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Each year the IRS allocates a certain amount of Low-Income Housing Tax Credits to each state using a formula allocation method, which is based on a state’s population, and is established in Section 42 of the Internal Revenue Code. In addition to the credits allocated by this formula method, each year, states are also permitted to allocate to the state housing finance agency (HFA) LIHTCs that were unused by recipients of tax credits allocated in a prior year, and LIHTCs from the prior calendar year that were not previously allocated by the HFA.
