"Our syndicator wants to price in a 50 percent state donation tax credit, and our GP thinks that makes us eligible for a state LIHTC match on top of the federal 9 percent award -- is any of that actually how Illinois's soft money works, and is IHDA's own gap loan even open for new requests right now?"
The Illinois Affordable Housing Tax Credit is a donation credit, not a state LIHTC match
The mechanism Illinois practitioners call the "Donations Tax Credit" is codified at 35 ILCS 5/214 (Section 214 of the Illinois Income Tax Act) and administered under Section 7.28 of the Illinois Housing Development Act (20 ILCS 3805/7.28). It does not create a state-level parallel to the federal Housing Tax Credit computed on the project's own eligible basis. Instead, a taxpayer -- anyone with Illinois income tax liability, not only project participants -- who makes a qualifying donation to a not-for-profit sponsor for an eligible affordable housing project, employer-assisted housing project, general operating support, or technical assistance receives a one-time credit against Illinois income tax equal to 50 percent of the donation's value. Unused credit carries forward for 5 taxable years, applied to the earliest year with liability first.
The credit only exists where an administrative housing agency -- defined in Section 7.28 as either IHDA or an agency of the City of Chicago -- has first reserved it for an approved project; "No tax credits shall be allowed for a project without a reservation of such tax credits by an administrative housing agency for that project." IHDA's own program page describes the practical mechanics: donations must exceed $10,000 (individually or aggregated across multiple donors for one development), must be money, securities, real estate, or personal property given without consideration, and must occur within 12 months of the IAHTC reservation. The donor may keep the credit for their own tax liability or transfer it -- either to another donor who has also made a qualifying donation, or directly into the project itself, which is what actually turns the credit into development financing: a purchaser willing to fund the project can acquire the transferred credit, in effect syndicating it much like tax-credit equity, at a price the market sets rather than a price IHDA sets.
| Item | Amount / rule |
|---|---|
| Total tax credits reservable, FY2027 | $41,831,227 (rising 10% each fiscal year thereafter; the FY2022-FY2026 base was $32,850,352, rising 5%/year through FY2026) |
| City of Chicago share | 24.5% of the total authorized each fiscal year |
| IHDA ("the Authority") share | The balance -- 75.5% of the total |
| Employer-assisted housing set-aside | $2,000,000 |
| General operating support & technical assistance set-aside (combined) | $1,000,000, and general operating support credits are separately capped at 10% of the total reservation for the related project |
| Minimum affordability restriction | An instrument recorded against the land requiring the project to maintain affordable housing compliance for a minimum of 10 years |
IHDA and the City of Chicago administer their own, separate IAHTC application processes under the same statewide statutory cap; a Chicago-sited project pursuing IAHTC should confirm with the City's own Department of Housing which administrative housing agency it is applying through, since a reservation from one does not substitute for the other.
Income targeting under Section 7.28 is deliberately different from LIHTC's own targeting. A rental affordable housing project must have at least 25 percent of units renting at or below a maximum-gross-rent figure IHDA publishes (built from HUD's 60-percent-of-area-median-income data, a 30-percent-of-income standard, and unit-size adjustments) and occupied by households at or below 60 percent AMI; homeownership units use 60 percent AMI for pre-2022 taxable years and 120 percent AMI for taxable years beginning on or after January 1, 2022. Employer-assisted housing projects serve employees up to 120 percent AMI. None of this is stated as a percentage of the LIHTC project's own restricted units, and a screening tool should not assume the two income tests automatically line up on a mixed-financing deal.
The Illinois Affordable Housing Trust Fund: one fund, two statutory agencies
The Illinois Affordable Housing Trust Fund is created by the Illinois Affordable Housing Act, 310 ILCS 65, and it is not simply "an IHDA fund." The statute splits the role in two: IHDA is defined as the "Program Administrator" (310 ILCS 65/3(j)), responsible for deciding how Trust Fund money gets used and ensuring it is spent for an authorized public purpose, while the Illinois Department of Human Services is separately defined as the "Funding Agent" (310 ILCS 65/3(k)), the entity that actually holds the statutory authority to certify and transfer Trust Fund moneys out of the State Treasury to IHDA or its designated payee. A screening tool that assumes IHDA alone controls disbursement is missing a statutory party with its own defined role.
Section 5 of the Act (310 ILCS 65/5) establishes the Trust Fund as a separate fund within the State Treasury, funded from multiple sources including loan repayments and interest on Trust Fund-financed loans, appropriations and gifts, investment income, program fees, other General Assembly appropriations, and -- notably -- "amounts as provided in Section 31-35 of the Real Estate Transfer Tax Law," a dedicated real estate transfer tax revenue stream layered on top of direct appropriations. Section 8(b) caps what the Program Administrator can draw down for its own uses in Sections 8(c) and 9 of the Act at an aggregate of $10,000,000 in any fiscal year, certified by IHDA to the Funding Agent, the Comptroller, and the State Treasurer. Section 8(a) requires that the majority of moneys appropriated to the Trust Fund in any given year go toward housing for very low-income households (at or below 50 percent AMI), not merely low-income households generally.
