Legislative Update 

By
4 min read

Despite Political Turmoil, HTC Advocates Remain Hopeful for a Year-End Tax Bill 

Historic Tax Credit (HTC) advocates are hopeful fiscal year (FY) 2024 spending will be resolved to clear the path forward for a possible year-end tax bill. On September 30, Congress passed a continuing resolution to fund the government through November 17.

As we head into the end of 2023, Congress will need to pass another stop-gap spending measure to avoid a government shutdown and to fund all the remaining FY 2024 spending bills. These bills will likely be bundled into one or more large omnibus spending bills. Legislators will need to reach an agreement on spending, both between parties and within their own respective parties before Congress will be able to determine if a year-end tax bill is possible. HTC advocates are vocalizing their support for the Historic Tax Credit Growth and Opportunity Act [HTC-GO (H.R. 1785/S. 639)], requesting co-sponsorship and inclusion of these provisions in a potential year-end tax bill.

HTC-GO Bill Provisions
Temporary Provisions (House Bill Only)
The HTC-GO legislation temporarily increases the rehabilitation credit (IRC § 47) to address profound challenges facing the historic rehabilitation sector.

This provision increases the HTC percentage from 20 to 30 percent through 2025. The credit percentage is phased down to 26 percent in 2026, 23 percent in 2027 and returns to 20 percent in 2028 and thereafter.

Permanent Provisions
The permanent provisions would make important changes to the HTC to encourage more building reuse and redevelopment nationwide and would be particularly impactful for small, midsize and rural communities. These provisions not only make the credit easier to use and more historic properties eligible, but they also enhance the value of the HTC, enable the creation of more affordable housing and reactivate more vacant/underutilized properties. Additionally, it:

  • Increases the credit from 20 to 30 percent for projects with less than $2.5 million in qualified rehabilitation expenses, making it easier to complete small rehabilitation projects;
  • Lowers the substantial rehabilitation threshold, making more buildings eligible to use the HTC;
  • Eliminates the requirement that the value of the HTC must be deducted from a building’s basis (property’s value for tax purposes), increasing the value of the HTC and making it easier to pair with the Federal Low Income Housing Tax Credit; and
  • Makes the HTC easier for nonprofits to use for affordable housing, homeless services and others by eliminating IRS restrictions that make it challenging to partner with developers.

In October, eight Republicans joined 208 Democrats to “vacate the chair” and oust Speaker McCarthy. House Republican Leadership descended into uncertainty. At the time of publication, the House had not elected a new speaker. This political turmoil will likely delay the passage of spending bills, making consideration of a year-end tax bill more difficult. Though difficult, it is still possible. There is regular communication between Senate Finance Committee Chairman Ron Wyden (D-OR) and House Ways and Means Committee Chairman Jason Smith (R-MO), and both have a desire to get a tax bill passed. Both legislators are optimistic that they will be able to reach an agreement on tax provisions if the urgent and broader policy issues Congress faces are resolved and House and Senate Leadership allow for a year-end tax bill to be considered.

The Historic Tax Credit Coalition (HTCC) along with other industry partners, like National Housing & Rehabilitation Association, continue to work closely with preservation advocates to contact offices and request co-sponsorship of HTC-GO. Advocates helped facilitate over a dozen interactions, tours and meetings with members of Congress during the August recess, resulting in 11 new co-sponsors being added to the House bill in September. A strong demonstration of support for HTC-GO elevates the chances of bill provisions being included in year-end tax legislation. This fall, HTCC is prioritizing outreach to Republican Senators for HTC-GO. If any HTC advocates would like assistance in contacting their members of Congress by sending messages to tax staff, please reach out to [email protected].