STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6653

August 15, 1990

CONFLICT OF INTEREST:

Member of Legislature applying for and receiving allocation of federal low income housing tax credits from state housing agency

CONSTITUTIONAL LAW:

Const 1963, art 4, Sec. 10--member of Legislature applying for and receiving allocation of federal low income housing tax credits from state housing agency

Neither Const 1963, art 4, Sec. 10, nor MCL 15.301 et seq; MSA 4.1700(21) et seq, preclude a member of the Legislature from applying for and receiving from the Michigan State Housing Development Authority an allocation of federal low income housing tax credits for qualified buildings under 26 USC 42.

Honorable Thomas L. Hickner

State Representative

The Capitol

Lansing, MI 48909

You have requested my opinion whether the Michigan State Housing Development Authority (MSHDA) may process an application submitted by a member of the Legislature for an allocation of federal low income housing tax credits as authorized by 26 USC 42 in light of Const 1963, art 4, Sec. 10, and MCL 15.301 et seq; MSA 4.1700(21) et seq.

Federal income tax credits for qualified buildings are provided in 26 USC 42 to foster housing projects for low to moderate income individuals. Congress has directed allocation of credits within a state for any calendar year equal to a total of $1.25 multiplied by the total population of the state, plus certain unused housing credits. 26 USC 42(h)(3). Allocations of the credits within a state are to be made by a duly authorized state housing credit agency, id, in accordance with a qualified allocation plan. 26 USC 42(m)(1)(B). After allocation of the credits, the housing credit agency has no ongoing responsibility to monitor or investigate continued compliance with the federal statute. 26 CFR 1.42-1T(d)(8)(v). The housing credit agency must, however, maintain a procedure for notifying the U.S. Internal Revenue Service of any noncompliance of which the agency becomes aware. 26 USC 42(m)(1)(B)(iv).

The Legislature has designated MSHDA as the housing credit agency within the state to allocate the federal low income housing tax credits. MCL 125.1422b(1); MSA 16.114(22b)(1).

Const 1963, art 4, Sec. 10, prohibits a member of the Legislature from having a direct or indirect interest in a contract with the state or any of its political subdivisions which shall cause a substantial conflict of interest.

The Legislature has implemented Const 1963, art 4, Sec. 10, by means of MCL 15.301 et seq; MSA 4.1700(21) et seq. Members of the Legislature may not have a direct or indirect interest in a contract with the state or any of its political subdivisions which shall cause a substantial conflict of interest, MCL 15.302; MSA 4.1700(22), and the term "substantial conflict of interest" is defined in MCL 15.304; MSA 4.1700(24).

These prohibitions apply to a legislator who has a direct or indirect interest in a contract with the state or its political subdivisions causing a substantial conflict of interest.

Neither 26 USC 42 nor MCL 125.1422b; MSA 16.114(22b), speak of the allocation of low income housing tax credits as a contract between the state housing credit agency designated to allocate the credits and the applicant receiving an allocation of such credits.

A statute granting a tax credit has been held to imply no contractual obligation between the taxing authority and the taxpayer. Ludka v. Department of Treasury, 155 MichApp 250, 259; 399 NW2d 490, 494 (1986). A credit against the levy of a tax is a privilege conferred by legislative grace. Keyes v. Chambers, 209 Or 640, 646; 307 P2d 498, 501 (1957).

I am advised that MSHDA does require persons who receive such an allocation of tax credits to sign a document entitled "Low Income Housing Credit Program Regulatory Agreement." This "agreement," however, is not a true contract in the sense intended by Const 1963, art 4, Sec. 10. The obligations assumed in the "agreement" by the recipient of the tax credits are essentially those imposed by the federal act itself as prerequisites for participation in the program. No consideration is recited and consideration is a basic element of any contract. Midwest Teen Centers, Inc v City of Roseville, 36 MichApp 627, 630; 193 NW2d 906 (1971). Thus, these obligations are imposed by law, not by means of a contractual agreement.

It follows that, in the event a member of the Legislature were to apply for and receive a federal low income housing tax credit from MSHDA, there would be no contractual relationship between the Authority and the legislator. Thus, Const 1963, art 4, Sec. 10, and MCL 15.301 et seq; MSA 4.1700(21) et seq, would not be implicated.

It is my opinion, therefore, that neither Const 1963, art 4, Sec. 10, nor MCL 15.301 et seq; MSA 4.1700(21) et seq, preclude a member of the Legislature from applying for and receiving from the Michigan State Housing Development Authority federal low income housing tax credits for qualified buildings under 26 USC 42.

Frank J. Kelley

Attorney General