Sigh of Relief: Fiscal Cliff Act Includes Housing, New Markets Credit Provisions

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The affordable housing, community development, and renewable energy industries received a boost with the inclusion of “extender” provisions in the American Taxpayer Relief Act signed into law by President Obama on January 2.

The measure (H.R. 8, P.L. 112-240), which in part addressed the “fiscal cliff,” also postponed until March 1 scheduled across-the-board federal spending cuts – or sequestration.

The law includes a provision extending the deadline for non-federally subsidized, newly constructed or substantially rehabilitated low-income housing tax credit projects to qualify for the minimum 9% credit rate. The extension covers projects receiving allocations of 9% housing credits before 2014. Prior law limited the 9% rate to projects placed in service before December 31, 2013.

The change only applies for allocations made from states’ housing credit authority from 2013 or earlier years, and not to forward commitments of 2014 or later credit authority. Projects with post-2013 allocations will have to use the prevailing monthly variable credit rate, which in January 2013 was 7.36%.

LIHTC industry officials welcomed the extension though expressed disappointment that the minimum 9% rate was not made permanent.

“We are very, very pleased,” said Garth Rieman of the National Council for State Housing Agencies. He said the provision allows the 9% rate for projects that probably wouldn’t have been able to place in service by year-end 2013. “Maintaining the 9% rate to those projects is going to mean more equity,” he noted. Rieman said the change also means “that some deals that might not have been able to go forward will be able to go forward.”

Syndicator Bob Moss of Boston Capital, speaking January 16 at an NCSHA conference, estimated the change will mean nearly $1 billion in additional tax credit equity for projects. “If the 9% rate hadn’t been fixed I think [2013] would be a tough year,” he said.

The act renewed the new markets tax credit program for calendar years 2012 and 2013, with $3.5 billion in allocation authority for each year. It also extended the carryover period for unused new markets tax credits through 2018. Authority for the NMTC program had lapsed at year-end 2011. The Community Development Financial Institutions Fund plans to announce NMTC allocation awards from the 2012 application round in April.

In addition, the act:

• Resurrects a 2008 statutory change to exclude Basic Allowance for Housing (BAH) payments received by military personnel from their household income for purposes of determining income eligibility for LIHTC buildings. To be covered, a building must be in a county containing a qualified military installation or an adjacent county. Besides nine specified military installations, other military installations qualify if the installation (1) has at least 1,000 assigned armed forces personnel and (2) saw a minimum 20% increase in the number of assigned personnel between December 31, 2005 and June 1, 2008. The provision applies to income determinations for projects that (1) receive housing credit allocations before 2014, or (2) if bond-financed, are placed in service before 2014.

• Extends the availability of the Section 45 renewable energy production tax credit to wind power projects placed in service before 2014, and to other kinds of qualified energy facilities that begin construction before 2014. The ability to claim the 30% investment tax credit in lieu of the production tax credit is available for facilities beginning construction before 2014.Extends the energy-efficient new homes tax credit for 2012 and 2013. This tax credit, of up to $2,000 per unit, is available to contractors and developers for the costs of new energy-efficient homes (including multifamily rental units) that meet certain energy-savings requirements.

(Act: http://tinyurl.com/a2jzgzw)