Tax Cuts
Congress quickly came to an agreement on a final tax package. Of most important note to members, the Low Income Housing Tax Credit is NOT expected to be affected by the dividend provisions.
The final version of the Jobs and Growth Reconciliation Tax Relief Act (HR 2) costs $350 billion. It was approved in each chamber and is on its way to the President. The good news is the dividend measures in HR 2 will not affect the LIHTC. It largely adopted the House position of lowering top tax rates on dividends and capital gains to 15 percent through 2008; rates on the lower brackets are limited to 5 percent through 2007 and dropped to zero in 2008. It does not include the worrisome “excludable dividend amount” calculation on the corporate side that many multifamily industry colleagues feared would soften demand for the credits.
For a brief summary of the bill, see Ways and Means Chairman Bill Thomas’ press release at
https://waysandmeans.house.gov/news.asp?formmode=release&id=80.
Hearings
The House Financial Services Committee approved noteworthy bills this week. Among them were the HOPE VI Program Reauthorization and Small Community Mainstreet Rejuvenation and Housing Act (HR 1614), sponsored by Rep. James Leach (R-IA) and the American Dream Downpayment Act (HR 1276), sponsored by Rep. Katherine Harris (R-FL). (See May 9 column below for additional details on these bills.) The timing for consideration by the full House is not yet known.
The first of a series of hearings on the HANF Act (HR 1841), which would convert tenant-based Section 8 to a state-administered block grant, began this week in the House Financial Services Subcommittee on Housing and Community Opportunity. Assistant Secretary of Public and Indian Housing Michael Liu testified in support of the legislation. For a copy of his submitted statement, please see
https://financialservices.house.gov/media/pdf/052203ml.pdf.
Under questioning, Liu rejected the most widespread criticisms of the HANF proposal. Liu rejected arguments that the block grant would not keep pace with inflation. He noted that the HOME program has increased 14 percent since its inception. He asserted states would not be able to divert HANF funds for other uses because the legislation would make clear it was for tenant-based rental assistance and homeownership and because there would be enough HUD staff monitoring he program to prevent it. Liu said the HUD staff currently administering the Section 8 program would be retained. Subcommittee Chairman Ney noted a key argument used in support of the block grant was the Section 8 recapture issue. Ney asked whether the new Section 8 allocation provisions in the 2003 omnibus appropriations bill addressed the recapture problem. Liu admitted the new law does address recapture, but he said that the law didn’t address Section 8’s complexity, utilization, administrative, and over-subsidy problems, nor do the new law’s provisions allow states to coordinate housing assistance with other federal social service programs. Liu has repeatedly emphasized during his testimony that the current Section 8 program loses $1 billion per year in over payment of subsidies and $1 billion due to recaptures.
