminate information on housing.

(c) To agree and comply
with conditions attached to federal financial assistance.

(d) To survey and
investigate housing conditions and needs, both urban and rural, throughout this
state and make recommendations to the governor and the legislature regarding
legislation and other measures necessary or advisable to alleviate any existing
housing shortage in this state.

(e) To establish and
collect fees and charges in connection with the sale of the authority’s
publications and the authority’s loans, commitments, and services, including, but not limited to, the
reimbursement of costs of financing by the authority, service charges, and
insurance premiums as the authority determines to be reasonable and as approved
by the authority. Fees and charges must be
determined by the authority and are not
considered to be interest. The authority may use any accumulated fees and
charges and interest income for achieving any of the corporate purposes of the
authority, to the extent that the fees, charges, and interest income are not
pledged to the repayment of bonds and notes of the authority or the interest on
those bonds and notes.

(f) To encourage
community organizations to assist in initiating housing projects as provided in
this act.

(g) To encourage the
salvage of all possible usable housing scheduled for demolition because of
highway, school, urban renewal, or other programs by seeking authority for the
sponsors of the programs to use funds provided for the demolition of the buildings,
to be allocated to those sponsors approved by the authority to defray moving
and rehabilitation costs of the buildings.

(h) To engage and
encourage research in, and to formulate demonstration projects to develop, new
and better techniques and methods for increasing the supply of housing for
persons eligible for assistance as provided in this act; and to provide
technical assistance in the development of housing projects and in the
development of programs to improve the quality of life for all the people of
this state.

(i) To make or purchase
loans, including loans for condominium units as that
term is defined in section 4 of the condominium act, 1978 PA 59, MCL
559.104, and loans to mortgage lenders that are
unsecured or the repayments of which are secured by mortgages, security
interests, or other forms of security; to purchase and enter into commitments
for the purchase of securities, certificates of deposits, time deposits, or
mortgage loans from mortgage lenders; to participate in the making or
purchasing of unsecured or secured loans and undertake commitments to make, guarantee, or purchase unsecured or secured loans;
to sell mortgages, security interests, notes, and other instruments or
obligations evidencing or securing loans, including certificates evidencing
interests in 1 or more loans, at public or private sale; in connection with the
sale of an instrument or obligation evidencing or securing 1 or more loans, to
service, guarantee payment on, or repurchase the instrument or obligation,
whether or not it is in default; to modify or alter mortgages and security
interests; to foreclose on any mortgage, security interest, or other form of
security; to finance housing units; to commence an action to protect or enforce
a right conferred upon the authority by law, mortgage, security agreement,
contract, or other agreement; to bid for and purchase property that was the
subject of the mortgage, security interest, or other form of security, at a
foreclosure or at any other sale, and to acquire or take possession of the
property. Upon acquiring or taking possession of the property, the authority
may complete, administer, and pay the principal and interest of obligations
incurred in connection with the property, and may dispose of and otherwise deal
with the property in any manner necessary or desirable to protect the interests
of the authority in the property. If the authority or an entity that provides
mortgage insurance to the authority acquires property on
the default of a borrower, the authority may make a mortgage loan to a
subsequent purchaser of that property even if the purchaser does not meet
otherwise applicable income limitations and purchase price limits.

(j) To set standards for
housing projects that receive loans under this act and to provide for
inspections to determine compliance with those standards. The standards for
construction and rehabilitation of mobile homes, mobile home parks, and mobile
home condominium projects shall be established
jointly by the authority and the mobile home commission, created in section 3
of the mobile home commission act, 1987 PA 96, MCL 125.2303. However, financing standards shall be established solely by the authority.

(k) To accept gifts,
grants, loans, appropriations, or other aid from the federal, state, or local
government, from a subdivision, agency, or instrumentality of a federal, state,
or local government, or from a person, corporation, firm, or other organization.

