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SB 3738

REVENUE-AFFORDABLE HOUSING

104th Regular Session Introduced by Graciela Guzmán and 7 co-sponsors

expands and extends Illinois' affordable housing tax donation credit, increasing annual credits after 2026 and broadening eligible uses and donors.

Rule 3-9(a) / Re-referred to Assignments
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Bill Summary · SB 3738

Summary of SB 3738 (104th Ill. General Assembly)

Proposed legislation: SB 3738, introduced February 5, 2026 by Sen. Mike Porfirio. This bill would amend the Illinois Housing Development Act and the Illinois Income Tax Act to adjust and extend the state’s affordable housing tax credit donation program.

Purpose and intent

  • Modernize and expand the affordable housing tax donation credit program to support increased funding for affordable housing projects, including rental, homeownership, employer-assisted housing, and related technical/operational support.
  • Extend the program’s duration and adjust credit issuance limits to align with anticipated demand and program growth.

Key provisions

Illinois Housing Development Act (amendment to 20 ILCS 3805/7.28)

  • Establishes and governs the affordable housing tax donation credit program.
  • Definitions:
    • Administrative housing agency: the Illinois Housing Development Authority (IHA) or an agency of the City of Chicago.
    • Affordable housing project: either a rental project with at least 25% of units affordable to households at or below 60% area median income (AMI), or a homebuyer unit with income up to 60% AMI (pre-2022) or 120% AMI (post-2022) and mortgage costs (PITI) capped at 30% of income.
    • Sponsor: a not-for-profit organization meeting specified criteria.
    • Other terms: donation, employer-assisted housing project, general operating support, technical assistance, etc.
  • Process and eligibility:
    • Sponsors apply to an administrative housing agency for project approval; credits are reserved for each approved project.
    • Rules to be adopted by the Authority for eligible costs, donations, credit issuance/verifications, and project selection.
    • Credits for employer-assisted housing, general operating support, and technical assistance are reserved within their respective pools.
  • Credit allocation and pools:
    • Prior credit reservation amounts:
    • State fiscal years 2022-2023: $32,850,352, with 5% annual increases through 2026.
    • Post-2026 adjustments:
    • Beginning FY 2027: credit reservations capped at $41,831,227, increasing by 10% annually thereafter.
    • Geographic and administrative allocation:
    • City of Chicago receives 24.5% of total annual credits; Authority retains the balance.
    • Set-asides within the total credits:
      • $2 million for employer-assisted housing.
      • $1 million for general operating support and technical assistance.
      • Remaining balance for affordable housing projects.
    • Timing: during the first nine months of a fiscal year, if set-asides cannot be reserved for their purposes, credits can be reserved for other approved projects.
  • Compliance and enforcement:
    • Reservations tied to land-based affordability compliance for at least 10 years; the Authority may adjust to avoid undue hardship to homeowners.

Illinois Income Tax Act (amendment to 35 ILCS 5/214)

  • Tax credit for affordable housing donations:
    • Effective for taxable years ending on or after December 31, 2001, through December 31, 2036 (note: this bill updates the end date for the enhanced program).
    • Current baseline: a credit equal to 50% of the value of a donation made under Section 7.28.
    • Post-2023 changes (consistent with prior amendments):
    • Credits flow to partners, S-corp owners, or LLC members per federal partnership and S-corp rules; non-taxpayers may receive and transfer credits as described.
    • Carryforward: any unused credit can be carried forward up to five years.
    • Transferability: credits may be transferred to (i) land designated for affordable housing or (ii) another qualifying donor.
    • Documentation: taxpayers must maintain information required by the Department and disclose donation details for the qualified project.

Who is affected

  • Qualified nonprofits acting as sponsors for affordable housing projects, employer-assisted housing programs, and related technical/operating support.
  • Donors to qualifying projects eligible for the Illinois affordable housing donation credit.
  • The City of Chicago and the Illinois Housing Development Authority (as administering agencies).
  • Taxpayers who donate to qualifying projects (individuals, corporations, partnerships, S-corporations, LLCs, etc.) eligible for the donation tax credit.

Procedural and timeline notes

  • Effective date: immediate upon enactment.
  • The program’s credit reservation amounts and annual increases are codified to begin in fiscal year 2022 and adjust through 2036, with post-2026 increases (FY2027 onward) at 10% annually.
  • Rulemaking: The Authority is required to adopt rules governing eligible costs, donations, credit issuance, verification, and project selection.
  • Legislative action history shows sponsors and committee timelines, with a Rule 2-10 deadline set for April 24, 2026.

Overall, SB 3738 seeks to expand and extend Illinois’ affordable housing tax credit donation framework, increase annual credit authority after 2026, and clarify program definitions, administration, and donor incentives to support a broader array of affordable housing efforts statewide.

Compiled from official sources — confirm details with the bill’s official record.

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