Luring Investors Advocates Hope for Movement in Congress on LIHTC Proposals
By Caitlin Jones
5 min read
Tax Credit Advisor, February 2010: Several new developments have encouraged advocates that Congress may act in the near future on improvements to the federal low-income housing tax credit program in order to help attract more investors.
On January 11, in comments at a Washington, D.C. conference sponsored by the National Council of State Housing Agencies, participants on panels noted the possibility that some of the pending proposed tax law changes to support the LIHTC program and housing bonds might be included in a final tax extenders bill or jobs bill approved by Congress.
In December, the U.S. House of Representatives passed an extenders bill (H.R. 4213) that would extend the current federal Section 1602 credit exchange program for 9% credits for one year on the current terms. It would also extend the federal new markets tax credit program through 2010 as well as a higher tax credit rate for certain historic rehabilitation expenditures. (For details, see Tax Credit Advisor, January 2010, p. 34.) “We are hopeful the Senate will pick up and pass the House-passed extenders bill very quickly,” said Garth Rieman, of the National Council of State Housing Agencies (NCSHA).
At the same time, there are so many moving pieces in Washington it’s virtually impossible to accurately predict what will or won’t happen regarding legislation. Moreover, the future picture is further muddied by the upset election of Scott Brown to the U.S. Senate from Massachusetts, depriving Senate Democrats of the critical 60th vote needed to shut off Republican filibusters and advance legislation. This could well alter the 2010 legislative agenda and timetable in Congress.
Extenders, Jobs Bills
Currently, H.R. 4213 doesn’t include any of the other key legislative changes being pushed by Rental ACTION, an industry coalition of more than 150 supporting organizations including NH&RA. Rental ACTION is lobbying for provisions to: (1) expand the exchange program to 4% housing credits as part of an extension; (2) extend the carryback period for investors for housing credits to five years; and (3) modify the passive loss rules so that taxpayers in certain business entities, such as community banks organized as S corporations, can utilize the housing credit. NCSHA has its own package of proposed changes that include an extension and expansion of the exchange program plus extensions and enhancements relating to housing bonds.
In December, the House also passed a jobs bill (H.R. 2847) that omits any LIHTC or housing bond provisions. But advocates hope that the House might craft and approve a supplementary package of jobs-oriented tax provisions and include some of the LIHTC and bond proposals, and that the Senate might do the same when it crafts its own expected jobs bill with a tax component. President Obama has said he wants a final jobs bill to include tax provisions to help reduce unemployment.
The Senate Finance Committee has primary responsibility for writing the Senate version of a tax extenders bill or the tax provisions in a jobs bill.
As of January 20, 15 senators, all members of the Senate Finance or Banking Committees, had signed a “Dear Colleague” letter to Finance Committee Chairman Max Baucus (D-Mt.) and Ranking Member Charles Grassley (R-Iowa), in which they recommended that Congress enact a one-year extension of the exchange program with expansion to 4% housing credits; an extension of the carryback period to five years for LIHTCs generated by new investments; and an extension of the carryback period to five years for LIHTC investments made during 2008-2010, provided the investor reinvests the tax savings.
The letter also encourages the Finance Committee leaders to “consider additional innovations that would attract new investors to affordable housing.”
In late December, Baucus and Grassley issued a joint statement saying they intend to address expiring tax provisions – extenders – in early 2010.
Comments by HUD Official
At the NCSHA conference, Carol Galante, Deputy Assistant Secretary for Multifamily Housing at the U.S. Department of Housing and Urban Development, agreed that the LIHTC has been a “tremendous program.” At the same time, though, she noted that the Obama Administration already did a lot for rental housing policy in 2009 and will be focusing on reducing the deficit going forward. Galante did not say whether the Administration supports the pending LIHTC and bond proposals. She urged the industry to “stand up” the LIHTC program by trying to come up with alternative and innovative actions to bolster the program that don’t require major changes or legislative “fixes.”
“When we look at the tax credit program and what should be done, what the Administration’s position should be moving forward, it’s important to keep in context that we have a deep concern about the looming deficits,” said Galante, previously a major owner/manager of LIHTC properties. She reported that federal agencies have been instructed to “tighten their belts” in preparing their proposed budgets for federal Fiscal Year 2011. The White House is expected to unveil its FY 2011 budget request in early February.
Administration achievements for rental housing in 2009 cited by Galante included the enactment of the federal credit exchange and “TCAP” programs, full funding of HUD Section 8 contract renewals, and increased budget funding for rental assistance. Later, she also mentioned that HUD has taken steps to make LIHTCs work better with HUD programs.
