Congressional Seesaw Exchange, NMTC Extensions Teetering

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Tax Credit Advisor, March 2010: The prospects for quick enactment of provisions to extend the low-income housing tax credit (LIHTC) exchange program and the new markets tax credit (NMTC) program brightened for a bit in February before becoming clouded.

On February 11, U.S. Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Charles Grassley (R-Iowa) released draft jobs legislation that would extend the Section 1602 exchange and NMTC programs. However, Senate Majority Leader Harry Reid subsequently unveiled a smaller jobs bill, one without extensions of the exchange and NMTC programs. He indicated that tax incentives might be included in a later bill.

The draft bill would:

  • Extend the Section 1602 exchange program for one year for “9%” housing credits. State agencies would have until 1/1/12 to provide these funds to projects.
  • Extend the new markets tax credit through 2010.
  • Continue current higher tax credit rates for rehabilitation expenditures during 2010 for old buildings located in the Gulf Opportunity (GO) Zone. These higher rates are 26% for historic buildings and 13% for pre-1936 structures.

In December, the U.S. House of Representatives passed a bill (H.R. 4213) that would provide for one-year extensions of the 9% LIHTC exchange program, the NMTC program, and the higher GO Zone rehab tax rates. It also passed a separate jobs bill (H.R. 2847) that omits any LIHTC or housing bond provisions.