Program election (9% vs. 4% vs. hybrid) — South Dakota

Two tracks, one agency, and a real structural split in the rules that apply

The 2026-2027 Qualified Allocation Plan (QAP), as approved by the SDHDA Board of Commissioners on June 15, 2026, opens by describing SDHDA as responsible for administering "the housing tax credit program" as a whole, then splits into two tracks in its very first substantive sections. Section I.A ("Application Cycle(s)") sets the annual 9% competitive round. Section I.B ("Bond Financed Developments with Housing Tax Credits") states plainly: "Applicants applying for tax-exempt bond financing must use the HOME/Housing Tax Credit Application and the Bond Financing Application. SDHDA will accept applications year-round and must close prior to November 1st." The same section adds that bond-financed projects "are subject to the threshold requirements of this Plan unless otherwise noted" -- language that matters because Section I.D, immediately following, states that the set-aside and funding-limit rules described below apply "to the total tax credits available for allocation" and that "tax-exempt bond projects are not subject to these limitations."

One genuine ambiguity this research could not resolve from the QAP text alone: Section V ("Project Selection Criteria") opens by stating "Applications must obtain a minimum of 400 points to be considered for award, other than those for additional tax credits, which will be eligible based on the applicable criteria" -- and does not, in that sentence or anywhere nearby, explicitly exempt bond-financed applications the way Section I.D explicitly exempts them from the set-aside and award-limit rules. Every other allocating agency reviewed for this library that runs a bond program alongside a 9% round exempts bond deals from the competitive score entirely, and SDHDA's own "threshold requirements... unless otherwise noted" language in Section I.B points the same direction -- but this QAP does not state the exemption for Section V in so many words. Confirm directly with SDHDA whether a bond-financed application must still document a 400-point self-score before proceeding.

How large a 9% award can actually be -- and why it pushes bigger deals toward bonds

Under IRC §42(h)(3)(C)(ii), the annual 9% state housing credit ceiling is "the greater of (1) $3.416 multiplied by the State population, or (2) $3,953,600" for calendar year 2026 (IRS Rev. Proc. 2025-32, §.03(2), as revised in Internal Revenue Bulletin 2025-44). Public population estimates for South Dakota for 2025-2026 cluster in the 899,000-965,000 range across the Census Bureau's own recent vintages and third-party trackers -- every one of those figures is well under the roughly 1,157,300 population that $3,953,600 divided by $3.416 would require, so South Dakota's 2026 ceiling is the small-state minimum, $3,953,600, regardless of which population estimate is used.

Section I.D then caps how much of that small pool any one project or developer can take: "SDHDA will award no more than 20% of the total annual tax credits available to any one project and no more than 25% to any one developer, sponsor, or owner." Applying those percentages to the $3,953,600 ceiling (a derived calculation, not a number stated directly in the QAP) puts the practical maximum around $790,720 in annual 9% credit for a single project and about $988,400 for a single developer's combined projects in one round -- before accounting for the Non-Profit and Rural/Tribal set-asides carved out of the same pool. A 9% award at that scale, multiplied across a 10-year federal credit period, caps out well short of what most mid-size or larger multifamily developments need, which is the practical reason the 4%/bond track -- not subject to any of these caps -- carries most of South Dakota's larger deal volume.

Who issues the bonds: SDHDA itself, under its own 1973 enabling act

Unlike states where the tax credit agency and the bond issuer are two different statutory creatures (Georgia's DCA versus GHFA and the local Urban Residential Finance Authorities is one example), South Dakota's structure is a single entity end to end. SDHDA was created by the Legislature under SDCL Title 11, Chapter 11 ("South Dakota Housing Development Authority"), and that same chapter gives it direct bond-issuance power: SDCL §11-11-43 states that "the authority may issue from time to time its negotiable notes and bonds in such principal amount as the authority shall determine to be necessary to provide sufficient funds for achieving its corporate purposes." There is no separate conduit issuer, no local housing authority reservation, and no urban-versus-rural bond allocation split to navigate -- SDHDA both allocates the 4% credit and issues the bonds that finance it.

South Dakota's own statewide private-activity bond volume cap for 2026 is, like the 9% credit ceiling, set at its small-state floor: IRS Rev. Proc. 2025-32 §.19 fixes the 2026 cap under IRC §146(d) at "the greater of (1) $135 multiplied by the State population, or (2) $397,625,000" -- and South Dakota's population is far short of the roughly 2.95 million that would be needed to exceed the floor, so $397,625,000 is the applicable statewide ceiling. Within that statewide cap, SDHDA's own published multifamily bond-financing program describes $80,000,000 available in tax-exempt bond financing for 2026, with a $40,000,000 per-project limit -- SDHDA's own reserved share of the state's total volume cap, not the full state ceiling itself. This research could not independently confirm from public SDHDA materials exactly how that $80 million reservation is set each year relative to the Governor's overall allocation of the state's volume cap among competing bond programs (housing, industrial development, student loan, etc.); confirm the current-year figure directly with SDHDA before sizing a bond request.

