The Iowa Finance Authority (IFA) is actively preparing for implementation of Section 111109 of HR 1, the “One Big Beautiful Bill Act”, signed into law on July 4, 2025. This section repeals and replaces 26 USC 42(h)(4)(B) and adds 26 USC 42(h)(4)(C), significantly lowering the threshold for 4% LIHTC projects to qualify for tax credits.
Under the new law, projects need only 25% or more of their aggregate basis (land and building costs) financed with tax-exempt bonds, compared to the previous 50% requirement. To qualify, properties must be placed in service after December 31, 2025, with at least 5% of the aggregate basis financed using Private Activity Bonds issued after that date.
Iowa is positioned to be among the first states in the nation to incorporate these changes into its Qualified Allocation Plan (QAP). IFA staff will be recommending the IFA Board approve a Third Amended 2025 4% QAP at its August 6, 2025 meeting.
The proposed amendment would revise Section 1.2 of the QAP to reflect the new federal provisions and reduce IFA’s Bond Cap Limit to the lesser of 35% of the aggregate basis or $25 million per project.
This change will further leverage the federal resource by enabling more projects to qualify for 4% credits using fewer tax-exempt bonds, ultimately increasing the number of affordable housing developments that can be financed across the state.
Please contact the housing tax credit team with any questions.
