A BILL to amend the Code of Virginia by adding in Article 13 of Chapter 3 of Title 58.1 a section numbered 58.1-439.12:13, relating to income tax; credit for affordable housing projects.
HB1135 creates a new Virginia individual income tax credit for owners of qualifying affordable housing projects. The credit is available for taxable years beginning on and after January 1, 2026, and before January 1, 2031, and is tied to the portion of a taxpayer’s ownership interest in a project and to the rent discount provided to qualifying tenants. A qualifying tenant is defined as a Virginia resident with income below 120 percent of area median income, adjusted for family size, and the project must be locally designated as affordable housing and commit 60 percent of its units to qualifying tenants for 30 years.
The credit is nonrefundable, may be carried forward for up to five years, and is capped statewide at $5 million per year. If demand exceeds the cap, the Department of Taxation must allocate credits pro rata. The bill also directs the Tax Commissioner, in consultation with the Department of Housing and Community Development, to issue guidelines for claiming the credit, and those guidelines are exempt from the Administrative Process Act.
The bill would add a new section to Title 58.1 of the Code of Virginia establishing a targeted income tax incentive for affordable housing investment and operation. It would affect taxpayers who own direct or indirect interests in qualifying affordable housing projects, including interests held through pass-through entities such as partnerships, LLCs, and S corporations, and would require allocation of credits among owners according to ownership interests or written agreement. The measure would also create administrative responsibilities for the Department of Taxation and the Department of Housing and Community Development, while limiting the fiscal exposure through a statewide annual cap and a fixed eligibility window.
Based on the available context, the bill appears to have been introduced as a policy proposal rather than the subject of recorded debate or a vote. There are no committee transcripts or vote tallies provided, and the bill was left in the House Finance Committee. That suggests the measure did not advance, but the available record does not show explicit support or opposition from legislators.
The main policy questions likely involve the cost and effectiveness of using tax credits to encourage affordable housing development, especially given the $5 million annual cap and the formula based on rent discounts. Potential points of contention include whether the credit sufficiently targets genuinely affordable units, whether the 30-year commitment and 60 percent set-aside are appropriate, and whether the nonrefundable structure and pro rata allocation rules make the credit workable for developers and investors. Another possible issue is the exemption of implementing guidelines from the Administrative Process Act, which reduces formal rulemaking procedures and may draw concern about oversight and transparency.