Which credit is typically applied to new construction or substantial rehabilitation projects under LIHTC?

The Low-Income Housing Tax Credit (LIHTC) program provides two types of tax credits for affordable housing projects: the 9% credit and the 4% credit. The 9% credit is typically utilized for new construction or substantial rehabilitation projects. This credit is allocated to projects that meet specific criteria and is intended to encourage the development of affordable housing by providing a higher value tax incentive, which can significantly reduce the cost of constructing or rehabilitating rental properties intended for low-income tenants.

The 4% credit, on the other hand, is generally applied to projects that utilize tax-exempt bond financing and does not provide as generous an incentive as the 9% credit. Options mentioning 6% and 12% credits do not apply to the LIHTC framework, as those percentages are not part of the established tax credit opportunities under LIHTC guidelines. Therefore, the 9% credit is the appropriate choice for incentivizing new construction or substantial rehabilitation under the LIHTC program.