Groups Strive to Finish Crafting LIHTC Proposals

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Tax Credit Advisor, August 2009: More than 20 organizations supportive of the low-income housing tax credit (LIHTC) are seeking to reach consensus on a limited final package of proposed legislative changes to the program designed to boost equity investment.

As of 7/16/09, tentative consensus agreement had been reached on two proposals. Discussions were continuing on a third about amending the current passive loss rules.

Among the groups that have participated in the meetings on the package are the Affordable Housing Tax Credit Coalition, Housing Advisory Group, National Association of Home Builders, National Council of State Housing Agencies, and Affordable Housing Investors Council.

Washington, DC attorney Richard Goldstein, a partner in Nixon Peabody LLP and counsel to the Affordable Housing Tax Credit Coalition, said the organizations feel additional legislative changes are needed because “the [LIHTC] market is still not back to where it needs to be to provide enough equity for all the deals that need it.”

One of the two tentative proposals pertains to the “carryback rules.” The proposal would permit existing LIHTC investors to carry back for up to the past five tax years, instead of the current one, unused LIHTCs from tax returns they file in 2008, 2009, and 2010, provided that these investors make new LIHTC investments equal in amount to their tax savings realized from the carryback of unused credits. For new investors, the proposal would extend the carryback period to five years, without any reinvestment requirement.

The second tentative proposal would extend the current LIHTC “credit exchange” program for one year. It would also permit the exchange by state housing credit (HCAs) agencies of so-called 4% housing credits Ð credits generated by tax-exempt bond financing Ð subject to certain limitations. At present only 9% housing credits can be exchanged.

Once consensus is reached on all elements, the package of legislative proposals is expected to be outlined in a joint letter signed by organizations endorsing it that is submitted to Congress.