"PRHFA runs the 9% competition and the 4% bond track through the same 2025-QAP, has already forward-committed two future years of the island's per-capita ceiling into this cycle, and states its own 25%-bond-test window as expiring in 2030 even though the federal law I've read says otherwise -- how much 9% money is actually in this round, who issues the bonds if I go 4%, and is there a local tax break stacked on top of any of this?"
One QAP, one federal per-capita ceiling -- already spent two years ahead of schedule
PRHFA's Foreword describes the 2025-QAP as "the official Tax Credit allocation plan for Puerto Rico," covering both "the competitive selection criteria for 9% LIHTC or the allocation of 4% LIHTC to projects financed with tax-exempt obligations subject to the annual Private Activity Bond Volume Cap (PAB) limitations under Section 146 of the Internal Revenue Code." Puerto Rico is treated as a full jurisdiction for the federal 9% credit ceiling the same way a state is: under 26 U.S.C. Section 42(h)(3)(C), IRS Rev. Proc. 2024-12 set the 2025 per-capita multiplier at $3.00 (or a $3,455,000 small-jurisdiction floor, whichever is greater), and the QAP applies that formula directly to Puerto Rico's own population of 3,203,295 (per IRS Bulletin 2025-16, issued April 14, 2025) to produce a $9,609,885 annual ceiling.
| Component | Amount | Note |
|---|---|---|
| 2025 annual 9% per-capita ceiling | $9,609,885/year | $3.00 x 3,203,295 population -- 26 U.S.C. Section 42(h)(3)(C); Rev. Proc. 2024-12 |
| Same ceiling over the 10-year credit period | $96,098,850 | 10% of this reserved for the Nonprofit Set-Aside per Section 4.3.1 |
| 2024 carryforward | $17,118,176 | Unused prior-year credits rolled into 2025 |
| Less: existing Section 42(h)(1)(C) forward commitments | -$22,480,793 | Already committed from a prior cycle |
| 2025-cycle Undesignated Tax Credits | $18,872,255 | Combined final distribution |
| 2025-cycle Nonprofit Set-Aside | $4,594,783 | Combined final distribution |
| 2025-cycle combined total | $23,467,038 (per the QAP's own distribution table) | The QAP's narrative text states $23,467,037 -- a $1 internal discrepancy in the source document itself |
QAP Foreword, "Available Funding." Figures also include forward commitments of the 2026 and 2027 per-capita 9% ceilings made within this same 2025-QAP cycle.
That last point is the structural surprise for anyone used to a mainland state allocating strictly year by year: "Along with the 2025 per capita 9% Tax Credits, the Authority plans to make available with this 2025-QAP forward commitments of the 2026 and 2027 per capita 9% Tax Credits" (Foreword). PRHFA is drawing down two future years of ceiling now, under the federal forward-commitment mechanism at IRC Section 42(h)(1)(C) -- meaning a developer counting on "next year's round" having a full, untouched annual ceiling should confirm directly with PRHFA how much of that year's per-capita amount remains uncommitted before assuming it's all still available.
The Nonprofit Set-Aside's 10% rate applies to PRHFA's Annual Tax Credit Volume Cap -- the per-capita figure -- not to whatever combined total a given cycle ends up publishing. The 2025 cycle's $4,594,783 Nonprofit / $18,872,255 Undesignated split is the result of layering in forward commitments and carryforward on top of that base, so it is not literally "10% of $23,467,038"; don't back into the set-aside amount by taking 10% of a published cycle total in a future year. (QAP Sections 4.3.1, Foreword)
Who issues the bonds: PRHFA itself, gatekept by AAFAF
The QAP's own application checklist for bond-financed deals treats PRHFA as the likely lender/issuer of record: applicants "must include a letter from the lender stating the tax-exempt status of the obligations issued to finance the project and a certification from a tax attorney or CPA certifying that this requirement is met. If the Authority is the lender, such a letter will not be required" (Section 9) -- a carve-out that only makes sense if PRHFA routinely finances these deals with its own tax-exempt obligations.
