|Housing Credit provisions in the House Ways and Means Proposal that originated in the Affordable Housing Credit Improvement Act include:
· Lowering the 50 percent bond financing threshold test to 25 percent for 7 years (2022 to 2028), for buildings placed in service in taxable years after December 31, 2021
· Increasing the annual Housing Credit allocation by 60 percent, with a 4-year phase-in, followed by an additional 3 years of inflation adjustment
· 2022 to 2025 Phase-In: The allocation increase, which is inclusive of the 12.5 percent temporary allocation increase that is currently set to expire at the end of this year, would be phased in over four years (from 2022 to 2025) with inflation adjustments.
· 2026 to 2028: The 2025 allocation would continue with an additional inflation adjustment from 2026 to 2028.
· Providing a 50 percent basis boost and 10 percent set-aside for developments serving Extremely Low-Income (ELI) households for 10 years (2022 to 2031)
· ELI Building Definition: Buildings serving ELI households are defined as buildings in which at least 20 percent of units are restricted for households whose aggregate household income does not exceed the greater of 30 percent of area median gross income or the federal poverty line.
· Set-Aside: Allocating agencies must allocate a minimum of 10 percent of the annual 9 percent Housing Credit allocation for developments serving ELI households. The higher increase to the Housing Credit allocation beyond the AHCIA’s proposed 50 percent increase is intended to support the provision of these ELI developments.
· Limitation on Basis Boost: The 50 percent ELI basis boost is available for both the 9 percent and 4 percent Housing Credit, and is available for up to 15 percent of the state’s annual Housing Credit allocation and 10 percent of the state’s annual Private Activity Bond volume cap.
· Allowing allocating agencies to provide a 30 percent basis boost for properties financed with 4 percent Housing Credits and Multifamily Housing Bonds if needed for financial feasibility for 7 years (2022 to 2028)
· Allowing allocating agencies to provide a 30 percent basis boost for developments in rural communities and Indian areas if needed for financial feasibility, effective for buildings placed in service after December 31, 2021, with no end date
· Rural Definition: Rural communities are defined as any nonmetropolitan counties or any rural areas designated in a state’s qualified action plan and defined by Section 520 of the Housing Act of 1949.
· Indian Area Definition: Indian Areas are defined in the Native American Housing Assistance and Self Determination Act of 1996. To qualify, buildings must be assisted or financed under the same Act, the project sponsor must be a qualifying Indian tribe or a tribally designated housing entity, or the building must be wholly owned or controlled by a qualifying Indian tribe or tribally designated housing entity.
Additional Housing Credit provisions include:
· Curtailing the use of Qualified Contracts by repealing the option for buildings receiving allocations after January 1, 2022, and, for existing properties, changing the price for the low-income portion of a property to fair market value, determined by the allocating agency taking into account the rent restrictions required to continue to satisfy the minimum set aside requirements.
· Making several modifications to the Right of First Refusal (ROFR) by (i) converting the right to a purchase option for agreements entered into after passage, (ii) allowing the inclusion of partnership assets related to the building in the definition of property; (iii) allowing the option holder to exercise the right of first refusal without requiring the approval of an investor or requiring a bona fide third party offer; and (iv) changing the purchase price to only debt and not debt plus exit taxes. The changes are not intended to change any express provision in an existing agreement.
Other affordable housing proposals include:
· Authorizing a new Neighborhood Homes Tax Credit to incentivize the rehabilitation of deteriorated homes in distressed communities
· Details: Neighborhood Homes Investment Act (NHIA) tax credit authority would be provided to states on a per-capita basis and awarded through a competitive process. NHIA tax credits would be used to cover the gap between development costs and sales prices, up to 35 percent of eligible development costs. Rehabilitated homes must be owner-occupied for investors to receive the credits. Homeowners must be below certain income limitations, sales prices are capped, and qualifying neighborhoods must have elevated poverty rates, lower incomes, and modest home values.
· Permanently extending the New Markets Tax Credit
· Additional Allocation: An additional $2 billion is provided for the 2022 allocation round, and an additional $1 billion is provided for the 2023 allocation round. The allocation is set at $5 billion beginning in 2024 with inflation adjustments.
· Modifying the Historic Tax Credit (HTC)
· Elimination of Credit Adjustment: Effective for properties placed in service in 2023 and after, the depreciable basis adjustment would be changed from 100 percent to zero, eliminating the requirement that the HTC be deducted from a building’s basis at the time of transfer and making the HTC easier to use with the Housing Credit.
· Additional Changes: Additional changes include increasing the HTC credit percentage from 20 to 30 percent temporarily (and permanently for small projects), modifying the definition of ‘substantially rehabilitated,’ modifying the disqualifying lease rules, and changing tax-exempt rules for public schools.
Energy tax credit proposals related to affordable housing include:
· Providing an additional 20 percent credit for the solar Investment Tax Credit if the solar facility isplaced in service in connection with a qualifying low-income residential building project, or an additional 10 percent credit if the facility is located in a low-income community
· Ensuring that Investment Tax Credits taken on a property will no longer reduce the eligible basis for the Housing Credit