House Infrastructure Package Includes Enterprise Tax Priorities
On July 1, the House passed its infrastructure package (first introduced on June 22), The Moving Forward Act, H.R. 2, which includes an expansive section to strengthen and expand the Low-Income Housing Tax Credit (Housing Credit) and other Enterprise tax priorities. Enterprise applauds the inclusion of many of our Housing Credit and New Markets Tax Credit priorities and the House’s leadership on advancing policies that include housing as infrastructure.
Housing Credit & Housing Bond Provisions
The Moving Forward Act includes all of the ACTION Campaign’s legislative priorities for Covid-19 relief, such as a permanent 4 percent Housing Credit rate, as well as several priorities that ACTION partners have been pursuing through regulatory relief. Many of the provisions are also based on those in the bipartisan Affordable Housing Credit Improvement Act (AHCIA), S.1703 and H.R.3077, and other provisions are new Housing Credit proposals. The Moving Forward Act also includes provisions related to multifamily housing bonds (Housing Bonds).
- Sec. 90601. Extension of period for rehabilitation expenditures (page 2254). Extends the rehabilitation expenditure deadline by 12 months (from 24 to 36 months) for projects receiving an allocation after December 31, 2016 and before January 1, 2022. As proposed in NCSHA letter to IRS.
- Sec. 90602. Extension of basis expenditure deadline (page 2254). Extends the 10 percent expenditure rule deadline by 12 months (from 12 to 24 months after the date of allocation) and the placed in service deadline by 12 months (from the end of the second calendar year following the year of allocation to the end of the third calendar year following the year of allocation) for projects receiving a Housing Credit allocation after December 31, 2016 and before January 1, 2022. As proposed in NCSHA letter to IRS.
- Sec. 90603. Tax-exempt bond financing requirement (page 2256). Lowers the “50 percent” threshold for tax-exempt bond financed developments to qualify for the 4 percent Housing Credit to 25 percent for buildings financed by an obligation issued in calendar years beginning after December 31, 2019.This is based on an ACTION priority for Covid-19 response.
- Sec. 90604. Minimum credit rate (page 2256). Sets a permanent minimum 4% Housing Credit rate for tax-exempt bond financed developments, effective for buildings placed in service after January 20, 2020. This is an ACTION priority for Covid-19 response and based on a provision from the AHCIA.
- Sec. 90605. Increases in State allocations (page 2257). Makes permanent the temporary 12.5 percent increase in Housing Credit allocation authority enacted in 2018 and increases the annual Housing Credit allocation authority and small state caps, phased-in over two years, by 27 percent in 2021 and by 62 percent after that. This is a similar to an ACTION priority for Covid-19 relief and a provision in the AHCIA.
- Sec. 90606. Increase in credit for certain projects designated to serve extremely low-income households (page 2258). Provides a 50 percent basis boost for the portion of properties serving extremely low-income (ELI) households (available to properties where 20 percent or more of the units are designated for ELI households). It also provides a 10 percent increase in state Housing Credit allocations for these properties. The basis boost portion of this provision is in the AHCIA.
- Sec. 90607. Inclusion of Indian areas as difficult development areas for purposes of certain buildings (page 2260). Provides developments in Indian areas with a 30 percent basis boost by defining Indian areas as difficult development areas (DDAs); effective for buildings placed in service after December 31, 2019. This is an ACTION priority for Covid-19 response and based on a provision from the AHCIA.
- Sec. 90608. Inclusion of rural areas as difficult development areas (page 2262). Provides developments in rural areas with a 30 percent basis boost by defining rural areas as difficult development areas (DDAs); effective for buildings placed in service after December 31, 2019. This is an ACTION priority for Covid-19 response and based on a provision from the AHCIA.
- Sec. 90609. Increase in credit for bond-financed projects designated by housing credit agency (page 2263). Enables state housing agencies to provide a 30 percent basis boost as needed for properties financed by Housing Bonds. This is an ACTION priority for Covid-19 response and based on a provision from the AHCIA.