(l) To acquire or contract to acquire from a
person, firm, corporation, municipality, or federal or state agency, by grant,
purchase, or otherwise, leaseholds or real or personal property, or any
interest in a leasehold or real or personal property; to own, hold, clear,
improve, and rehabilitate and to sell, assign, exchange, transfer, convey,
lease, mortgage, or otherwise dispose of or encumber any interest in a
leasehold or real or personal property. This act shall
not impede the operation and effect of local zoning, building, and
housing ordinances, ordinances relating to subdivision control, land
development, or fire prevention, or other ordinances having to do with housing
or the development of housing.

(m) To procure insurance
against any loss in connection with the property and other assets of the
authority.

(n) To invest, at the
discretion of the authority, funds held in reserve or sinking funds, or money
not required for immediate use or disbursement, in obligations of this state or
of the United States, in obligations the principal and interest of which are
guaranteed by this state or the United States, or in other obligations as may
be approved by the state treasurer.

(o) To promulgate rules
necessary to carry out the purposes of this act and to exercise the powers
expressly granted in this act under the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328.

(p) To enter into
agreements with nonprofit housing corporations, consumer housing cooperatives,
limited dividend housing corporations, mobile home park corporations, and
mobile home park associations that provide for regulation by the authority of
the planning, development, and management of any housing project undertaken by
nonprofit housing corporations, consumer housing cooperatives, limited dividend
housing corporations, mobile home park corporations, and mobile home park
associations and that provide for the disposition of the property and
franchises of those corporations, cooperatives, and associations.

(q) To appoint to the
board of directors of a nonprofit housing corporation, consumer housing
cooperative, limited dividend housing corporation, mobile home park
corporation, or mobile home park association, a number of new directors
sufficient to constitute a majority of the board notwithstanding other
provisions of the articles of incorporation or other provisions of law.
Directors appointed under this subsection need not be stockholders or members
or meet other qualifications that may be described by the certificate of
incorporation or bylaws. In the absence of fraud or bad faith, directors
appointed under this subsection shall not be personally liable for debts,
obligations, or liabilities of the corporation or association. The authority
may appoint directors under this subsection only if 1 or more of the following
occur:

(i) The nonprofit housing corporation, consumer
housing cooperative, limited dividend housing corporation, mobile home park
corporation, or mobile home park association has received a loan or advance, as
provided for in this act, and the authority determines that the loan or advance
is in jeopardy of not being repaid.

(ii) The nonprofit housing corporation, consumer
housing cooperative, limited dividend housing corporation, mobile home park
corporation, or mobile home park association received a loan or advance as
provided for in this act and the authority determines that the proposed housing
project for which the loan or advance was made is in jeopardy of not being
constructed.

(iii) The authority determines that any of the following apply:

(A)
Some part of the net income or net earnings of the nonprofit housing
corporation is inuring to the benefit of a private individual, firm,
corporation, partnership, or association.

(B)
An unreasonable part of the net income or net earnings of the consumer
housing cooperative is inuring to the benefit of a private individual, firm,
corporation, partnership, or association.

(C)
Some part of the net income or net earnings of the limited dividend
housing corporation, in excess of that permitted by other provisions of this
act, is inuring to the benefit of a private individual, firm, corporation,
partnership, or association.

(iv) The authority determines that the nonprofit
corporation or consumer housing cooperative is in some manner controlled by,
under the direction of, or acting in the substantial interest of a private
individual, firm, corporation, partnership, or association seeking to derive
benefit or gain from, or seeking to eliminate or minimize losses in any
dealings or transactions with, the nonprofit corporation or consumer housing
cooperative. This subparagraph applies to individual cooperators in consumer
housing cooperatives only in circumstances defined by the authority in its
rules.

(v) The authority determines that the nonprofit
housing corporation, consumer housing cooperative, limited dividend housing
corporation, mobile home park corporation, or mobile home park association is
in violation of the rules promulgated under this section.

(vi) The authority determines that the nonprofit
housing corporation, consumer housing cooperative, limited dividend housing
corporation, mobile home park corporation, or mobile home park association is
in violation of 1 or more agreements entered into with the authority that
provide for regulation by the authority of the planning, development, and
management of a housing project undertaken by the nonprofit housing
corporation, consumer housing cooperative, limited dividend housing
corporation, mobile home park corporation, or mobile home park association or
that provide for the disposition of the property and franchises of the
corporation, cooperative, or association.

