Hawaii Issued Guidance on Housing Tax Credit Transfers

Investors in partnerships or LLCs can now transfer low-income housing tax credits under new state rules.

Updated on Sept. 25, 2026 in Taxes

Isometric editorial illustration featuring stylized architectural blocks and a tropical flower, representing state housing tax credit regulations. — The Hawaii Department of Taxation has issued new guidance outlining how partners and LLC members can transfer low-income housing tax credits. AI Illustration. Upload story photo >

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The Hawaii Department of Taxation has released guidance detailing how partners and members of LLCs can sell or transfer low-income housing tax credits. These rules apply to credits allocated by the Hawaii Housing Finance and Development Corporation after July 1.

Why it matters

This guidance clarifies the implementation of Act 205, providing a structured path for taxpayers to transfer credits to third parties. It establishes clear requirements for managing these tax assets within partnership or LLC structures.

The new rules under Act 205 allow for the transfer of low-income housing tax credits received after July 1. Recipients must adhere to mandatory reporting deadlines by the 20th day of the month following the period's close.

The players

Hawaii Department of Taxation

The state agency responsible for administering tax laws and issuing guidance for Hawaii residents.

Hawaii Housing Finance and Development Corporation

The state entity that manages affordable housing programs and allocates housing tax credits.

The details

Under the new state guidance, eligible partners or LLC members can assign all or a portion of their allocated credits to third parties. To remain compliant, taxpayers must submit the required transfer reports by the 20th day of the first month following the period's close. This framework governs how these credits can be moved, sold, or assigned to other parties.

July 1: The earliest date for credits to be eligible for transfer.
September 25, 2026: The Hawaii Department of Taxation published the official guidance.

Money Landscape

This guidance marks the operational rollout of Act 205, Session Laws of Hawaii 2026. It formalizes the transfer process for state-allocated low-income housing tax credits within the existing tax framework.

If you are a partner or member of an LLC holding eligible credits, you can now transfer these assets to third parties. Consult a tax professional to ensure your transfers meet the reporting deadline by the 20th day of the month following the period's close.

The takeaway

The new guidance provides a specific process for selling or assigning allocated tax credits to third parties. Investors should verify that their credit allocations originated after July 1 and maintain a calendar for the 20th-day reporting deadline.