After healthcare legislation recently failed to reach a vote in the House, both the Trump Administration and Congress are feeling increased pressure to achieve a major legislative victory through tax reform. However, there is now doubt about their ability to pass comprehensive tax legislation, since it may be more complicated than the failed healthcare proposals. The House has been following Speaker Ryan’s draft tax reform blueprint as a guide to develop tax legislation that is revenue neutral, but major obstacles– including deep divisions on a destination-based tax system known as “border adjustment” – are now further complicated without the elimination of $1 trillion of Affordable Care Act taxes, which would have been enacted under the House’s healthcare bill.
The Trump Administration has signaled that they are leading tax reform negotiations with Congress, with Treasury Secretary Steven Mnuchin continuing to promise that legislation reform will be signed by August. This emphasis on pushing a tax bill through Congress quickly has prompted speculation about whether the ultimate outcome will be politically expedient tax cuts rather than an ambitious overhaul of the nation’s tax code. Despite the uncertainty around this legislative agenda, tax reform proposals are likely to emerge over the coming months, and it is incumbent on Housing Credit and New Markets Tax Credit (NMTC) stakeholders to urge Congress and the Administration to preserve, strengthen and expand these key housing and community development programs in any tax legislation.