On December 3, the House passed by a vote of 378 to 46, the Tax Increase Prevention Act of 2014 (H.R. 5771). The bill would provide the minimum 9% credit to Low Income Housing Tax Credit (LIHTC) projects allocated tax credits before January 1, 2015, but not necessarily placed in service. In 2008, Congress established a minimum 9% rate, but the provision expired at the end of 2013. Without this extension, these LIHTC projects would receive a floating rate based on a formula that uses the federal cost of borrowing to establish the credit rate; for example, the December rate is 7.51%.
However, the value of the one-year LIHTC floor for 2014 is limited. While it is good to keep the minimum floor within the larger package of tax extenders for future action, there is no immediate benefit to the provision. A blog posted on the Affordable Rental Housing A.C.T.I.O.N. (A Call to Invest in Neighborhoods) Campaign website says, “… the 2014 Housing Credit allocation has been distributed and the vast majority of deals have already closed, meaning retroactively approving a minimum credit rate will provide no benefit.”
This extension was a priority for the ACTION Campaign that includes hundreds of national, state, and local partners, including NLIHC. The week of November 24, the ACTION Campaign sent a letter to David Camp (R-MI), Chair of the House Committee on Ways and Means, explaining that the “floating rate…makes it difficult for states to allocate scarce resources as effectively, impacting the communities and residents that rely on them,” and that “[p]roperties underwritten with the floating rate generally either require other funding sources to help fill the financing gap or must charge rents at levels that allow for higher levels of debt service.”
H.R. 5771 must pass the Senate before heading to President Barak Obama for his signature. The Administration has signaled support for the bill.
The ACTION Campaign’s letter is at http://bit.ly/14FVIV2.
The ACTION Campaign’s blog on the House tax extenders bill is at http://www.rentalhousingaction.org/blog/congress-considering-one-year-tax-extenders-package-that-would-not-benefit-the-housing-credit