Arkansas General Assembly enacts amendments to low-income housing tax credit

On March 14, 2025, the Arkansas State Legislature introduced House Bill 1797, a significant piece of legislation aimed at enhancing the state's low-income housing tax credit program. This bill seeks to amend existing provisions related to the Arkansas Development Finance Authority (ADFA) and streamline the process for providing tax credits to support affordable housing initiatives.

The primary focus of HB1797 is to clarify the calculation and allowance of the low-income housing tax credit, which is crucial for incentivizing developers to invest in affordable housing projects. Under the proposed amendments, the tax credit will remain non-refundable, meaning that taxpayers can only use the credit against their state income or premium taxes, with any excess credit being eligible to carry forward for up to five years. This change is designed to ensure that the program remains financially viable while encouraging long-term investment in housing solutions.

The bill has sparked discussions among lawmakers and community advocates, particularly regarding its potential impact on housing availability for low-income residents. Proponents argue that enhancing the tax credit will stimulate the construction of affordable housing units, addressing a pressing need in many Arkansas communities. However, some critics express concerns about the non-refundable nature of the credit, fearing it may limit access for smaller developers who may not have sufficient tax liabilities to benefit fully from the program.

The urgency of the bill is underscored by an emergency clause, which states that the amendments must take effect by July 1, 2025, to avoid disruptions in the operations of the ADFA and the essential programs it administers. This timeline reflects the state's commitment to addressing housing challenges promptly, as delays could hinder the provision of necessary governmental services.

As Arkansas grapples with housing affordability issues, HB1797 represents a critical step toward bolstering support for low-income residents. If passed, the bill could lead to increased investment in affordable housing, ultimately benefiting communities across the state. The ongoing debates surrounding the bill highlight the complexities of balancing fiscal responsibility with the urgent need for accessible housing solutions. As the legislative process unfolds, stakeholders will be closely monitoring its implications for Arkansas's housing landscape and the well-being of its residents.