(r) To approve or consent to any
of the following:

(i) The articles
of incorporation submitted to the authority by a corporation seeking approval
as a nonprofit housing corporation, consumer housing cooperative, limited
dividend housing corporation, or mobile home park corporation under chapter 4,
5, 6, or 8.

(ii) The partnership
agreement, joint venture agreement, trust agreement, or other document of basic
organization of a limited dividend housing association under chapter 7 or
mobile home park association under chapter 9.

(s) To engage the
services of private consultants on a contract basis for rendering professional
and technical assistance and advice.

(t) To lease real or
personal property, to operate as the sole statewide
public housing agency, and to accept federal funds for, and participate
in, federal programs of housing assistance. As used
in this subdivision, “public housing agency” means that term as defined under
42 USC 1437a.

(u) To review and approve
rental charges for authority-financed housing projects and require whatever
changes the authority determines to be necessary. The changes are effective not less than 30 days after written notice is given to the residents
of the affected authority-financed housing projects.

(v) To set forth in the
various loan documents of the authority those restrictions on the sale,
conveyance by land contract, or transfer of residential real property, housing
projects, or housing units for which a note is held by the authority and restrictions
on the assumption by subsequent purchasers of loans originated by and held by,
or originated for purchase by and held by, the authority as the authority
determines to be necessary in order to comply with requirements of federal
statutes, federal rules or regulations promulgated under 5 USC 551 to 559,
state statutes, or state rules promulgated under the administrative procedures
act of 1969, 1969 PA 306, MCL 24.201 to 24.328, or to obtain and maintain
the tax exempt status of authority bonds and notes. The
authority shall not use a due on sale or acceleration clause solely for
the purpose of renegotiating the interest rate on a loan made with respect to
an owner-occupied single-family housing unit. Without limiting the authority’s
power to establish other restrictions, as provided in this section, on the
sale, conveyance by land contract, or transfer of residential real property,
housing projects, or housing units for which a note is held by the authority
and the assumption by subsequent purchasers of loans made or purchased by the
authority, the authority shall provide in its loan documents relating to a
single family loan that the single family loan may be assumed by a new
purchaser only when the new purchaser qualifies under the authority income
limitations rules, unless such a restriction diminishes or precludes the
insurance or a guarantee by an agency of the federal government with respect to
the single family loan. A loan made for a mobile home that the borrower does
not intend to permanently affix to real property shall
become immediately due and payable if the mobile home is moved out of
the state. Any restrictions on conveyance by sale, conveyance by land contract,
or transfer that are authorized in this section apply only to loans originated
by and held by, or originated for purchase by and held by, the authority and
may, at the option of the authority, be enforced by accelerating and declaring
immediately due and payable all sums evidenced by the note held by the
authority. An acceleration and declaration of all sums to be due and payable on
conveyance by sale, land contract, or transfer is not an unreasonable restraint
on alienation. An acceleration and declaration, unless otherwise prohibited in
this subdivision, of all sums to be due and payable under this subdivision is enforceable
in any court of competent jurisdiction. This subdivision applies to secured and unsecured loans  and loan
documents utilized in conjunction with an authority-operated program of
residential rehabilitation by an entity cooperating or participating with the
authority under section 22a(4), if the loans are originated with the intent to
sell those loans to the authority.

(w) To set forth in the
various loan documents of the authority remedies for the making of a false
statement, representation, or pretense or a material misstatement by a borrower
during the loan application process. Without limiting the authority’s power to
pursue other remedies, the authority shall provide in its loan documents that,
if a borrower makes a false statement, representation, or pretense or a
material misstatement during the loan application process, the authority, at
its option, may accelerate and declare immediately due and payable all sums
evidenced by the note held by the authority. An acceleration and declaration of
all sums to be due and payable as provided in this subdivision is enforceable
in any court of competent jurisdiction. This subdivision applies to secured and unsecured loans.

(x) To collect interest
on a real estate loan, the primary security for which is not a first lien on
real estate, at the rate of 15% or less per annum on the unpaid balance. This
subdivision does not impair the validity of a transaction or rate of interest
that is lawful notwithstanding this
subdivision.

