Pursuant to Code Section 42(d)(6)(c)(ii), a project is exempt from the 10 year placement in service requirement for qualification acquisition credit if the project is federally subsidized or subsidized under a state program that is substantially similar to certain enumerated federal housing subsidy programs.  A number of states, including New York and Illinois, have redirected Medicaid HHS funding into supportive housing programs.  These programs, for example the Illinois Supportive Living Facilities program, have goals and objectives that are substantially similar to the housing programs identified in Code Section 42(d)(6)(c)(i).  While the sources of the funds loaned to projects under this arrangement are not described in Code Section 42(d)(6)(c)(i), the state programs effectively convert the funds into a state subsidy program that should qualify as state subsidy similar in purpose to the federal subsidy programs identified in Code Section 42(d)(6)(c)(i).  While the IRS will not rule on the qualification of any particular state program as “similar in purpose” to the federal housing subsidy programs, due to the open regulation project regarding the definition of “substantially” for purposes of Section 42(d)(6)(c)(i), and no direct authority has been issued which address the question, we believe that an appropriately structured state program should constitute “similar” state subsidy for purposes of Code Section 42(d)(6)(c)(i).