Hawaii Released Guidance for Housing Tax Credit Transfers

The state taxation department issued new rules for selling low-income housing credits under Act 205.

Updated on Sept. 25, 2026 in Taxes

Isometric editorial illustration of a stone housing module, representing Hawaii's new tax credit transfer guidance. — The Hawaii Department of Taxation has finalized new guidance for the transfer of low-income housing tax credits under Act 205. AI Illustration. Upload story photo >

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The Hawaii Department of Taxation has published official guidance regarding the transfer of low-income housing tax credits. These rules clarify the implementation of Act 205, which allows partners and members of LLCs to sell or transfer their allocated credits.

Why it matters

This guidance provides necessary clarity for taxpayers looking to navigate the implementation of Act 205. It establishes clear protocols for transferring credits, ensuring compliance with state reporting requirements.

The new guidance mandates that any transfer of low-income housing tax credits must be reported by the 20th day of the first month following the close of the period. This applies strictly to credits allocated by the Hawaii Housing Finance and Development Corporation.

The players

Hawaii Department of Taxation

This is the state agency responsible for the administration and enforcement of tax laws throughout Hawaii.

Hawaii Housing Finance and Development Corporation

This state organization oversees affordable housing development programs and the allocation of associated tax credits.

The details

Under the new provisions of Act 205, partners or members of partnerships and LLCs are now permitted to sell, assign, or transfer all or a portion of their housing tax credits to third parties. Taxpayers must strictly adhere to the established reporting deadlines to remain in compliance with the state department.

July 1 marked the earliest date for eligible LIHTC allocations.
The tax guidance was officially published on September 25, 2026.

Market Dynamics

The guidance aligns with Act 205, Session Laws of Hawaii 2026, to standardize the secondary market for housing credits. This legislative move formalizes the process for transferring tax assets, positioning Hawaii alongside other states seeking to attract private capital to affordable housing.

Investors and partners in housing LLCs must ensure all credit transfers are documented by the 20th day of the month following the period close to avoid penalties. Stakeholders should consult with tax professionals to align their portfolio strategies with these new reporting mandates.

The takeaway

Taxpayers should review their existing partnership agreements to determine if these new transfer rights are applicable to their current holdings. Maintaining strict compliance with the reporting schedule is essential for those intending to sell their allocated credits.