(y) To encourage and
engage or participate in programs to accomplish the preservation of housing in
this state available for occupancy by persons and families of low or moderate
income.

(z) To verify for the
state treasurer statements submitted by a city, village, township, or county as
to exempt properties under section 7d of the general property tax act, 1893 PA
206, MCL 211.7d.

(aa) For the purpose of
more effectively managing its debt service, to enter into an interest rate
exchange or swap, hedge, or similar agreement with respect to its bonds or
notes on the terms and payable from the sources and with the security, if any,
as determined by a resolution of the authority.

(bb) To make working
capital loans to contractors or subcontractors on housing projects financed by
the authority. The authority shall submit an annual report to the legislature
containing the amount, recipient, duration, circumstance, and other related statistics
for each capital loan made to a contractor or subcontractor under this
subdivision. The authority shall include in the report statistics related to
the cost of improvements made to adapt property for use by disabled individuals
as provided in section 32b or 44.

(cc) Subject to rules of
the civil service commission, to adopt a code of ethics with respect to its
employees that requires disclosure of financial interests, defines and
precludes conflicts of interest, and establishes reasonable post-employment
restrictions for a period of up to 1 year after an employee terminates
employment with the authority.

(dd) To impose covenants
running with the land in order to satisfy requirements of applicable federal
law with respect to housing assisted or to be assisted through federal programs
such as the low income housing tax credit program or the home investment
partnerships program. These covenants shall be
imposed by executing and recording regulatory agreements between the authority,
or a municipality or other entity designated by the authority, and the person
or entity to be bound. The covenants shall run with the land and be effective with
respect to the parties making the covenants and other intended beneficiaries of
the covenants, even though there is no privity of estate or privity of contract
between the authority and the persons or entities to be bound.

(ee) To impose covenants
running with the land in order to satisfy requirements of applicable state or
federal law with respect to housing financed by the authority. These covenants shall be imposed by executing and recording
regulatory agreements between the authority and the person or entity to be
bound. The covenants shall
run with the land and be effective with respect to the parties making
the covenants and other intended beneficiaries of the covenants, even though
there is no privity of estate or privity of contract between the authority and
the persons or entities to be bound. With respect to any applicable
environmental laws, this subdivision does not grant to the authority any
additional rights, privileges, or immunities not otherwise afforded to a
private lender that is not in the chain of title for the land.

(ff) To participate in
programs designed to assist persons and families whose incomes do not exceed
115% of the greater of statewide median gross income or the area median gross
income become homeowners where loans are made by private lenders for purchase
by the government national mortgage association, federal national mortgage
association, federal home loan mortgage corporation, or other federally
chartered organizations. Participation may include providing or funding
homeownership counseling and providing some or all of a reserve fund to be used
to pay for losses in excess of insurance coverage.

(gg) To invest, under the
conditions prescribed in this subdivision and without the consent of the escrow
depositors, up to 20% of funds held, by or for the authority, in escrow
accounts for the benefit of the authority or mortgagors of authority-financed
housing. The investments under this subdivision shall
be made in loans originated or purchased by the authority for
construction or rehabilitation of multifamily housing developments for
occupancy by persons or families without regard to income. In connection with
loans described in this subdivision, the authority may charge and retain fees
in amounts similar to those charged with respect to similar loans for which the
source of funding does not come from escrow accounts. For purposes of this
subdivision, “escrow account” means any account or reserve held by the
authority and established in a mortgage or a regulatory agreement to which the
authority is a party or which has been assigned to the authority. For purposes of this subdivision, escrow account
does not include any account labeled in the associated regulatory agreement as “development
cost escrow principal” or “operating assurance reserve”. For purposes of this
subdivision, “multifamily housing development” means a development in which not
less than 50% of the floor space is used primarily for residential purposes.
The investment authorized by this subdivision must not
be made unless both of the following requirements are met:

(i) The return on the loan is approximately
equivalent to that which could be obtained from investments of substantially
similar credit quality and maturity, as determined by the authority.

