November 15, 2017

New Senate Tax Reform Bill Adds Provisions to Strengthen Housing Credit, but Additional Changes Needed

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Senate Tax Cuts and Jobs Act Inforgraphic

Last night Senate Finance Committee Chairman Orrin Hatch (R-UT) released a modified chairman’s mark for the Senate version of the “Tax Cuts and Jobs Act,” which includes many significant changes from the version released last Thursday.

The new version of the bill still retains the Low-Income Housing Tax Credit (Housing Credit);  private activity bonds, including multifamily Housing Bonds; and the New Markets Tax Credit (NMTC). It also adds several no-cost proposals to strengthen the Housing Credit taken from the Cantwell-Hatch Affordable Housing Credit Improvement Act (S. 548), which would: 

  • Allow for a reasonable restoration period after a casualty loss (Sec. 302)
  • Replace the existing nonprofit right of first refusal with a purchase option to help nonprofit sponsors keep properties affordable for the long term (Sec. 303)
  • Clarify that state Housing Credit agencies have the authority to determine what constitutes community revitalization, with broad parameters, for purposes of determining whether properties are eligible for a basis boost by virtue of being located in a Qualified Census Tract and contributing to a “concerted community revitalization plan” (Sec. 307)
  • Prohibit local approval and contribution requirements in order to prevent NIMBY opposition from interfering with Housing Credit development (Sec. 308)
  • Require that states add a selection criteria to their Qualified Allocation Plans for housing that serves the needs of Native Americans (Sec. 401)
  • Rename the Low-Income Housing Tax Credit to the "Affordable Housing Tax Credit" (Sec. 501)

See the ACTION Campaign’s bill summary for more information about these provisions. Because many of the other broadly-supported provisions in the Affordable Housing Credit Improvement Act do have associated costs (though they are in many cases minimal), they were not included in the modified mark due to budgetary pressures. Enterprise and our partners in the ACTION Campaign will continue to look for opportunities to advance them.

The bill does not, however, provide any changes to the Housing Credit to offset the impact that the proposed corporate rate of 20 percent would have on Housing Credit investment. According to Novogradac & Co., absent any change to the Housing Credit, the lower corporate rate would translate into a loss of roughly 200,000 affordable rental homes over the next ten years. We continue to advocate for this change as the Senate continues its markup this week, to ensure that the Housing Credit remains at least as robust a tool as it is today.

The bill also creates opportunity zones to encourage investment in distressed communities, a concept introduced by Senator Tim Scott and Representative Pat Tiberi in the Investing in Opportunity Act (S. 293 and H.R. 828). The proposal, which is modeled after the NMTC, would allow for capital gains deferrals and exclusions in qualified “opportunity funds.” The NMTC would only remain authorized through 2019 in the Senate tax reform bill, however, and would be repealed in the House bill.

Action needed:

  • Thank Chairman Hatch and other Republican members of the Senate Finance Committee for retaining the Housing Credit, Housing Bonds, and NMTC, and for adding provisions to strengthen the Housing Credit. Urge them to retain these programs and provisions in any final tax reform legislation.
  • Urge Republican Senators to weigh in with Chairman Hatch in support of a provision to sustain affordable housing production in light of the lower corporate rate.

Visit the ACTION Campaign’s Advocacy Toolkit for an updated sample letter to Senators and other advocacy resources. See the NMTC Coalition website for resources to support the NMTC.