- Sec. 90610. Repeal of qualified contract option (page 2263). Repeals the qualified contract option for properties which receive Housing Credit allocations after December 31, 2019, and modifies the qualified contract pricing on existing properties (receiving Housing Credit allocations before January 1, 2020) to be fair market value as determined by housing credit agencies. This is based on the Save Affordable Housing Act (S.1956/H.R.3479).
- Sec. 90611. Prohibition of local approval and contribution requirements (page 2266). Prohibits the consideration of local or elected official support or opposition or local government contributions in Qualified Allocation Plans. This is based on a provision in the AHCIA.
- Sec. 90612. Adjustment of credit to provide relief during COVID–19 outbreak (page 2267). Provides the option of claiming 150% of otherwise allowable credits for the first or second taxable year of a building’s credit period for building’s whose first year in the credit period ends between July 1, 2020 July 1, 2022, which also have construction or leasing delays occurring on or after January 1, 2020. The credit boost is recaptured in subsequent years pro rata. This is a new proposal that has emerged in response to Covid-19 to accommodate credit adjuster issues.
- Sec. 90613. Credit for low-income housing supportive services (page 2269). Creates a new tax credit for investors equal to 25 percent of a qualified supportive housing contribution, with a max contribution amount of $120,000 per low-income unit. This is a new proposal.
- Sec. 90104. Volume Cap on Private Activity Bonds (page 2124). Increases the ceiling on private activity bond volume cap, thereby allowing states to issue more multifamily Housing Bonds. This is a new proposal.
Other Tax Priorities
The Moving to Forward Act would also permanently extend and expand the New Markets Tax Credit (NMTC) (page 2170). The package would:
- Make permanent the NMTC and provide $5 billion in annual allocation authority, indexed to inflation.
- Provide $3.5 billion in additional allocation to low-income communities to aid in their recovery from the economic downturn, including $500 million toward the pending allocation round (2019), an additional $2 billion available in 2020, and an additional $1 billion in 2021. These changes would set the allocation level to $4 billion in 2019, $7 billion in 2020, and $6 billion in 2021. The extra $500 million for 2019 would be awarded to CDEs that were either (a) not going to receive an award otherwise or (b) were going to receive an award that is smaller than their request.
- Encourage the use of NMTC in Indian Country, defining certain Tribal Statistical Areas as low-income communities, authorizing the use of the NMTC for community facilities or infrastructure projects benefiting native populations, and establishing a proportionality goal for Tribal communities that is along the lines of a provision in current law for rural areas.
- Provide NMTC investors with relief from the Alternative Minimum Tax (starting with NMTC investments made after December 31, 2020).
The Housing section of the Moving Forward Act also includes the enactment of the Neighborhood Homes Credit (page 2277), which was first introduced in the Neighborhood Homes Investment Act (H.R. 3316). The Neighborhood Homes Credit is designed to stimulate private investment to build or rehabilitate owner-occupied, single family homes in distressed communities.
Additional Affordable Housing Provisions
The Moving Forward Act would also authorize more than $100 billion in affordable housing infrastructure:
- $70 billion for the Public Housing Capital Fund;
- $10 billion for Community Development Block Grants (CDBG);
- $5 billion for the HOME Investment Partnerships Program;
- $5 billion for the Housing Trust Fund;
- $2.5 billion for the Capital Magnet Fund;
- $1 billion for the USDA’s Multifamily Preservation and Revitalization Demonstration program; and
- $1 billion Native American Housing Block Grant program.
The bill now moves to the Senate; however, the Senate is expected to introduce is own infrastructure package and it is considered unlikely for Congress to pass an infrastructure package of this size in the near future. On June 25, Senate Finance Committee Ranking Member Ron Wyden (D-OR) and Senator Maria Cantwell (D-WA) introduced The Emergency Affordable Housing Act of 2020, S.4078, standalone Senate companion legislation to the Housing Credit provisions included in The Moving Forward Act.
Meanwhile, the Senate also continues to consider its response to the House passed HEROES Act, i.e. the next Covid-19 response package, which it is expected to address before the August recess.
The Moving Forward Act will hopefully set a precedent that Housing Credit, Housing Bond, NMTC, and other affordable housing and community development provisions should be included in any future infrastructure package.