Reconciled tax reform bill preserves Housing Credits and Housing Bonds
Following strong advocacy by NAHMA members and industry colleagues, a reconciled tax reform bill was announced today with favorable adjustments for affordable housing. The Conference Committee concluded negotiations to combine the House and Senate versions of the “Tax Cuts and Jobs Act,” which would overhaul the tax code but largely preserve the Housing Credit.
In particular, the reconciled bill preserves the Low-Income Housing Tax Credit (LIHTC) despite eliminating many other credits and deductions. Importantly, the reconciled bill also preserves the tax-preferred status of Private Activity Bonds (PABs), including Multifamily Housing Bonds, which trigger the 4% credit rate responsible for more than 50% of production under the LIHTC program. Previously, the PAB tax status had been preserved in the Senate bill but eliminated under the House version.
While the most harmful provisions for affordable housing have been removed from the bill, the Conference Committee agreed to reduce the corporate tax rate to 21% beginning January 1, 2018, which would lower the value of Housing Credits purchased by institutional investors. In addition, the reconciled bill presents a missed opportunity to incorporate aspects of the widely-supported “Affordable Housing Credit Improvement Act” (
H.R. 1661 /
S. 548), such as provisions to allow for income-mixing and to expand the credit allocation by 50% over 10 years.
Finally, the Joint Committee on Taxation last week reported that a previous draft of the bill could add over $1 trillion to the federal deficit (after accounting for projected growth resulting from tax cuts). The added deficit increases the likelihood that Congress and the Administration will ramp up efforts to cut spending in coming years to offset the deficit, particularly with regard to domestic programs.
NAHMA will keep members updated as final voting occurs next week. To read our recent
NAHMAnalysis on tax reform, please click here. To tell us about your advocacy efforts throughout tax reform, please click
here.
Spending negotiations likely to hit pushback in Senate
After extending federal funding until December 22, 2017, lawmakers this week continued negotiations with limited time before the Holiday Recess. A Joint Resolution under consideration by the House would appropriate increased defense spending for fiscal year 2018, but continue to fund other agencies at mostly fiscal 2017 levels through January 19
th, 2018, setting up another fiscal cliff early in the new year.
The bundled
legislation would include a five-year extension of the Children’s Health Insurance Program (CHIP), but would fail to appropriate supplemental spending for disaster recovery. If approved by the House, the bill would likely be rejected by Senate Democrats, who are calling for parity between defense and non-defense funding levels, as well as an immigration fix.
House Committee votes to curtail Housing Trust Fund contributions
This week, the House Financial Services Committee approved a bill that could restrict GSE payments to the Housing Trust Fund (HTF) and Capital Magnet Fund (CMF). Titled the “Jumpstart GSE Reform Act” (
H.R. 4560), the legislation would prohibit Fannie Mae and Freddie Mac contributions to the HTF and CMF for any year during which all of the GSEs’ quarterly profits were not transferred to the Treasury Department.
The GSE net profit transfer is currently required by a joint agreement called “preferred stock purchase agreements,” or PSPAs, which were put into place as the GSEs came under conservatorship during the economic collapse of 2008 and amended in 2012.
Because the PSPAs also require Fannie Mae and Freddie Mac to reduce to zero any capital reserves by the start of the new year, FHFA Director Mel Watt recently testified that we was working with Treasury to explore avenues for the GSEs to retain “buffer” funds. However, under H.R. 4560, the GSEs would not be able to make HTF contributions – seen as “discretionary obligations” by Committee Chairman Jeb Hensarling (R-TX) – if they do not continue making their full dividend payments to Treasury.
The Committee approved the bill by a 33-27 vote and rejected an amendment by Ranking Member Waters (D-CA) to remove the HTF and CMF provisions from the bill. The bill still requires approval from the full House of Representatives.
