House GOP Tax Reform Bill Retains Housing Credit But Repeals Housing Bonds, NMTC
Today House Ways and Means Committee Chairman Kevin Brady (R-TX) released highly-anticipated comprehensive tax reform legislation, a major step in advancing the White House and Congress’s top policy priority.
The legislation, named the “Tax Cuts and Jobs Act” (see bill text and section-by-section summary) would make sweeping reforms to many aspects of our current tax system, including individual, corporate and international. Of particular significance to affordable housing and community development, the bill would:
- Lower the top corporate tax rate from 35 percent to 20 percent, effective January 1, 2018, and eliminate dozens of tax expenditures in order to achieve the lower rate.
- Retain the Low-Income Housing Tax Credit (Housing Credit) with no proposed changes. None of the broadly-supported provisions from the Affordable Housing Credit Improvement Act (H.R. 1661) were included – a missed opportunity to strengthen the program.
- Eliminate the tax exemption on private activity bonds, including multifamily Housing Bonds. This tax exemption allows bond-financed multifamily projects to access 4 percent Housing Credits. Over half of Housing Credit developments utilize tax-exempt bonds and 4 percent Housing Credits. Eliminating the tax exemption would eliminate these bond/4 percent transactions after 2017.
- Eliminate New Markets Tax Credit (NMTC) allocation authority after 2017. The NMTC is currently authorized through 2019, meaning this legislation would rescind two years of allocation authority that had already been made available.
- Repeal the historic rehabilitation credit beginning in 2018.
- Phase out solar, wind and numerous other energy credits.
While we were pleased to see that the Low-Income Housing Tax Credit was retained in the legislation, overall the legislation would have a devastating effect on affordable housing and community development.
Eliminating Housing Bonds, which provide critical financing to nearly half of all Housing Credit projects, will seriously threaten affordable housing production and preservation. The lower corporate rate will also negatively impact investment in affordable housing without offsetting adjustments.
Additionally, eliminating the NMTC, a successful public-private partnership that attracts private capital to some of the nation’s most distressed communities, will hinder efforts to revitalize communities and promote economic opportunity.
Chairman Brady will develop a “chairman’s mark” over the weekend, which will include modifications to the legislative text released today – and provides an opportunity to weigh in to encourage changes that will strengthen affordable housing and community development programs. The House Ways and Means Committee will begin its mark-up of the legislation on Monday, November 6, which may last several days before it is sent to the House floor.
Meanwhile the Senate is expected to release its own legislation as soon as next week, with a mark-up the week of November 13. The goal is for each chamber to pass tax reform legislation on the floor by Thanksgiving, work out the differences in a conference committee in December, and have the President sign tax reform into law by the end of the year.
This is an aggressive timeline and significant obstacles to passage remain, including opposition that is already mobilizing in reaction to many of the proposals in the tax reform bill; the cost of the bill, which at this point is unknown; and a crowded legislative calendar for the remaining months of the year, which also includes passing an appropriations bill by December 8 when the current continuing resolution expires, providing additional funding for disaster recovery and raising the debt ceiling.
These days before the House Ways and Means Committee mark-up are a critical time to weigh in with members of Congress urging them to:
- Preserve the tax exemption on multifamily Housing Bonds.
- Make adjustments to offset the impact of a lower corporate rate on Housing Credit investment to ensure that the amount of Housing Credit equity per development is not substantially decreased. More detailed proposals on the adjustments needed are forthcoming, but in the meantime we encourage advocates to simply convey the message that modifications will be needed.
- Include the provisions to strengthen the Housing credit from the Tiberi-Neal Affordable Housing Credit Improvement Act (H.R. 1661). This legislation has overwhelming bipartisan support and would make significant strides towards making the program more streamlined and flexible, many of which are low- or no-cost.
- Retain the NMTC, a successful program with a proven track record and strong bipartisan support.
The ACTION Campaign recently sent a letter to Congress and the Administration in October on behalf of 2,150 national, state and local organizations and businesses in support of the Housing Credit and Housing Bonds in tax reform. The letter thanked congressional and administration Republican leadership for recognizing the value of the Housing Credit in the “Unified Framework for Fixing Our Broken Tax Code,” and urged lawmakers to not only retain the Housing Credit in tax reform, but to also make the following modifications to modernize our affordable housing delivery system:
- Retain the tax exemption on multifamily Housing Bonds,
- Enact the Affordable Housing Credit Improvement Act, and
- Make adjustments to the Housing Credit to ensure its production potential is not negatively impacted by other changes in tax reform.
The NMTC Coalition also sent a letter to Congress last month on behalf of more than 2,100 organizations urging Congress to expand and make the NMTC permanent in tax reform.
We encourage you to share these letters with your members of Congress to urge support for these programs in the Chairman’s Mark. We will also be reinforcing these messages throughout the tax reform process in the House and Senate.
If you have any questions, please contact Emily Cadik, Director, Public Policy, at firstname.lastname@example.org or 202-403-8015.