Department of Revenue Threatens Low-Income Housing, Suit Says

Unusual new rules adopted by the Alabama Department of Revenue threaten development of affordable housing in Alabama by treating low-income housing incentives as taxable assets, says a lawsuit recently filed in the state court by the Alabama Affordable Housing Association.

The new approach is “wholly unreasonable and undercuts the incentive and ability to continue to provide affordable housing across this state,” say the plaintiffs in their complaint, filed recently for a hearing on January 17 in the Circuit Court of Jefferson County.

The Jefferson County Board of Equalization, also named a defendant in the suit, has taken the same tack as the ADR, especially in regard to a 100-unit affordable housing apartment complex named Glenbrook at Oxmoor Valley, which is also a plaintiff, along with the AAHA.

Plaintiffs are asking for a declaratory judgment that “Defendants’ method for determining the assessed value for ad valorem tax purposes of the Glenbrook Property and other affordable housing properties in Alabama does not reflect ‘fair and reasonable market value,’ as required by” Alabama law.

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The new treatment of low-income housing incentives “is an assault on affordable housing by the Alabama Department of Revenue,” says KC Conway, director of research for the Alabama Center for Real Estate and chief economist for the CCIM Institute. “They have decided that Low Income Housing Tax Credits (LIHTC) are real estate and not a financing incentive to facilitate affordable housing and are forcing counties like Jefferson County to tax affordable housing projects with LIHTC as though they didn’t have them and increase property taxes by as much as 50 percent to 70 percent.”

In an earlier appeal for a declaratory judgment, Circuit Court of Jefferson County Judge Annetta Verin ordered that the treatment of LIHTC by the state and the Jefferson County Board of Equalization be overturned.

The defendants appealed that order, and the appeal was denied. But the defendants have persisted in their new interpretation of the tax incentives, say the plaintiffs.

“Everybody in state government is trying to find revenue,” says Conway, “but this is the wrong way to pick it up. I don’t know why the governor’s office has not been all over this.”

The ADR “is using Jefferson County as a test case. If they prevail, it will destroy affordable housing tax credits in the state of Alabama.”

Plaintiffs are represented by Kenneth Perry and Ethan Tidmore, with Bradley Arant Cummings.

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