(ii) The authority agrees to pay with its own
funds the principal balance of any loan, made with the escrow funds, that
becomes delinquent in excess of 30 days. This subdivision does not obligate the
authority to purchase a delinquent loan so long as with respect to that loan
the authority pays to the escrow funds from its own funds the amount of the
delinquent payments. The authority’s election to pay the delinquent payments to
the escrow funds does not in any manner abate or cure the delinquency of the
loan and the authority may resort to any remedies that would exist in the
absence of that payment.

(hh) To acquire, develop,
rehabilitate, own, operate, and enter into contracts with respect to the
management and operation of real and personal property to use as office
facilities by the authority and to enter into leases with respect to facilities
not immediately necessary for the activities of the authority.

(ii) To make loans to
certain qualified buyers and resident organizations and to make grants to
resident organizations as provided in the following:

(i) The urban homestead act, 1999 PA 127, MCL
125.2701 to 125.2709.

(ii) The urban homesteading on vacant land act,
1999 PA 129, MCL 125.2741 to 125.2748.

(iii) The urban homesteading in single-family
public housing act, 1999 PA 128, MCL 125.2761 to 125.2770.

(iv) The urban homesteading in multifamily public
housing act, 1999 PA 84, MCL 125.2721 to 125.2734.

(jj) To implement and
administer a housing and community development program as described in this
act.

(kk) To implement,
administer, or execute administrative, substantive, or supervisory powers under the individual or family development account
program act, 2006 PA 513, MCL 206.901 to 206.911.

(ll)
To establish, implement, and administer the housing opportunity tax credit
program under section 22e.

Sec.
22e. (1) The authority, in cooperation with the department of treasury, shall
establish, implement, and administer a housing opportunity tax credit program
to encourage the development of qualified projects in this state.

(2) For award cycles beginning on and after January 1, 2027,
the authority shall, in conjunction with applications received under section
22b, accept applications for housing opportunity tax credits under this
section. The authority shall not issue an award for an annual housing
opportunity tax credit under this program for a qualified project that exceeds
the lesser of the following:

(a) The amount necessary for the financial feasibility of the
qualified project.

(b) The adjusted annual federal credit amount for the
qualified project.

(3) A person seeking a housing opportunity tax credit under
this section shall submit an application in a form and manner as prescribed by
the authority. In a process determined by the authority that considers the
impact on total development costs, the authority shall give preference to
qualified projects that use building components during construction or
rehabilitation that are manufactured in this state. The authority shall review
completed applications for housing opportunity tax credits received for 4%
qualified projects on a first-come, first-served basis. The authority shall
treat all complete applications received on the same day as having been
received simultaneously. If the applications received for 4% qualified projects
exceed the portion of the award cycle cap set aside under subsection (4)(b) and
(c) on any day, the authority shall establish an evaluation methodology to
determine which of the 4% qualified projects applications are approved and
issued an approval notice for a housing opportunity tax credit. Except as
otherwise provided under this subsection, the evaluation methodology required
under this subsection must be limited to factors that maximize efficient unit
production, including, but not limited to, each of the following:

(a) The amount of the housing opportunity tax credit
requested for each unit under the proposed qualified project.

(b) The number of units to be preserved or created under the
proposed qualified project.

(c) The estimated development period of the proposed
qualified project from the initial approval notice to placing the proposed
qualified project in service.

(4) For the 2027 award cycle, the authority shall not issue
approval notices for a total of more than the base annual amount of
$42,000,000.00 for housing opportunity tax credits under this section. For each
award cycle after the 2027 award cycle, to determine the award cycle cap for
that award cycle, the base annual amount for the immediately preceding award
cycle must be adjusted annually by the percentage increase in the United States
Consumer Price Index for the immediately preceding calendar year. The total
amount of all housing opportunity tax credits for which an approval notice is
issued under this section must not exceed the award cycle cap for any award
cycle. For each application window, the authority shall approve and allot not
less than 45% of the award cycle cap set aside under subdivisions (b) and (c)
to 4% qualified projects to the extent that the authority receives a sufficient
number of applications. If, at the end of the final application window of each
award cycle, the authority has not received a sufficient number of completed
applications to allot the amount set aside under subdivision (b) or (c), the
authority may reapportion the unallotted credit amounts to other qualified
projects in accordance with the qualified allocation plan or other alternative
competitive processes. Except as otherwise provided under this subsection, the
authority must set aside the following amounts of the award cycle cap as
follows:

(a) Up to 50% to any qualified project at the authority’s
discretion.

