Efforts Continue to Win Passage of Tax Credit Amendments, Though Hurdles Loom
By A. J. Johnson & Caitlin Jones
6 min read
Tax Credit Advisor July, 2006: Efforts to win new legislative amendments to the low-income housing tax credit program appear poised for a boost in the U.S. Senate, but the odds for enactment this year are long, according to industry and congressional sources.
With a short remaining congressional calendar, the distractions of an election year, and a dearth of must-do major tax bills that could carry housing credit amendments to passage, supporters of a pending key bill (H.R. 4873) to enhance the housing credit program have their work cut out for them.
The same long odds apply to enactment of proposed amendments to the federal historic rehabilitation tax credit, and of an extension of the federal new markets tax credit program past its scheduled sunset date of December 31, 2007. The NMTC is a federal tax incentive designed to foster investment and economic development in low-income and depressed communities.
Senate Bill Expected
As the Tax Credit Advisor went to press, Sen. Orrin Hatch (R-Utah) was planning by around the Fourth of July congressional recess to introduce a bill similar to H.R. 4873 to make amendments to the housing credit program.
The bill’s contents weren’t final as of June 20, and there was a chance it might contain some additional proposed changes not in the Ramstad bill.
The forthcoming action, given Sen. Hatch’s prominence as the No. 2 Senate Finance Committee member, and as strong past supporter of the housing credit, should give new momentum to the campaign to win enactment of legislative improvements to the housing credit program – this year, or next. H.R. 4873, introduced March 2 by Rep. Jim Ramstad (R-Minn.), has been formally endorsed by 16 or so national organizations, and more are expected, Garth Rieman, Director of Policy and Government Affairs for the National Council of State Housing Agencies, told the Tax Credit Advisor in a recent interview. Among the bill’s supporters are NCSHA, the Affordable Housing Tax Credit Coalition, and the Housing Advisory Group.
Ramstad aide Karin Hope told TCA on June 20 that H.R. 4873 presently has 12 House co-sponsors, and that a “Dear Colleague” letter is to go out shortly to solicit more.
Need for Vehicle
The key question for advocates of the housing credit amendments is whether Congress before the end of this session will consider and pass any more major tax bills to which the provisions of H.R. 4873 could be attached. Having such a tax “vehicle” is key.
Rieman, Affordable Housing Tax Credit Coalition lobbyist Francine Friedman, and several other industry and congressional sources said the prospects for enactment this year of the housing credit amendments aren’t great. However, Rieman and others didn’t rule it out entirely, and said they will seize on any opportunity that comes along.
“I think it’s unlikely that Congress will purpose major tax legislation in the remainder of this session,” said Rieman. “But we don’t know if they might come up some smaller tax vehicle that might move forward.”
As TCA went to press, it appeared Congress would soon take up and act on one and possibly two tax bills, a pension bill and an estate taxation measure. But it appeared unlikely the housing credit amendments might be attached.
A more likely candidate, if it happens, would be a smaller “extenders” bill to renew some popular federal tax breaks that have expired, such as the hugely popular research and development tax credit. In directing action on the last tax reconciliation bill that passed, House Ways and Means Chairman Bill Thomas (R-Calif.) excluded the extenders while suggesting tax-writers would deal with them later.
Housing credit advocates noted time is running out for action this year to enact the housing credit amendments. Less than 30 legislative days are left this year on the congressional schedule as it now stands.
Ramstad’s office and supporters of H.R. 4873, meanwhile, are working to solicit additional House members to sign up as co-sponsors of the bill, to enhance the chances of its provisions being attached to any tax vehicle that comes along – this year, or next.
H.R. 4873 would amend the housing credit program to:
- Exempt housing credit investments from the alternative minimum tax, both for corporate and individual taxpayers.
- Permit the 9 percent credit for new federally subsidized construction and rehabilitation expenditures. Tax-exempt bond-financed expenditures would remain limited to the 4 percent rate.
- Allow states to award 30 percent more credit to projects that meet state-specified geographic or income targeting requirements.
- Allow 30 percent more credit to HOME-assisted projects in high-cost areas.
- Fix the so-called 4 and 9 percent credit rates annually.
- Replace the recapture bond requirement with information reporting.
- Mandate proportionate dispersion of credit units in scattered-site developments.
- Rename it the Affordable Housing Credit program.
H.R. 4873 would also repeal the so-called “10-year” rule for tax-free single-family housing bonds, which if passed could free up more tax-exempt bond authority in states for multifamily housing projects.
Historic, New Markets Credit Proposals
Patrick Lally, of the National Housing Trust for Historic Preservation, gave even odds for passage this year of the federal historic tax credit program amendments in a bill (H.R. 3159) introduced by Reps. Phil English (R-Penn.) and William Jefferson (D-La.).
The Trust, Preservation Action, and others have rallied behind the bill, said Lally, who described it as “very targeted and very tailored to a specific outcome in tax credit policy.” He said the bill’s provisions would increase the historic credit’s utility for community revitalization efforts, make it more usable for smaller projects, and unlock more of its potential for housing.
No hearings have been held on H.R. 3159, but the bill now has 62 co-sponsors, including several House tax-writers. “We’re pretty pleased where we are right now,” Lally said.
A broader bill (H.R. 5420) introduced in May by Rep. Russ Carnahan (D-Mo.) contains similar amendments to the historic credit program but would also remove impediments to the combined use of federal and state historic credits.
Earlier this year, new markets tax credit advocates were disappointed that a proposed one-year extension of the program through 2008 was dropped from tax reconciliation legislation.
“The problem with reauthorization effort right now is that there isn’t a sense of urgency because the program does not expire until the end of next year,” said Randall Kahn of Capmark Finance Inc.
Kahn said it would be difficult at this time to get Congress to agree to a five year extension of the tax credits, which had been the preferred approach. Last September, Rep. Ron Lewis (R-Ky.) and Sen. Olympia Snowe (R.-Me.) introduced parallel bills to extend the NMTC program from 2008 through 2012, with $3.5 billion in new tax credits to be allocated in each of those five years.
Kahn said that the best avenue for prolonging the program appears to be another effort at a one-year extension, perhaps using pension legislation, or a smaller extenders bill as a vehicle.
