House GOP Tax Reform Bill Retains Housing Credit, But Repeals Housing Bonds

Yesterday House Ways and Means Committee Chairman Kevin Brady (R-TX) released the “Tax Cuts and Jobs Act” (see bill text and summary), which would:

  • Lower the top corporate tax rate from 35 percent to 20 percent, effective January 1, 2018.
  • Retain the Low-Income Housing Tax Credit (Housing Credit) with no proposed modifications.
  • Eliminate the tax exemption on private activity bonds, including multifamily Housing Bonds, which provide critical financing to roughly half of all Housing Credit developments.

Despite maintaining the Housing Credit, the bill would devastate production under the program by eliminating private activity multifamily Housing Bonds. 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.

Coupled with the lower corporate tax rate, which would reduce investor interest in the Housing Credit without other changes to the Credit, the loss of Housing Bonds could reduce annual production by up to two-thirds annually.

Next Steps

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 the Committee to restore multifamily Housing Bonds and make other changes to offset the negative impact of other tax reforms. 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.

The Senate is expected to release its own legislation as soon as next week, with a mark-up the week of November 13. We do not expect the Senate bill to mirror the House bill and will be working to ensure that the Senate understands the devastating impact of the House’s bill on affordable housing. 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.

Action Needed

Now is a critical time to weigh in with members of Congress urging them to:

  • Preserve the tax exemption on multifamily Housing Bonds. Without Housing Bonds, Housing Credit development could be reduced by as much or more than 50 percent annually.
  • 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.

ACTION has released a statement that we encourage you to send to your representatives.

Visit the ACTION Campaign website for more information and advocacy materials.

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