Congress Considering Disaster Tax Relief Legislation
While the full extent of the damage from Hurricanes Harvey, Irma and Maria may not be known for some time, it is already clear that many more resources beyond those already provided will be needed in order to rebuild the homes and communities that have been destroyed. Though the bulk of these resources will likely be delivered as Community Development Block Grant – Disaster Recovery (CDBG-DR) funds, which have a proven track record of helping to rebuild communities, it is critical that Congress also provide tax relief for the communities that have been impacted. It is more difficult to rebuild lost affordable housing without the Low-Income Housing Tax Credit (Housing Credit) and to revitalize the most distressed neighborhoods without the New Markets Tax Credit (NMTC).
In the aftermath of Hurricane Katrina Congress established a Gulf Opportunity (GO) Zone, which was eligible for a package of tax credits that included an increased allocation of the Housing Credit, NMTC and GO Zone Bonds. These credits were critical to the success of the recovery effort and allowed the CDBG-DR grants that were allocated at the time to go even further by leveraging private capital through public-private partnerships.
Enterprise’s work in the Gulf Coast gave us firsthand experience using affordable housing and community development tax credits to rebuild, and a deep understanding of their importance for full recovery. For example, the Faubourg Lafitte development – which transformed 78 dilapidated, aging public housing buildings into a vibrant mixed-income community – used Housing Credits provided by the GO Zone Act as its largest financing source.
Despite the clear impact of these tax benefits after previous disasters, and repeated calls for these credits from city officials on both sides of the aisle, no corresponding legislation was enacted after Superstorm Sandy or the many other natural disasters in recent years.
Last night the House considered legislation introduced by Ways and Means Chairman Kevin Brady (R-TX-8) to provide tax relief to the communities affected by Hurricanes Harvey, Irma and Maria. However, this tax relief legislation is more limited in scope than the GO Zone Act or other proposals from recent years, and does not include additional allocations of the Housing Credit, NMTC or tax-exempt bonds. Though the legislation was part of a larger package that did not advance, it may be taken up again.
Earlier this month, Rep. Tom Reed (R-NY-23) reintroduced the Natural Disaster Tax Relief Act (H.R. 3679) to provide a broader tax relief package to federally declared natural disasters from 2012 through 2015. The legislation includes an additional Housing Credit allocation that is the greater of 50 percent of the state’s annual Housing Credit ceiling or $8 per person in the disaster area, $500 million in additional NMTC allocation for each year, increased historic rehabilitation credits and an issuance of disaster area recovery bonds. This legislation had the support of 41 bipartisan co-sponsors in the last Congress, representing 17 states, as well as bipartisan support in the Senate. But by only covering disasters from 2012 through 2015 in the reintroduced version of this legislation, Rep. Reed is leaving the door open for a lead sponsor from one of the more recently affected states to introduce an updated version of the bill while providing a reminder that the other disasters from recent years are still awaiting relief. The legislation introduced by Chairman Brady, which does not provide retroactive relief or the full slate of benefits, may be broadened if the bill advances through Congress.
Enterprise is calling on Congress and the Administration to provide increased allocations of the Housing Credit and NMTC as part of any recovery package. We are also part of broad coalition of advocates calling on Congress to advance these reforms among other affordable housing and community development provisions. Organizations may sign on to support these principles through Wednesday, September 27.