LIHTC compliance period and extended use dates
A tax credit building claims credits for 10 years, stays under the compliance rules for 15 and owes at least 15 more of extended use. Put in the year it was placed in service and see each date that matters for an exit: when recapture ends, when a qualified contract can be requested, and when extended use runs out.
- Credit period
- 2012 to 2021, plus a catch-up in 2022 for any first-year shortfall
- Compliance period ends
- December 31, 2026
- Recapture exposure ends
- With the compliance period, December 31, 2026
- Qualified contract request
- Any time after year 14, so from January 1, 2026, unless the agreement or state law rules it out. The agency then has one year to find a buyer.
- Earliest exercise of a right of first refusal, if one was granted
- After December 31, 2026
- Extended use runs to at least
- December 31, 2041
- Keep first-year records until
- At least 6 years after the due date of the 2026 return
Example: placed in service in 2012, credits from 2012. Assumes calendar tax years and allocations after 1989, when extended use began. Not tax or legal advice.
The four clocks
Credit period. Ten taxable years starting the year the building is placed in service or, by an irrevocable election, the next year (IRC 42(f)(1)). The first year's credit uses the average of the applicable fraction at the end of each month the building is in service, so lease-up drives it, and the shortfall is claimed in year 11 (42(f)(2)).
Compliance period. Fifteen taxable years from the first credit year (42(i)(1)). Recapture under 42(j) applies when qualified basis drops at the close of a year inside this window. After it, a drop costs no credits already taken.
Extended use. The agency agreement must keep the building low-income through the later of its own date or 15 years past the compliance period (42(h)(6)(D)). It ends early only by foreclosure, or if the owner asked for a qualified contract and the agency couldn't produce one within a year.
The three-year tail. Even when extended use ends early, existing low-income tenants can't be evicted without good cause, and their rents can't rise above what section 42 allows, for three more years (42(h)(6)(E)(ii)).
Worked example
A building placed in service in 2012 with credits from 2012 claims credits 2012 to 2021. Its compliance period ends December 31, 2026. The owner could have asked for a qualified contract starting January 1, 2026. Extended use runs to at least December 31, 2041. If the owner deferred credits to 2013, every date moves out a year.
Thinking about the exit itself? The Year 15 exit and refinance calculator works the right of first refusal price, a qualified contract price and the refinance loan.
Questions people ask
When does the LIHTC compliance period end?
At the close of the 15th taxable year beginning with the first year of the credit period (IRC 42(i)(1)). For a building whose credits started in 2012, that is December 31, 2026. If the owner elected to start credits the year after placement in service, add a year.
Is extended use always 30 years?
At least 30 years from the first credit year, unless it ends early through foreclosure or a qualified contract the agency could not fill. The period ends on the later of the date in the agency agreement or 15 years after the compliance period closes (IRC 42(h)(6)(D)), and many agreements set a later date.
When can an owner ask for a qualified contract?
After the 14th year of the compliance period, by written request to the housing credit agency, which then has one year to present a qualified contract (IRC 42(h)(6)(I)). The agreement or state law can rule this out, and a state allocation plan can require owners to waive it up front.