That issuance is not unilateral, though. Section 9's "Issuance Criteria" requires bond-financed projects to "also meet the issuance criteria adopted by the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF, by its Spanish acronym) as the Authority's fiscal agent in order to assure compliance in the issuance of obligations by the Authority, including but not limited to compliance with the PAB approved for the Authority." AAFAF is Puerto Rico's central fiscal agent, created in the aftermath of the Commonwealth's fiscal crisis to oversee debt issuance across government instrumentalities -- PRHFA included -- so a PR 4% bond deal effectively clears two layers: PRHFA as issuer/lender, and AAFAF as the fiscal agent confirming the issuance meets its adopted criteria and the Commonwealth's PAB allocation to PRHFA.
The QAP text does not name any other eligible issuer type -- no municipality, local development authority, or private conduit issuer is described as an alternative path for a PR LIHTC bond deal the way some mainland states let a local IDA issue on a state HFA's behalf. If a deal is being structured around a non-PRHFA issuer, confirm that directly with PRHFA and bond counsel; this research found no QAP language contemplating it.
Mechanically, instead of the Carryover Allocation Agreement a 9% deal gets, PRHFA issues a "42(M) Letter" (Annex R) -- an Initial Determination Letter stating the estimated Tax Credit amount the project is eligible for -- "just prior to the closing of the issuance of the tax-exempt obligations." After placement in service, the owner requests IRS Form 8609 the same way a 9% deal would (Section 9).
The 50%/25% bond test -- and a PRHFA sunset this research could not reconcile with federal law
The QAP states the federal aggregate-basis test in two tiers: "For obligations made before December 31, 2025: fifty percent (50%), or more of the aggregate basis of a project (including land) is financed with the proceeds of such tax-exempt obligations," and "For obligations made after December 31, 2025 and before January 1, 2030: twenty-five percent (25%) of the aggregate basis of a project (including land) is financed with the proceeds of such tax-exempt obligations" (Section 9) -- with only the qualifying portion of basis eligible for 4% credit if a project falls short of the applicable threshold.
This research independently confirmed the actual amended statutory text against 26 U.S.C. Section 42(h)(4)(B): the 25% alternative applies to a building where one or more tax-exempt obligations "are part of an issue the issue date of which is after December 31, 2025, and provide the financing for not less than 5 percent of the aggregate basis of such building and the land on which the building is located" -- with no sunset date anywhere in that statutory language. This 25% alternative was added by the One Big Beautiful Bill Act (Pub. L. 119-21, signed July 4, 2025); multiple independent legal analyses (not novoco) describe the change as a permanent reduction from the old 50% floor, not a temporary window.
Flag: PRHFA's own 2025-QAP -- approved by the Governor on October 24, 2025, well after OBBBA's enactment -- nonetheless frames the 25% test as expiring for obligations issued on or after January 1, 2030. This research could not confirm whether that is (a) a deliberate PRHFA administrative choice to adopt the federal test only for a defined window, or (b) a drafting holdover from an earlier, since-superseded congressional draft (an earlier version of the reconciliation bill did propose a temporary multi-year window before the final law made the reduction open-ended). A developer structuring a bond closing expected to occur after 2029 should confirm directly with PRHFA and bond counsel which reading actually governs, rather than assume either the QAP's stated cutoff or the statute's apparent permanence.
Puerto Rico's real "hybrid": LIHTC layered onto CDBG-MIT disaster-recovery funds
The QAP doesn't describe a mainland-style phased 9%/4% building combination as a named "hybrid" option. The closer Puerto Rico-specific analog is the LIHTC-MIT program: PRHFA and the Puerto Rico Department of Housing (PRDOH) entered a Subrecipient Agreement on June 6, 2025 setting aside Community Development Block Grant Mitigation (CDBG-MIT) funds -- $83,797,630 for the 2025 cycle -- specifically "for the redevelopment, conversion, rehabilitation, and/or reuse of industrial and commercial properties into low- and moderate-income housing projects," intended to "leverage Tax Credits to extend the impact of CDBG-MIT funding" (Foreword). PRHFA also administers HOME ($10,492,002) and Housing Trust Fund ($619,615) allocations within the same NOFA-2025.