In practice, IHDA folds Trust Fund money into the same discretionary, oversubscribed pool of subordinate resources it offers alongside HOME and the National Housing Trust Fund (NHTF) -- IHDA's own "Soft Funds" page describes a single gap-filling process for 9% LIHTC projects that "leave a financial gap," filled "at IHDA's discretion assuming resources are available," and states plainly: "The Illinois Housing Development Authority has paused accepting requests for soft funds. Currently, IHDA's subordinate debt resources are over-subscribed." That status should be reconfirmed directly against IHDA's current Soft Funds page before a deal is underwritten assuming any of this money is actually reachable.
HOME and the National Housing Trust Fund: IHDA runs the statewide allocation, not the whole state
IHDA is the State of Illinois's own HOME Investment Partnerships Program and National Housing Trust Fund grantee, but it is not the only Illinois entity that receives these HUD formula funds directly. Illinois's own Consolidated Plan materials describe sixteen separate HOME Participating Jurisdictions across the state -- entitlement cities and counties, with the City of Chicago the largest -- that receive and administer their own HOME allocations independently of IHDA, in addition to the non-entitlement HOME funds IHDA administers statewide as the designated lead agency for the balance of Illinois. A project inside the City of Chicago (or another entitlement PJ) cannot assume IHDA's own HOME allocation reaches it; the relevant local HOME source is the municipality's own Department of Housing (see below for Chicago specifically), a materially different application process with its own rules.
This split has a direct scoring consequence buried inside the QAP's own Leveraging category (Section IX.C.ii.c, discussed further in Phase 8 of this guide): the QAP's own resource table treats "Authority funds with below-market interest rates, including loan and/or grants" -- which is how IHDA's own HOME and NHTF allocation functions in the Common Application -- as a Non-Leveraging resource that earns zero points, while "USDA financing or municipal financing (i.e., local HOME or CDBG funds)" -- a separate PJ's own entitlement allocation, such as Chicago's -- is explicitly listed as a Leveraging resource that can earn up to 8 points. The same federal program name (HOME) scores differently in the Common Application depending on which government body is actually the source.
IHDA's 2026 LIHTC Application Round FAQ states that any application carrying federal HOME or NHTF funds should assume it is subject to the Build America, Buy America (BABA) Act, 41 U.S.C. §8301 note, per HUD's phased-implementation waiver notice (88 FR 17001) -- a domestic-content procurement requirement for the general contractor and subcontractors that a screening tool should flag whenever HOME or NHTF appears in the sources, independent of who administers the specific allocation.
IHDA's own subordinate debt: scored, capped by geographic Set-Aside, and currently paused
When IHDA's own gap resources are open, the Authority caps how much of a project's Total Development Cost its own below-market-rate debt sources can cover, and the cap varies by the same four geographic Set-Asides the QAP uses for competitive scoring. IHDA's 2026 LIHTC Application Round FAQ (updated 2/4/2026) states these limits: projects in the Non-Metro Set-Aside may apply for up to 20% of total development cost in Authority debt sources with below-market interest rates; Chicago Metro and Other Metro projects, up to 15%; City of Chicago projects, up to 10%. Priority for these limited dollars goes to the highest-scoring projects in each Set-Aside. Standard repayment terms for this soft debt are the lesser of 25% of cash flow or $1,200 annually, and IHDA's stated preference is to have its own soft funds repaid before any deferred developer fee, so that the dollars recycle into other affordable housing projects.
These specific percentages and the $1,200 repayment figure are sourced to IHDA's FAQ for the 2026 9% round, issued under the prior 2026 QAP -- they were not independently re-confirmed against the 2027-2028 QAP's own text or a 2027-cycle FAQ in this research pass, since IHDA had not yet published a 2027-round FAQ at the time of this research. Treat them as the most recent confirmed figures and verify they still apply before underwriting a 2027 or 2028 deal.
Two further FAQ answers matter for any capital stack that leans on non-Authority soft sources for Leveraging points: an anticipated grant -- from a local utility's energy-efficiency program, or from the Federal Home Loan Bank's Affordable Housing Program (AHP) -- cannot be counted toward Leveraging scoring unless the grant agreement has already been received; a Sponsor may instead commit in writing to self-fund the same amount if the grant falls through, which preserves the scoring points, but a Sponsor that makes that commitment and then fails to close the gap risks having its Tax Credit award revoked.
