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: 54.12: continued (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).