Housing Credits Predicted to Decrease Under Tax Bill

Legislation | December 18, 2017 | by Linda Couch

Congress appears poised to enact a sweeping tax cut bill, which would lower the corporate tax rate from 35% to 21%, thus lowering the value of Low Income Housing Tax Credits by a predicted 15 – 20%.

The good news in the bill is that it does not eliminate the tax exemption of private activity bonds, which the House-passed tax bill did. Because private activity bonds are the only way to trigger use of 4% Low Income Housing Tax Credits, enactment of the House bill would have resulted in the loss of about 50% of all Housing Credit production and preservation resources.

Passage of the Senate/House conference agreement of the massive tax cut bill is imminent, and President Trump hopes to sign the bill by December 25.

LeadingAge is thrilled that the conference agreement does not effectively end the 4% Housing Credit program, but we have significant misgivings about the final bill. First, the bill does not provide any adjustment to offset the negative impact the lower corporate tax rate would have on Housing Credit production in this bill. Second, the bill does not include any of several provisions LeadingAge was advocating be included to improve the Housing Credit program.

For example, the final tax bill does not include a basis boost for communities serving a high percentage of extremely low-income people; it does not include an income averaging provision, which would have helped the Housing Credit program serve lower income households than it currently serves; it lacks provisions to help preserve Housing Credit communities over the long haul; and, it does not include an expansion of the Housing Credit by 50%. Each of these provisions is in S. 548, a bi-partisan Housing Credit improvement and expansion bill long sought by housing advocates.

LeadingAge is proud and grateful for our members who were advocated to retain the 4% Housing Credit program by making calls, writing letters, writing op-eds, and visiting members of Congress. Your voice made a significant impact.