(b) Not less than 25% shall be available during application
windows to 4% qualified projects that are new construction.

(c) Not less than 25% shall be available during application
windows to 4% qualified projects that are preservation.

(d) To the extent the authority receives a sufficient number
of completed applications for projects that are located in rural areas, not
less than 30% of the amounts set aside under subdivisions (a) to (c) during
each award cycle shall be designated for qualified projects that are located in
a rural area.

(5) If the authority approves an application for a housing
opportunity tax credit, the authority shall send an approval notice to the
applicant that states the amount of the housing opportunity tax credit approved
for each year of the qualified project’s credit period. The approval notice
must clearly stipulate that the housing opportunity tax credit approved is
contingent on the authority’s approval of a final cost certification and the
issuance of an eligibility statement, and for the purposes of the housing
opportunity tax credit only, the exception under section 42(h)(6)(E)(i)(II) of
the internal revenue code, 26 USC 42, does not apply. The owner and the
authority shall use a regulatory agreement that gives preference to maximizing
long-term affordability. On completion of a qualified project, as determined by
the authority, the owner shall submit a final cost certification and a request for
the issuance of an eligibility statement to the authority. On approval of the
final cost certification, the authority shall issue an eligibility statement to
the owner for the qualified project. The eligibility statement must state the
amount of the housing opportunity tax credit that may be claimed against an
applicable tax each year of the credit period. Except as otherwise provided
under section 281 or 678 of the income tax act of 1967, 1967 PA 281, MCL
206.281 and 206.678, or under section 476a of the insurance code of 1956, 1956
PA 218, MCL 500.476a, whichever is applicable, for each calendar year of the
credit period, an owner claiming a housing opportunity tax credit shall claim
the credit for that calendar year against an applicable tax for the owner’s tax
year beginning with or within that calendar year.

(6) If an owner that is a qualified taxpayer is a
flow-through entity, the owner may, in a form and manner as prescribed by the
authority, allocate all or a portion of the housing opportunity tax credit
attributable to a qualified project to some or all of its members in any manner
agreed to by its members, regardless of whether that member is allocated or
allowed any portion of any federal low-income housing tax credit with respect
to the same qualified project, whether the allocation of the housing opportunity
tax credit under the terms of the agreement has substantial economic effect
within the meaning of section 704(b) of the internal revenue code, 26 USC
704, and whether the member is deemed a partner for federal income tax
purposes. A flow-through entity that receives an allocation of the housing
opportunity tax credit under this subsection, either from the owner of the
qualified project or from another flow-through entity, may further allocate the
housing opportunity tax credit among some or all of its members in the same
manner as the owner. A member of a flow-through entity that is allocated or
receives a pass-through of a housing opportunity tax credit under this
subsection may assign all or any part of its interest in the flow-through
entity and the assignee may subsequently be allocated credits from the
flow-through entity. Except as otherwise provided under section 281 or 678 of
the income tax act of 1967, 1967 PA 281, MCL 206.281 and 206.678, or under
section 476a of the insurance code of 1956, 1956 PA 218, MCL 500.476a,
whichever is applicable, a qualified taxpayer that has been allocated all or a
portion of a housing opportunity tax credit under this subsection shall claim
that credit against an applicable tax for the qualified taxpayer’s tax year
beginning with or within the calendar year in which the allocation was made.
Any flow-through entity allocating all or a portion of a housing opportunity
tax credit for a qualified project under this subsection shall provide the
recipient with a copy of the eligibility statement or, if the authority has not
yet issued an eligibility statement, the approval notice for that qualified
project. If a copy of the approval notice is provided to the recipient and an
eligibility statement is subsequently issued, the person who allocated the
credit shall provide the recipient with a copy of the eligibility statement.

