Senate Holds Hearing on Climate, Energy-Efficient and Resilient Housing
This week, the Senate Banking, Housing and Urban Affairs Committee held a hearing on climate change with energy-efficient and resilient housing. Witnesses included Ms. Ruth Ann Norton, President & CEO of the Green & Healthy Homes Initiative, Ms. Katie Tubb, Research Fellow at the Center for Energy, Climate, and Environment, The Heritage Foundation, and Ms. Krista Egger, Vice President, Building Resilient Futures, Enterprise Community Partners. The hearing focused on how to make homes safer, more energy and water efficient, and more resilient to natural disasters. Chairman of the Committee, Senator Sherrod Brown (D-OH), stated in his opening testimony that “20 percent of US greenhouse gas emissions come from residential buildings and most homes in the United States have some risk of climate change induced disasters. Fully, one third of homes, 35 million of them are considered to be at high risk.” Ms. Norton stated the smartest path forward to addressing energy efficiency in housing is through the creation of a flexible housing home repair fund that ensures healthier and more equitable opportunities for all. However, the ranking member of the Committee, Sen. Pat Toomey disagreed with the notion that the federal government can push these efforts through energy efficiency mandates and subsidies. “This is the wrong approach. Efficiency mandates are not free. Consider California’s mandate that many newly constructed homes and buildings have to have solar panels. The New York Times notes that adding solar panels and a battery to a new home can raise its costs by $20,000 or more.” he said. Ms. Tubbs agreed with Sen. Toomey, stating “federal weatherization subsidies and efficiency mandates have delivered underwhelming results and do not account for the diverse preferences of the American people. Unfortunately, too many of these programs do not look back at real world use and consumer experiences. While this can be humorous at times such as the Department of Energy’s assumption that Americans use their washing machines 392 times per year, which is more than once per day to justify their costly efficiency standards, it can also lead to phenomenal waste of resources.”
Sen. Jack Reed (D-RI), who recently introduced the bipartisan Green Retrofits Act (S. 2361), a bill that would make energy efficient upgrades to HUD assisted multi-family homes, asked the witnesses if there’s a real need for green retrofits and affordable multifamily home? “Unequivocally, yes. There is a need for a green affordable retrofits, particularly for HUD assisted properties, which have the greatest deferred maintenance needs and the greatest needs for — for upgrades. And we’ve seen that building retrofits can improve efficiency, which improves the amount or reduces the amount of utility bills which residents face every day.” said Ms. Egger. Sen. Tina Smith (D-MN) agreed and commented that “almost 40 percent of renters are living in housing built before 1970. So these are again folks that are going to benefit the most from these sorts of energy retrofits.” While discussing the main barriers to more widespread adoption of technologies and products by low- and middle-income households and small businesses that improve energy efficiency and add resiliency, Ms. Egger noted that even when investments pay off quickly, many families can’t afford the initial investment. “So a tax credit can be an important way for families that make that initial investment, and it will accelerate the payback period for a positive return by lowering the energy bills in a home and being able to get families across that threshold to affordability to make that change.”
To view the full Senate hearing, click here.
LIHTC Likely Protected from Global Minimum Tax Implementation
As global minimum tax implementation guidelines are being established, serious concerns have been raised regarding the potential impact of the global minimum tax on multinational corporations’ eagerness to invest in LIHTC and other community development tax credits. Concerns stem from the way the Organization for Economic Cooperation and Development’s (OECD) Pillar Two model rules for implementing the global minimum tax would account for the LIHTC and other business tax credits in effective tax rate calculations. If these credits are included in the calculation, it would bring the effective tax rate for many major investors well below the 15 percent threshold, at which point investors would be required to pay a top-up tax to foreign countries in which they also do business. Recent statements form Treasury officials, including Lily Batchelder, who serves as Treasury’s Assistant Secretary for Tax Policy, seem to indicate that the LIHTC investments would be protected. “The Treasury Department has been engaging with the OECD to “clarify the treatment of general business credits under the minimum tax,” said Batchelder during her recent remarks to the D.C. Bar Association. “We are confident that the value of many of our general business credits is preserved under the OECD rules, and we have established a process with the OECD for working towards additional clarifications…because of the way those investments are structured and accounted for, the income or loss and the income tax consequences of those investments typically will be excluded from the effective tax rate calculation — so those credits generally should not be impacted.” Batchelder stated. The Treasury Department and the OECD are expected to make this clarification which would allow for the exclusion of Housing Credits using the equity method from the OECD effective tax rate calculations, and if the other countries participating in the global minimum tax agreement do not issue conflicting guidance. NAHMA will continue to monitor this issue.
To view the remarks by Assistant Secretary Batchelder for the D.C. Bar Association, click here.