Capital stack and soft money — Colorado

Four state credits, one QAP — but only two of them touch a LIHTC award

Colorado's original state credit — House Bill 14-1017, codified at Colorado Revised Statutes, Article 22 of Title 39 (the QAP's own defined term, "the Colorado Act," now spanning Part 21's original credit plus the newer Parts 54 and 55 described below) — was extended from its original December 31, 2024 sunset to December 31, 2034 by House Bill 22-1051 (2022). House Bill 24-1434 (2024) is the statute that produced today's Standard/Accelerated structure: it split the original credit into a "Standard" and an "Accelerated" tranche, and, building on HB24-1313's Transit-Oriented Communities Act, created a new five-year Transit-Oriented Communities (TOC) credit. A separate 2024 bill, House Bill 24-1316 (signed May 30, 2024), created the fourth credit, an entirely separate, non-stacking Middle-Income Housing Tax Credit (MIHTC). Of the four, only Standard and Accelerated pair with the federal credit inside the QAP's own competitive rounds; the TOC credit runs under its own separate CHFA allocation plan (adopted by the CHFA Board December 19, 2024) and requires DOLA site-eligibility verification, and the MIHTC cannot be paired with any other federal or state Housing Tax Credit at all.

CHFA's own per-project caps run well under those annual pools. Under the 2025–2026 QAP, CHFA will pair a fixed $500,000 of standard annual state credit with a federal 9 percent award, if requested; in Round Two it will accept applications for up to $1,300,000 of accelerated annual state credit plus up to $600,000 of standard annual state credit for any one project, Applicant, or Affiliate; and for tax-exempt bond deals applying in the September–November window, the cap is $10,000 per unit up to a $700,000 maximum. None of the four credits are awarded independent of an underwriting test: consistent with the Colorado Act, CHFA allocates "the least amount of Housing Tax Credit for financial feasibility."

For any state-credit application, Threshold #16 of the QAP requires the Applicant to "provide evidence that local government will provide some monetary, in-kind, or other contribution benefitting the proposed project" — a letter of support describing that contribution is the QAP's own suggested form of evidence. It is a pass/fail threshold, not a competitive scoring item, and it applies only to state-credit rounds; a purely federal 9 percent application carries no equivalent local-contribution requirement at all.

The mechanics of turning a state credit award into cash mirror the federal 4 percent credit rather than a grant: CHFA issues an award letter, the project owner brings in an investor partner who can use the credit against Colorado income or insurance-premium tax liability, and that partnership contribution funds development costs before the credit is ever claimed. A taxpayer cannot claim the credit until the project places in service — typically 1–2 years after award — and unused credit carries forward up to 11 years.

Financial feasibility is judged case-by-case, not scored with points

Nothing in the QAP's Section 5 Scoring Criteria awards points for committed soft funding, a favorable leverage ratio, or a local match — the scored-leverage mechanism some other states build into their competitive tables does not exist in Colorado's. Instead, the QAP folds financial feasibility into Section 2.B, "Criteria for Approval" — the same discretionary bucket Phase 1 of this guide already flags for Site Suitability — under "Overall Financial Feasibility and Viability": CHFA reviews the sources and uses of funds on every application, tests whether the project would be feasible on a federal 4 percent credit and no state credit at all, and "strongly encourage[s]" every Applicant to run that self-assessment before submitting.

The closest thing to a leverage signal that reaches the numbered Scoring Criteria at all is indirect: Section 2.B's separate "Project Costs" factor tells CHFA to weigh "the availability and use of other funding sources" as part of judging cost reasonableness, and a Development Team without a record of "repeatedly requesting additional Housing Tax Credits (supplemental credits) may be viewed more favorably in the competitive process" — but neither is an addable point value the way TOD siting or non-metro-county location are under Section 5. A capital stack heavy with DOH, Proposition 123, or CHFA gap financing does not add points to an Application; it changes CHFA's judgment of how much Housing Tax Credit the deal actually needs, which is a harder variable to model in a screening tool than a fixed scoring line.

The Division of Housing's own gap layer runs its own calendar — HOME, HDG, HTF, and Proposition 123's Concessionary Debt

The QAP itself acknowledges this is a separate track: Section 3.B.8 commits CHFA to "closely coordinate the review and underwriting" of any Application seeking resources from the Colorado Division of Housing (styled CDOH in the QAP, DOH elsewhere), but that coordination is a courtesy, not a shared deadline — DOH runs its own grant and loan application cycles independent of CHFA's Round One/Round Two calendar.

Layered on top of DOH's own funds is Proposition 123's Concessionary Debt program, administered jointly by CHFA and the Office of Economic Development and International Trade (OEDIT) and introduced in Phases 1 and 2 of this guide for its Land Banking arm. Its LIHTC Gap Finance product is the piece that actually closes a capital stack: subordinate loans of $400,000 to $6,000,000 — capped at the least of a 1.05 debt service coverage ratio, 10 percent of total project costs, or the $6 million ceiling — at a fixed 2.5 percent rate, secured by project assets, with a regulatory agreement running for the greater of the loan term or 30 years. Restricted units must average 60 percent AMI or less across the property, with up to 25 percent of units allowed to sit outside that restriction and be excluded from the financing calculation. Eligibility carries the same jurisdictional gate Phase 1 already flags for Land Banking: the project's jurisdiction must already have a completed Proposition 123 Local Government Affordable Housing Commitment on file with DOLA's Division of Housing before this money is available at all. A related, earlier-stage Predevelopment Finance product exists under the same Concessionary Debt program: loans up to $750,000 with no stated minimum, interest-only with principal due at the earlier of construction-loan closeout or a stated maturity date, terms up to 36 months, a fixed 2.5 percent rate, unsecured with borrower recourse guaranties, the same ≤60 percent average-AMI restriction, and no additional affordability restrictions beyond what LIHTC itself already requires.