Property tax: a mandatory statewide valuation rule, and a separate opt-in assessment-reduction program
Illinois runs two genuinely different property-tax mechanisms for affordable rental housing, and they are frequently confused with each other. The first, 35 ILCS 200/10-235, is a statement of state policy that any project developed under Section 515 of the federal Housing Act or that qualifies for the federal LIHTC under IRC Section 42 "shall be valued at 33 and one-third percent of the fair market value of their economic productivity to the owners of the projects" -- an income-based valuation standard meant to keep property tax from forcing rents upward, with a companion provision (35 ILCS 200/10-260) directing that "emphasis shall be given to the income approach" when the assessor determines fair cash value. This is a valuation methodology the Property Tax Code directs assessors to apply to every LIHTC property in the state, not a program an owner opts into with an application to unlock a further reduction.
The second, 35 ILCS 200/15-178, the Affordable Housing Special Assessment Program (AHSAP), is a separate, opt-in reduction in assessed value on top of whatever valuation the assessor otherwise reaches, and it requires each chief county assessment officer to implement it (counties under 3,000,000 population may opt out by county-board ordinance, and may later opt back in). A property qualifies only if it is a "qualifying development" -- a newly constructed or substantially rehabilitated multifamily building of 7 or more units, or, in a county of 3,000,000 or more (Cook County), a portfolio of 7 or more units across 2 or more commonly-owned buildings under specific conditions -- and the owner applies directly to the county assessor, not to IHDA, within 2 years of the property being placed in service.
| Tier | Affordability commitment | Rehab/investment threshold | Benefit | Geographic limit |
|---|---|---|---|---|
| Tier 1 | ≥15% but <35% of units at ≤60% AMI rents and incomes, for 10 years | ≥$8/sq ft (2021 dollars, CPI-U indexed annually thereafter) plus replacement of ≥2 primary building systems | 25% reduction in assessed value for the 10-year term | Statewide |
| Tier 2 | ≥35% of units at ≤60% AMI, for 10 years | ≥$12.50/sq ft (2021 dollars, CPI-U indexed) plus ≥2 primary building systems | 35% reduction in assessed value for the 10-year term | Statewide |
| Tier 3 | ≥20% of units at ≤60% AMI, for 30 years | ≥$60/sq ft (2021 dollars, CPI-U indexed) plus ≥5 primary building systems, and a fully executed Project Labor Agreement with the local building trades council before construction begins | Phased reduction equal to 100% of the value increase in years 1-3, declining to 80% (years 4-6), 60% (years 7-9), 40% (years 10-12), and 20% (years 13-30) | "Low affordability community" only -- a sub-1,000,000-population jurisdiction where ≤40% of housing is affordable (as IHDA determines under the Affordable Housing Planning and Appeal Act), a Chicago "D" zoning district, or a jurisdiction a large municipality designates by ordinance |
Tiers 1 and 2 renew annually for an initial 10-year period and can extend for up to two additional 10-year periods (30 years total) with continued annual certification; Tier 3 runs a single 30-year eligibility period that can itself be renewed. New applications are accepted through December 31, 2034; properties already approved keep their remaining eligibility even if the program later lapses.
Two interaction rules matter for underwriting. First, a property cannot receive a reduction under more than one AHSAP tier at the same time. Second, Cook County's own, older Class 9 assessment classification cannot be combined with AHSAP in the same assessment year, and years a property already spent in Class 9 count against its total AHSAP eligibility (three 10-year periods); the statute does give Class 9 properties automatic crossover eligibility for meeting AHSAP's new-construction-or-rehab test, and lets an owner whose Class 9 status was wrongly revoked on or after January 1, 2017 potentially requalify. Third, the statute lets a county assessor accept "a substantially similar certification granted by the Illinois Housing Development Authority or a comparable local authority" in lieu of the owner's own direct-application paperwork, provided the assessor independently verifies it with IHDA -- so IHDA re-enters this otherwise county-run program as a certifying party, even though it does not administer AHSAP itself.
A third, narrower mechanism -- the general charitable-purposes property tax exemption at 35 ILCS 200/15-65 -- is referenced on IHDA's own property-tax program page as potentially available to some affordable housing properties, with detail left to 86 Ill. Adm. Code 110.116. This research pass did not confirm whether that exemption reaches a standard investor-limited-partner-owned LIHTC structure the way it plainly would a property directly owned and operated by a qualifying charity; unlike Colorado's statute, which explicitly carves out a nonprofit-general-partner LIHTC ownership structure for its own charitable exemption, no equivalent Illinois carve-out was located in this pass. Treat eligibility for a typical syndicated LIHTC ownership entity as unconfirmed and get a real property-tax attorney's read before assuming it applies.