(7) The owner of a qualified project that is awarded a
housing opportunity tax credit shall report any recapture event described in
section 281(3) or 678(3) of the income tax act of 1967, 1967 PA 281, MCL
206.281 and 206.678, or section 476a(10) of the insurance code of 1956, 1956 PA
218, MCL 500.476a, to the designated reporter, the department of treasury, and
the authority in the same manner as required for the recapture of federal
low-income housing tax credits. If the owner of the qualified project is not
the only qualified taxpayer that claimed the housing opportunity tax credit
attributable to that qualified project against an applicable tax, the
designated reporter shall also report the recapture event to each qualified
taxpayer that was allocated a housing opportunity tax credit attributable to
that same qualified project.

(8) A designated reporter shall do both of the following:

(a) For each calendar year, provide the department of
treasury, in the form prescribed by the department of treasury, an allocation
report for the qualified project containing all of the following information:

(i) The name, address, and taxpayer
identification number of the owner and each qualified taxpayer that has been
allocated all or a portion of the annual credit listed on the eligibility
statement or approval notice, whichever is applicable, for that year.

(ii) The amount of the annual credit retained
by or allocated to each person listed under subparagraph (i) for that year and the person’s tax year under the
applicable tax.

(iii) The total of the amounts listed for each
person under subparagraph (ii), demonstrating that the total does not
exceed the amount listed on the eligibility statement or approval notice,
whichever is applicable, for that year.

(iv) Any other information required by the
department of treasury.

(b) If any of the information reported under subdivision (a)
changes after the designated reporter has provided the allocation report to the
department of treasury, including, but not limited to, changes resulting from a
reduction or increase in the amount of the annual credit approved in the
approval notice, provide the department of treasury and any affected qualified
taxpayer an updated allocation report for the calendar year in the time and
manner as prescribed by the department of treasury.

(9) As used in this section:

(a) “Adjusted annual federal credit amount” means 1/6 of the
aggregate amount of the federal credit allocated to a qualified project on
federal income tax form 8609 over its federal credit period.

(b) “Allocation report” means the annual report submitted by
a designated reporter to the department of treasury under subsection (8).

(c) “Applicable tax” means a tax imposed under the income tax
act of 1967, 1967 PA 281, MCL 206.1 to 206.847, or under section 476a of the
insurance code of 1956, 1956 PA 218, MCL 500.476a.

(d) “Application window” means the first quarter, January 1
through March 31, or the third quarter, July 1 through September 30, of the
award cycle. If either the first or last day of the application window falls on
a nonbusiness day, then the starting or ending date is the next business day.

(e) “Approval notice” means a binding reservation letter
issued by the authority for a housing opportunity tax credit attributable to a
qualified project during an award cycle, setting forth the amount of the
housing opportunity tax credit to be claimed in each year of the credit period.

(f) “Award” or “awarded” means the issuance or receipt of an
eligibility statement under subsection (5) for a qualified project.

(g) “Award cycle” means each calendar year for which the
authority approves and issues approval notices for housing opportunity tax
credits for qualified projects.

(h) “Award cycle cap” means the sum of the following:

(i) The base annual amount as determined
under subsection (4) for each calendar year of the credit period.

(ii) The amount, if any, by which the award
cycle cap prescribed under this section for the preceding award cycle exceeds
the total of all housing opportunity tax credits approved by the authority in
that award cycle.

(iii) The amount of housing opportunity tax
credits recaptured or otherwise disallowed under subsection (7) in the
preceding calendar year or otherwise returned to the authority since the prior
award cycle.

(i) “Credit period” means the period of 6 calendar years
beginning with the calendar year in which a building that is part of a
qualified project is placed in service. If a qualified project consists of more
than 1 building, then the owner may elect to either treat all buildings as 1
project and begin the credit period when the last building is placed in service
or treat each building’s credit period independently on a building-by-building
basis. For purposes of the housing opportunity tax credit under this section,
the special rule for the first year of the credit period under section 42(f)(2)
of the internal revenue code does not apply.

(j) “Designated reporter” means the owner of the qualified
project or a person designated by the owner to prepare the allocation report
for the qualified project.

