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The LIHTC Security Act proposes changes to the Internal Revenue Code to prevent certain non-citizen individuals, specifically those not authorized under specific immigration provisions, from occupying units in qualified low-income housing projects that receive federal tax credits. The bill amends Section 42 of the tax code, which governs the Low-Income Housing Tax Credit (LIHTC) program, by adding an occupancy requirement that prohibits leasing to alien individuals not meeting defined immigration criteria. This requirement applies to all relevant low-income units in a building for the taxable year, with a transition period allowing 75% compliance for certain buildings until 2031.

Additionally, the bill provides states with an option to avoid enforcing this occupancy restriction by electing to reduce the amount of housing tax credits allocated to buildings in their jurisdiction by 5%. This election is made at the state level and applies annually unless revoked with federal approval. The bill's provisions take effect for taxable years and calendar years starting after December 31, 2027.

The practical effect of this legislation would be to limit access to federally subsidized low-income housing for certain non-citizens who do not meet specific immigration status criteria, potentially reducing the eligible tenant pool. At the same time, states can choose to maintain broader occupancy eligibility but at the cost of reduced federal tax credits for housing developers. This could influence the availability and financing of affordable housing projects and impact both housing providers and prospective tenants.