Caution: HOME, HTF, and CDBG-MIT funds cannot be used to fund any project reserve (QAP Section 5.2.3.5) even though they count as sources in the Total Development Cost stack. Heavier reliance on these funds also feeds directly into the Point Ranking System's Category II.6 "Gap Financing Efficiency" score -- computed as ((Total Development Cost minus Gap Financing Requested) / Total Development Cost) x 10 -- so leaning on this layered financing to make a deal feasible can simultaneously reduce the project's score (Section 5.4.2).
Local tax incentives: the obvious answer (Act 60) probably isn't it, and the real one may be closed
The QAP itself never names a specific PR tax-exemption statute -- it only requires "written evidence for projects claiming and/or receiving (or not) tax exemptions (e.g., property tax waivers, rental income exemptions)" (Sections 5.1.5.13, 5.2.1), leaving the applicant to identify and document whatever local exemption actually applies.
Act 60-2019 ("Codigo de Incentivos de Puerto Rico" / Puerto Rico Incentives Code) is the island's best-known modern tax-incentive statute, but this research found no dedicated affordable-rental-housing property or income tax exemption inside it -- confirmed only via secondary legal-news sources, not the statute's own text. Its most housing-relevant recent change is a 2024 amendment (Act 182-2024) adding a 4% income tax rate and property tax exemptions for urban-core redevelopment projects -- a general urban-revitalization incentive, not an affordable-housing-specific or LIHTC-paired one. Whether a given LIHTC deal sited in a qualifying urban center could also layer Act 182-2024's benefits was not confirmed in this research; check directly with Puerto Rico's Department of Economic Development and Commerce (DDEC).
The long-standing PR statute actually built for affordable-rental tax relief is Act 47-1987 ("Ley de Coparticipacion del Sector Publico y Privado para la Nueva Operacion de Vivienda" / "Law of Public-Private Cooperation for New Housing Operations," 17 L.P.R.A. Sections 891 et seq.), which this research fetched and read directly. Its Article 6 (17 L.P.R.A. Section 896) reads, in the original Spanish: "Estaran exentos de pago de la contribucion sobre la propiedad las unidades de vivienda de proyectos multifamiliares que se alquilen a familias de ingresos bajos o moderados" -- English translation (this agent's own, not an official translation): "Housing units of multifamily projects that are rented to low- or moderate-income families shall be exempt from payment of the property tax" -- for up to 15 years. Article 5 (17 L.P.R.A. Section 895) separately exempts the owner's rental income up to a 10% return on invested capital. But both provisions require construction or rehabilitation to have commenced before December 31, 2018 (Article 5(e), cross-referenced by Article 6(a)), and the law's own effective-date article states, in the original Spanish: "Los beneficios otorgados por esta Ley podran ser reclamados durante anos contributivos comenzados antes del 1 de enero de 2020" -- English translation (this agent's own): "The benefits granted by this Law may be claimed during tax years beginning before January 1, 2020" (Article 14, 17 L.P.R.A. Section 891 note).
Per the Puerto Rico Office of Management and Budget's own compiled text of Act 47-1987 (revised April 21, 2026, reflecting amendments through Act 100-2025), neither the December 31, 2018 construction-start date nor the January 1, 2020 claim-window date has been extended -- the more recent amendments (Act 1-2024, Act 100-2025) touched other articles (definitions, and the income-limit/price-cap review cycle), not these two sunset dates. On the text as currently compiled, Act 47-1987's rental exemptions do not appear available to a new LIHTC deal breaking ground today. Confirm current status directly with Puerto Rico's Housing Department (Departamento de la Vivienda) and PR Treasury (Hacienda) before underwriting any savings from this statute -- a general web search can easily surface Act 47-1987 as a live, current incentive without surfacing these sunset dates.