CHFA runs two more gap loans directly, independent of DOH and Proposition 123. CHFA HOF (Housing Opportunity Fund) provides up to $1,000,000 of flexible gap financing on a 30-year term, usable as a first mortgage, a second mortgage behind a CHFA senior loan, or an interest-rate subsidy, and pairs with 9 percent or 4 percent Housing Credit deals or with non-Housing-Credit projects alike. The Capital Magnet Fund (CMF) — CHFA's re-lent award from the federal CDFI Fund's own Capital Magnet Fund program — is narrower: up to $750,000 on a 17-year term, restricted to projects that already carry a 9 percent or 4 percent reservation and serve incomes at or below 50 percent AMI, with no non-Housing-Credit use at all. Only CMF carries a grant-conversion feature — up to 20 percent of the loan amount can be structured as a grant to a nonprofit when CHFA is the senior lender; HOF's own benefit is listed simply as an interest-rate subsidy, with no grant-conversion option. CHFA quotes a 60-to-90-day closing timeline for either loan.

Property tax exemption is real — but it turns on ownership structure and which income test a project fits, not on LIHTC status itself

Colorado has no LIHTC-specific property tax statute the way Florida's Missing Middle exemption is written directly around unit count and AMI tiers. What it has instead is a decades-old "strictly charitable purposes" exemption framework — C.R.S. §§39-3-106 through 113.5, 116, and 127.7 — administered by DOLA's Division of Property Taxation, into which affordable rental housing has to fit one of several named residential subsections, each carrying its own income test and its own rules about who is allowed to own the property.

Every one of those categories is, by default, restricted to property "owned and used solely and exclusively for strictly charitable purposes" — but §39-3-112(3)(c) itself carves out the exception a LIHTC ownership entity actually needs, and the carve-out does not reach every category the same way. For the elderly/disabled, transitional-housing, and low-income-household categories, property may be owned by a limited partnership whose general partner is a nonprofit corporation, or by a limited partnership where every general and limited partner is a nonprofit (§39-3-112(3)(c)(II)-(III)); and, for the elderly/disabled and low-income-household categories specifically (not transitional-housing), by a limited partnership whose for-profit general partner is at least 75 percent owned by, and has at least 75 percent of its board elected by, one or more nonprofit corporations (§39-3-112(3)(c)(IV)). The family-service-facility category gets no such carve-out at all — its own eligibility clause already requires the facility to be owned and operated directly by a 501(c)(3), so a standard investor-LP/nonprofit-GP syndication structure cannot use that category. Outside the all-nonprofit case, Colorado's own Assessors' Reference Library describes the statute as requiring the limited partnership to have been "formed for the purpose of obtaining low-income housing tax credits pursuant to section 42 of the Internal Revenue Code," with an actual credit allocation made to that structure — reaching a real LIHTC ownership entity, not just a freestanding nonprofit. (A separate provision, §39-3-112.5, exempts property owned by the United States and leased to a nonprofit for housing homeless individuals — an unrelated federal-lease mechanism, not a LIHTC ownership carve-out.)

A separate provision goes further for a typical LIHTC deal's actual ownership shape — a nonprofit or nonprofit-controlled general partner holding a small interest, paired with an institutional investor limited partner holding the rest for tax-credit purposes. Under §39-3-127.5, when the property is owned by a "qualified business entity" formed to obtain federal tax credits, the Assessors' Reference Library states that "only the general partner or managing member needs to qualify for property tax exemption" under the charitable-purpose statutes — the investor LP's ownership share does not have to independently qualify for the whole property to be treated as exempt.

The income tests are not interchangeable, and that matters directly for a mixed-AMI LIHTC property: the general "low-income housing" category caps at 30 percent AMI — well below a typical 60-percent-average LIHTC rent structure — while the elderly/disabled, family-service, and transitional-housing categories instead use 150 percent of the income limit for the nearest public housing authority's low-rent housing, a different and often more generous benchmark tied to local public housing rather than straight to HUD's area median income tables. A project that doesn't fit one of the named categories, or whose ownership doesn't meet §39-3-112(3)(c)'s nonprofit-ownership or nonprofit-control tests, gets none of this exemption regardless of how low its rents actually are. Property owned by a housing authority itself sits under a different, more generous statute entirely — C.R.S. §29-4-227 exempts the portion of a project for occupancy by persons of low income outright, with the qualifying percentage determined by the housing authority itself based on square footage or cost — and CHFA's own real property is exempt as a political subdivision under §29-4-704, though CHFA can become liable for a payment equivalent to property tax under §29-4-727(3) when it co-invests in a project alongside a sponsor that is not itself exemption-eligible.

One more mechanism is worth naming only to rule out: the Middle-Income Housing Authority (MIHA), created alongside the MIHTC, has its own property tax exemption for public-private-partnership projects under C.R.S. §29-4-1104(12)(a) — a provision that carries no numeric income-percentage condition in its own text. The "at least 60 percent of units... available to rent... to middle-income individuals" figure lives instead in §29-4-1107(1)(c)(I), among the project-selection criteria for MIHA's initial pilot RFP process, not as a codified precondition to the exemption itself. Either way, MIHA targets a materially higher income band than any LIHTC project does, and it is entirely unrelated to the charitable-purpose exemption above. Applying MIHA's test, or the MIHTC's economics, to a standard LIHTC deal answers a different question than the one being asked.