OBBBA's 25% bond-financing test: the QAP does not mention it

The One, Big, Beautiful Bill Act (Pub. L. 119-21, 2025) permanently lowered the long-standing "50% test" under IRC §42(h)(4)(B) -- the share of a building's aggregate basis that must be financed with tax-exempt bonds to unlock 4% credits on 100% of qualified basis -- to 25%, for buildings placed in service after December 31, 2025, provided at least 5% of aggregate basis is financed with bonds issued after that same date. A number of states responded by writing their own, sometimes tighter, administrative caps into their QAPs (one example reviewed for this library caps bond financing at 30% of aggregate basis regardless of the federal number). This research searched the full text of South Dakota's 2026-2027 QAP for any reference to the aggregate-basis test, the 50% or 25% thresholds, or Pub. L. 119-21/OBBBA by name, and found none. That silence could mean SDHDA simply defers entirely to whatever the federal test currently requires, or it could mean the QAP has not yet been updated to reflect a law that took effect the same year this QAP cycle began -- this research could not distinguish between those two possibilities from the document alone. Confirm directly with SDHDA and bond counsel which basis percentage a South Dakota bond deal actually needs to hit before structuring around the new 25%/5% test.

Is there a South Dakota state tax credit? This research found none

Several sibling states in this library layer a state-level housing tax credit on top of the federal 9%/4% credits (a dollar-for-dollar state match, or a separate state-only credit against insurance premium or bank franchise tax, for example). This research checked for a South Dakota equivalent three ways: (1) a full-text search of the current 2026-2027 QAP for any reference to a state credit, a state HTC, or a South Dakota Codified Laws (SDCL) tax-credit citation -- none found; (2) a search of SDHDA's own published program list on sdhda.org/sdhousing.org for any state-credit program distinct from the federal 9%/4% credits -- none found, only the federally-funded Housing Opportunity Fund (a state housing trust fund that makes grants and loans, not a tax credit) and the federal credit itself; (3) general web research, which repeatedly surfaced a figure -- "the U.S. Department of Treasury annually allocates in excess of $3.1 million to South Dakota" -- that some summaries characterize as a distinct state program, but which this research concludes is simply an approximate, slightly dated restatement of the same small-state-minimum federal 9% ceiling described above (the 2026 figure is $3,953,600; a $3.1 million figure would be roughly consistent with an earlier year's smaller small-state minimum). No independent South Dakota state low-income housing tax credit statute was located. This is a negative finding, not proof of absence -- if a state credit exists, it was not found in any primary source checked here, and should be verified directly with SDHDA and the South Dakota Department of Revenue before assuming either way.

Fee structure differs by track -- a real, if secondary, election factor

Two fee mechanics genuinely differ between the 9% and 4%/bond tracks and are worth weighing alongside the set-aside and scoring differences above. First, the developer fee: 9% deals are capped at 12% of total development cost (less developer's and consultant's fees) for projects under 61 units, 10% for 61 units or more, and, on top of either percentage, an absolute $1,000,000 ceiling applies to "any 9% tax credit project." Bond-financed developer fees, by contrast, are "limited to 12% of the calculated Total Project Costs (less developer's and consultant's fees)... and are not subject to the $1,000,000 limitation" -- meaning a large bond deal can generate a materially larger dollar developer fee than the same-size deal could under 9%. Second, the allocation fee -- paid at final allocation -- is 7% of the annual tax credit allocation amount generally, but 10% "for projects financed with bonds" (QAP Section VII.C), a real added cost specific to the bond track. Full detail on the developer-fee mechanics lives in the cost/construction phase of this guide; the point here is that the fee delta is itself a program-election input, not just a downstream cost line.

A currency flag worth checking before relying on this QAP

The QAP's own cover page states it was "approved by the SDHDA Board of Commissioners, June 15, 2026." The PDF file currently published at sdhda.org, however, carries the filename "2026-2027-HTC-QAP-Final-072026.pdf" -- implying a July 2026 finalization, a month after the stated board-approval date -- and the PDF's own embedded metadata records its creation date as August 20, 2026, more than two months after board approval. This research found no separate SDHDA amendment memorandum, board minutes, or public notice describing substantive changes made between June 15 and August 20, 2026 (the kind of document Georgia's DCA, for comparison, published in full when it amended its own QAP mid-cycle). The gap here most plausibly reflects ordinary formatting, pagination, or typo cleanup rather than a substantive amendment, but that could not be independently confirmed from the document alone. Before relying on any specific number in this QAP for a live deal, confirm with SDHDA that the version in hand is the final, currently operative text -- and ask directly whether anything changed in the two-month gap between board approval and file publication.