The 25% private activity bond threshold for 4% LIHTC took effect January 1, 2026. States implementing new rules—California, Colorado, and others adapting programs.
Show Notes
The reduced private activity bond financing threshold—from 50% to 25% of aggregate basis—took effect January 1, 2026, unlocking significant additional 4% LIHTC production capacity.
What Changed:
- Previous threshold: 50% of aggregate basis in bond financing required
- New threshold: Only 25% bond financing needed for 4% LIHTC eligibility
- Result: Less bond volume cap consumed per project
- Impact: States can finance more deals with same allocation
State Implementation Approaches:
- California: Encouraging return of unused 2025 PAB allocations for redeployment
- Colorado: Phasing in threshold, starting at 45% upper limit for 2026 rounds
- Other states: Updating QAPs and application materials
Developer Implications:
- Acquisition-rehab deals can proceed with smaller bond issuances
- Improved project economics through reduced debt service
- New opportunities in bond-constrained states
- Work closely with bond counsel on state-specific requirements
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