(k) “Eligibility statement” means a statement issued by the
authority to the owner of a qualified project certifying that the project is a
qualified project and specifying the amount of the housing opportunity tax
credit that may be claimed each year of the credit period, the years that
comprise the credit period, the name, address, and taxpayer identification
number of the owner, the date of issuance, and any additional information
prescribed by the authority.

(l) “Federal credit period” means the
10-year period described under section 42(f)(1) of the internal revenue code,
26 USC 42.

(m) “Federal low-income housing tax credit” or “federal
credit” means the credit allowed under section 42 of the internal revenue code,
26 USC 42.

(n) “Flow-through entity” means an entity that for the
relevant tax year is treated as a subchapter S corporation under section
1362(a) of the internal revenue code, 26 USC 1362, a general partnership, a
trust, a limited partnership, a limited liability partnership, or a limited
liability company, and that for the tax year is not taxed as a corporation for
federal income tax purposes. Flow-through entity does not include any entity
treated as a corporation under section 699 of the income tax act of 1967, 1967
PA 281, MCL 206.699.

(o) “4% qualified project” means a qualified project that is
eligible for both of the following:

(i) A federal low-income housing tax credit
under section 42(h)(4) of the internal revenue code, 26 USC 42.

(ii) A bond issued under section 44c in which
the authority is not the bondholder with respect to the bond proceeds.

(p) “Housing opportunity tax credit” means a tax credit
authorized to be claimed against an applicable tax.

(q) “Internal revenue code” means the United States internal
revenue code of 1986, 26 USC 1 to 9834.

(r) “Manufactured in this state” means the following:

(i) For iron or steel products, all
manufacturing processes, from the initial melting stage through the application
of coatings, occurred in this state.

(ii) For manufactured products, the final
point of manufacture for the finished product is a facility physically located
within the borders of this state, regardless of the origin of the subcomponents
or raw materials used in the assembly or production of said product.

(iii) For construction materials, all
manufacturing processes for the construction material occurred in this state.

(s) “Member”, when used in reference to a flow-through
entity, means a shareholder of a subchapter S corporation, a partner in a
general partnership, a limited partnership, or a limited liability partnership,
a member of a limited liability company, or a beneficiary of a trust that is a
flow-through entity, as long as the shareholder, partner, member, or
beneficiary, as applicable, is considered a shareholder, partner, member, or
beneficiary under applicable state law governing such flow-through entity.

(t) “New construction” means newly constructed housing units
and does not include the rehabilitation or acquisition of existing buildings or
adaptive reuse projects. New construction includes the demolition necessary for
the construction of new housing units.

(u) “Owner” means a person holding a fee simple interest in a
qualified project or a leasehold interest pursuant to a ground lease in the
land on which a qualified project is located.

(v) “Person” means an individual, bank, financial
institution, insurance company, association, corporation, flow-through entity,
receiver, estate, trust, or any other group or combination of groups acting as
a unit.

(w) “Preservation” means projects that involve rehabilitation
of existing housing units or the adaptive re-use of an existing building.

(x) “Qualified project” means a qualified low-income building
as defined in section 42(c) of the internal revenue code, 26 USC 42, that is
located in this state, is eligible for the federal low-income housing tax
credit, and is placed in service on or after January 1, 2027.

(y) “Qualified taxpayer” means that term as defined in section 281 or
678 of the income tax act of 1967, 1967 PA 281, MCL 206.281 and 206.678,
or in section 476a of the insurance code of 1956, 1956 PA 218, MCL 500.476a,
as applicable.

(z) “Rural area” means a city, village, or township with a
population of 35,000 or less, or an area designated as rural as defined by the
United States Department of Agriculture or the United States Census Bureau.

(aa) “Taxpayer” means a person subject to an applicable tax.

(bb) “United States Consumer Price Index” means the United
States Consumer Price Index for all urban consumers as defined and reported by
the United States Department of Labor, Bureau of Labor Statistics.

Enacting section 1. This amendatory act does not
take effect unless all of the following bills of the 103rd Legislature are
enacted into law:

(a) House Bill
No. 5806.

(b) House Bill No.
5807.

This act is ordered to take
immediate effect.

Secretary of the Senate

Clerk of the House of Representatives

Approved___________________________________________

____________________________________________________

Governor