The 125-unit ceiling: a program-election-adjacent constraint
For the 2025 allocation cycle, "all projects must have no more than one hundred twenty-five (125) units" (QAP Foreword) -- an explicit PRHFA policy to spread awards across more of the island's municipalities rather than concentrate credits in a few large developments: "In order to impact as many municipalities as possible we will encourage the development of small- and medium-sized projects around the Island." A larger deal may need to be phased across cycles or split between 9% and 4% components to fit under this ceiling -- a real driver of the 9%-vs-4%-vs-phased decision that operates differently from a mainland per-project dollar cap.
Where this goes wrong
- Assuming Puerto Rico runs separate application calendars for 9% and 4% like many mainland QAPs -- PRHFA runs one shared NOFA cycle and one shared Basic Threshold/Point Ranking review for both tracks.
- Treating the $9,609,885 annual per-capita number as what's actually up for competition in the 2025 round -- PRHFA has already forward-committed 2026 and 2027 per-capita ceiling into this cycle, and net of existing forward commitments and carryforward, the actual combined 2025-cycle pool is $23,467,038 ($18,872,255 Undesignated / $4,594,783 Nonprofit).
- Backing into the Nonprofit Set-Aside as "10% of the published cycle total" -- the statutory 10% rate applies to the Annual Tax Credit Volume Cap (the per-capita figure), a different and smaller base than the final cycle total that already layers in forward commitments and carryforward.
- Assuming a 4% bond deal is an as-of-right lottery or priority queue -- Puerto Rico requires 4% deals to clear the identical Basic Threshold and score the identical 30-point Point Ranking System minimum as 9% deals; they're just not charged against the Annual Tax Credit Volume Cap.
- Assuming a municipality, local development authority, or private conduit can issue the tax-exempt bonds the way some state HFAs delegate to a local IDA -- the QAP's own text frames PRHFA (the Authority) as directly acting as lender/issuer, with AAFAF gatekeeping issuance criteria and PAB compliance as PRHFA's fiscal agent; no other eligible issuer type is named. Confirm with PRHFA and bond counsel before structuring around a different issuer.
- Restating the QAP's 25%-bond-test cutoff ("before January 1, 2030") as if it were a firm federal deadline -- the actual amended IRC Section 42(h)(4)(B) contains no sunset for bonds issued after December 31, 2025; this research could not resolve why PRHFA's own QAP text imposes one, and a deal expecting to close after 2029 should get this confirmed directly rather than assume either reading.
- Assuming Act 60 (Puerto Rico's Incentives Code) includes a ready-made affordable-rental-housing property tax break -- no such dedicated provision was found; the traditional PR statute for that purpose (Act 47-1987) has its own construction-start (Dec. 31, 2018) and claim-window (Jan. 1, 2020) sunsets that, per the current compiled text, do not appear extended.
- Assuming HOME/HTF/CDBG-MIT gap funds can be used to fund a project's reserves -- the QAP expressly bars this (Section 5.2.3.5), even though the same funds count as sources in the Total Development Cost stack and factor into the Gap Financing Efficiency score.
- Assuming a 125+ unit development can be submitted as filed -- the 2025-cycle unit cap forces a phasing or program-split decision earlier in underwriting than a mainland per-project dollar cap typically does.
- Treating PRHFA's own cover-page description of itself as "A Subsidiary of the Government Development Bank for Puerto Rico" as current organizational fact without confirming it independently -- this is the QAP's own self-description as printed, but GDB has been in a Title III debt-restructuring process for years; confirm PRHFA's current legal/organizational status directly if it matters to a transaction.
- Assuming the 2025-QAP's deadlines automatically carry forward unchanged to a future cycle -- PRHFA publishes a new Schedule of Application (Section 8.1) each cycle and reserves broad discretion to amend the QAP; confirm the current cycle's actual dates before relying on the 2025 schedule.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies