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Legislative audit: HPIP data inconsistent; KHRC awarded ~$73M in state affordable housing credits that investors had not yet used
Summary
Legislative Post Audit told the Tax Committee it could not quantify High Performance Incentive Program (HPIP) credits because KDOR data sets were inconsistent. The audit also found Kansas Housing Resources Corporation had awarded about $73 million in state affordable housing tax credits since 2023; investors had not used those credits at audit time.
Legislative Post Audit staff told the Kansas Senate Tax Committee that data inconsistencies prevented them from reporting how much High Performance Incentive Program (HPIP) tax credits businesses earned and used.
"We reviewed three HPIP data sets for this audit ... they weren't [consistent]," said Josh of Legislative Post Audit, noting that for tax year 2019 the datasets showed markedly different 'earned' and 'used' amounts. Because the limited-scope audit had a 100-hour limit and the datasets conflicted, auditors could not determine the actual amounts and recommended a full audit to review KDOR's HPIP data for accuracy.
The presentation described HPIP mechanics: a training credit available for qualifying training expenditures (credits for training are capped at $50,000 per business per year and are nonrefundable) and capital-investment credits that use county-specific thresholds and may be carried forward. Josh said businesses must be certified by the Department of Commerce to earn HPIP credits and generally work with the Kansas Department of Revenue (KDOR) to use them.
On the Kansas affordable housing tax credit (KAHTC), auditors said Kansas Housing Resources Corporation (KHRC) had awarded nearly $73,000,000 in state credits through August (the audit date) and that no investors had used the credits to reduce state tax liabilities at the time of the audit because investor claims begin only after projects are complete and occupied. Auditors noted two projects had recently completed and investor use could begin soon.
Auditors described the 'stacking' effect of KAHTC: awards are made by KHRC and can be claimed annually by investors for up to 10 years, and state credits mirror federal low-income housing tax credit rules. Auditors estimated, under a set of assumptions they listed, that investor use of awarded credits could result in substantial foregone tax revenues over time; Josh cited an illustrative figure of "as much as $1,000,000,000" in foregone state revenue over multiple decades while also explaining the estimate depends on several assumptions. Using a separate illustration, auditors showed KHRC's 2023 awards (~$25,000,000) could be used in tax years 2026–2035 and that potential annual foregone revenues could peak near $107,000,000 under the audit's modeling assumptions.
Auditors attributed HPIP data inconsistencies to a combination of data-entry errors, tax-system limitations and program complexity, including cases where credits pass through to owners or shareholders and must be manually tracked to avoid double counting. KDOR told auditors it was reviewing and correcting data with plans to complete work by the start of 2026; auditors recommended KDOR continue corrections and report updated data to the Legislature.
Committee members asked clarifying questions about the federal tests used to define low-income housing eligibility, developer responsibilities for tenant-income verification, whether KDOR data had improved (the committee scheduled Department of Revenue staff to appear Thursday) and the statutory sunset for KAHTC (auditors confirmed the sunset date as 12/31/2028). Josh told the committee that determining whether projects would have been built absent the credits was beyond the limited-scope audit.
The audit report includes written responses from KDOR and KHRC, a recommendation that KDOR pursue a full data review of HPIP records, and Appendix A listing award projects and unit-level restrictions.
