Representatives Pat Tiberi (R-OH) and Richard Neal (D-MA) introduced a bill that would establish a permanent, fixed 9% minimum tax credit rate for new construction and substantial rehabilitation projects assisted by the Low Income Housing Tax Credit (LIHTC) program. The bill would also establish a permanent, fixed 4% minimum tax credit rate for the acquisition of existing properties. H.R. 1142 was introduced on February 26 and has drawn bipartisan support with 20 cosponsors.
A minimum 9% tax credit rate was included in the Housing and Economic Recovery Act of 2008, but it expired for rental units placed in service after December 31, 2013. The American Taxpayer Relief Act of 2012 allowed any project receiving a LIHTC allocation before January 1, 2014 to qualify for the fixed 9% credit. There was no Congressional action in FY13 and FY14 to renew the fixed 9% value. The Tax Increase Prevention Act of 2014 provided a fixed 9% minimum, but it only extended the rate through December 31, 2014. H.R. 1142 would apply to buildings placed in service after December 31, 2014.
As enacted in the Tax Reform Act of 1986, the value of tax credits awarded to projects is based on a formula that uses the federal cost of borrowing to determine the credit rate. As the cost of borrowing declines, the value of tax credits also declines. For instance, the actual 9% rate for March 2015 is 7.42%. By establishing permanent, fixed 9% and 4% minimum rates, H.R. 1142 aims to protect LIHTC developments from reductions in investor equity used to subsidize construction or acquisition of affordable housing.
When introducing the bill, Mr. Tiberi said in a statement, “I’ve seen first-hand the benefits of the Low Income Housing Tax Credit during my visits to low income housing developments in my district. It’s an effective, successful program, and by making a permanent floor on the credit rate, we’re creating certainty for developers to create construction and renovation jobs while increasing housing availability for more low income families, veterans, seniors, and individuals living with disabilities.”
Mr. Tiberi and Mr. Neal introduced a similar bill in the 113th Congress (see Memo, 5/30/14)
H.R. 1142 was referred to the House Committee on Ways and Means.
Text of the bill is at http://www.gpo.gov/fdsys/pkg/BILLS-114hr1142ih/pdf/BILLS-114hr1142ih.pdf
More information about the Low Income Housing Tax Credit program is on page 5-32 of NLIHC’s 2015 Advocates’ Guide, http://nlihc.org/library/guides