Chicago-specific soft funds, when a Chicago site is in play
A project inside the City of Chicago layers a second, city-run funding and application process on top of IHDA's own QAP, run by the Chicago Department of Housing (DOH) under its own Multifamily Application Instructions and Underwriting Standards Guide. At Preliminary Project Application, Chicago DOH allows a request for Multifamily Gap Financing -- the City's own soft-fund umbrella, described in City materials as drawing on sources that include the City's own HOME allocation (Chicago is its own HOME entitlement PJ, distinct from IHDA's statewide allocation, as discussed above) -- of up to 20% of Total Development Cost, excluding any 9% LIHTC allocation itself.
Chicago also runs a separate Multi-Family TIF Purchase-Rehab Program, providing Tax Increment Financing assistance equal to roughly 30 to 50 percent of the total cost to purchase and/or rehabilitate an underutilized multifamily or mixed-use building of 5 or more units inside a designated TIF district -- a resource with no equivalent at the state level, tied entirely to a parcel's location inside one of Chicago's TIF districts. And because Chicago administers its own 24.5% share of the statewide IAHTC authority described above, a Chicago-sited project pursuing IAHTC applies to the City's own Department of Housing for that reservation, not to IHDA.
This research pass located references in Chicago DOH materials to soft-fund categories abbreviated "AHOF" and "CRP" alongside HOME as Multifamily Gap Financing sources, but could not access Chicago's current Underwriting Standards Guide directly (the document returned an access error during this research) to confirm what those abbreviations stand for or their specific terms. Do not guess at these program names or their mechanics; confirm directly against Chicago DOH's current, published Multifamily Application Instructions and Underwriting Standards Guide before relying on either as a named source in a capital stack.
Where this goes wrong
- Treating the Illinois Affordable Housing Tax Credit (IAHTC / "Donations Tax Credit") as a state-level LIHTC match computed on the project's own eligible basis. It is a 50 percent Illinois income tax credit paid to a third-party donor for a qualifying donation to a nonprofit sponsor, reservation-gated by IHDA or the City of Chicago, and it only becomes project financing when the donor transfers the credit into the deal for syndication -- a fundamentally different mechanism from a parallel state credit.
- Assuming IHDA's own subordinate debt or Illinois Affordable Housing Trust Fund money is reliably available for underwriting. IHDA's own Soft Funds page states the Authority has paused accepting new soft-fund requests because its subordinate debt resources are oversubscribed; confirm current status before assuming any of it closes the gap.
- Scoring a locally-administered HOME or CDBG allocation (such as the City of Chicago's own entitlement funds) the same way as IHDA's own below-market Authority resources. The QAP's Leveraging category treats "Authority funds with below-market interest rates" (IHDA's own HOME/NHTF allocation, equity from LIHTC/IAHTC) as non-leveraging, worth zero points, while "municipal financing (i.e., local HOME or CDBG funds)" from a separate entitlement PJ is an explicitly leveraging resource worth up to 8 points.
- Confusing the mandatory 33⅓-percent LIHTC property valuation standard (35 ILCS 200/10-235) with the opt-in Affordable Housing Special Assessment Program (35 ILCS 200/15-178). The first is a statewide valuation policy assessors apply to qualifying LIHTC properties; the second is a separate reduction in assessed value that requires a direct application to the county assessor, with its own tiers, unit-count minimums, and rehab-investment thresholds.
- Assuming a Tier 3 Affordable Housing Special Assessment Program benefit is available anywhere in the state. Tier 3 is restricted to a statutorily defined "low affordability community" and, unlike Tiers 1 and 2, requires a fully executed Project Labor Agreement with the local building trades council before construction starts.
- Assuming Cook County's Class 9 assessment classification and the statewide Affordable Housing Special Assessment Program can be layered in the same tax year. The statute bars claiming both at once, and years already spent in Class 9 count against AHSAP's own 30-year (3 x 10-year) eligibility ceiling.
- Treating the IAHTC's statewide cap as a fixed number year over year. It steps up automatically -- $41,831,227 in State Fiscal Year 2027, rising 10% each fiscal year thereafter -- split 75.5% to IHDA and 24.5% to the City of Chicago, with separate $2 million (employer-assisted) and $1 million (general operating support / technical assistance) set-asides carved out first.
- Assuming Illinois's general charitable-purposes property tax exemption (35 ILCS 200/15-65) reaches a standard investor-limited-partner-owned LIHTC structure the way Colorado's statute explicitly does for a nonprofit-general-partner deal. No equivalent Illinois carve-out for that specific ownership structure was confirmed in this research pass -- treat it as an open question for counsel, not a modeling assumption.
- Citing Chicago DOH's "AHOF" or "CRP" gap-financing sources by name without confirming what they stand for or their current terms. This research pass could not access Chicago's current Underwriting Standards Guide to verify either abbreviation; do not guess.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies