Senate Finance Committee Advances Tax Bill

CARH’s BROADCAST EMAIL – Legislative Update

November 21, 2017

On November 16th, the full U.S. House of Representatives (House) approved H.R. 1, Tax Cuts and Jobs Act on a party line vote. As reported in CARH’s Broadcast Email on November 3rd, the House legislation severely affects the 9% Housing Credits, even while retaining them. While the House Ways and Means Committee amended H.R. 1 during Committee’s mark-up, none of the changes reverse the bill’s harmful effects on affordable housing over the next decade due to the lowering of the corporate rates, elimination of Private Activity Bonds (PABs), and the use of the 4% Housing Credit.

Also on November 16th, the U.S. Senate Finance Committee (SFC) voted along party lines to approve its version of tax reform legislation. A section-by-section summary can be found here.

The Senate bill would keep the mortgage interest deduction and, unlike H.R. 1, would preserve the New Markets Tax Credit through 2019. Both the House and Senate versions retain the Housing Credit program, but only the Senate legislation protects the use of PABs that make 4% tax credits possible.

Unfortunately, neither the House nor SFC bill makes any adjustments to prevent a negative impact on affordable housing investments that is expected to be created by the decrease in the corporate tax rate from 35% to 20%. The House bill would reduce Housing Credits by up to two-thirds. The SFC bill would reduce the value of Housing Credits by approximately 20%.

Included in the SFC bill are some no-cost provisions from the S. 548, the Affordable Housing Improvement Act, which was introduced by Senators Maria Cantwell (D-WA) and Chairman Orrin Hatch’s (R-UT) and that is strongly supported by the affordable housing industry. Those provisions include:

  • Allowing for a reasonable restoration period after a casualty loss.
  • Replacing the existing nonprofit right of first refusal with a purchase option to help nonprofit sponsors keep properties affordable for the long term.
  • Clarifying 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.”
  • Prohibiting local approval and contribution requirements in order to prevent NIMBY opposition from interfering with housing credit development.
  • Renaming the Low-Income Housing Tax Credit (LIHTC) to the Affordable Housing Tax Credit.

The Senate Finance Committee released the full legislative text after completion of its mark-up. You can view that by clicking here. The full Senate is expected to take up the legislation after Thanksgiving recess. The House and Senate will also have to enter Reconciliation to negotiate the differences between their two bills.

While there are improvements for the affordable housing industry in SFC bill, further improvements are still needed. As CARH has previously mentioned, even with PABs included in the final legislation about 20% of the value of Housing Credits will be lost. View the National Summary chart from Novogradac/NAHB, by clicking here, and the State by State break down by clicking here. Thus, it is critical that CARH members continue to weigh in with their Senators during the holiday break. This is particularly true for members in rural states with Republican members as the legislation was passed on a party line out of the SFC.

To contact your Senators, click here. Social media (i.e., Twitter and Facebook) is also a very effective way to deliver your message. (The contact links also include links to your members of Congress social media pages.) Whichever contact method you use, it is important that you make your message personal. Your message should be one that will show the impact of changes to your portfolio and to rural housing across the country. Specific examples are important especially when legislation is being considered that will negatively impact your business as well as the residents who live in your affordable apartment communities.

Future cuts in appropriations are anticipated under the Budgets provided earlier in the year and anticipated reductions in federal revenue under both the House and SFC bills would put added pressure for future funding cuts. Congress will be very busy with a host of legislative issues to resolve, such as the Fiscal Year (FY) 18 budget, before the year’s end. Your continued and vocal outreach is necessary to help make sure the voice of rural housing is heard.

CARH will continue to keep members apprised of developments as they occur.

If you have any questions or comments, please contact CARH at 703-837-9001 or         

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