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Middle-Income Housing Tax Credit Act of 2016 This bill amends the Internal Revenue Code to allow a tax credit for the development of housing for middle-income households. The credit is based on the existing low-income housing tax credit and applies to the development or rehabilitation of residential rental properties if: (1) 60% or more of the residential units in the project are both rent-restricted and occupied by individuals whose income is 100% or less of the area median gross income, and (2) the project is not federally subsidized or financed with a federally funded grant. The credits are allocated to each state based on population, and state housing agencies then distribute the credits to developers using a competitive process. The credits are paid over a 15-year credit period, and the amounts of the credits are based on a percentage of a project's qualified basis, which is the portion of the project dedicated to affordable middle-income housing. The credit dollar amount allocated to a project may not exceed the amount that is necessary for the financial feasibility of the project and its viability as a qualified middle-income housing project throughout the credit period. To qualify for the credit, the developer must make a long-term commitment to middle-income housing, under which the affordability restrictions for a property remain in place for at least an additional 15 years after the close of the credit period.

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