On July 21, the Senate Committee on Finance will mark up a draft tax extenders bill that includes a provision that would set the minimum tax credit rate at 9% for housing projects that receive Low Income Housing Tax Credits (LIHTC) before 2017. Without this extension, LIHTC projects would continue to receive a floating rate based on a formula that uses the federal cost of borrowing to establish the tax credit rate. For example, the July applicable tax credit rate is 7.53%.
The Housing and Economic Recovery Act of 2008 (HERA) provided a minimum 9% rate for LIHTC developments, but the provision was not permanent, necessitating several Congressional extensions. Most recently, lawmakers extended the minimum tax credit rate at the end of last Congress for projects that were allocated tax credits before January 1, 2015, but not necessarily placed in service. However, the value of the one-year LIHTC floor for 2014 was limited and had no immediate benefit.
The draft bill also includes a two-year renewal of a provision, which expired at the end of 2011, allowing recipients of the military basic allowance for housing to exclude that allowance from their income for the purpose of determining eligibility for LIHTC units. The exclusion would apply only to “qualified” LIHTC buildings, defined as those located in counties with military bases that had increases in personnel greater than 20% between 2005 and 2008. The provision would also apply to LIHTC buildings in adjacent counties. NLIHC opposes this exclusion of income, as it allows higher income households access to LIHTC units when the LIHTC program should be made more affordable to lower income households.
In addition, the draft bill includes a two-year extension of the New Markets Tax Credit, which seeks to leverage private investment in low income communities by providing a 39% tax credit spread over seven years on qualified equity investments made to acquire stock in corporation, or a capital interest in a partnership that is a “qualified community development entity.”
The mark-up will be held at 11 am ET in room 215 of the Dirksen Senate Office Building.
A description of the Senate Finance Chairman’s mark of the draft bill is at http://www.finance.senate.gov/imo/media/doc/JCX-101-15%20Extenders%20Markup.pdf
Webcast of the mark-up will be at http://www.finance.senate.gov/hearings/hearing/?id=19ebd115-5056-a055-6476-dfa0734f0773
More information about the LIHTC program is on page 5-32 of NLIHC’s 2015 Advocates’ Guide, http://nlihc.org/sites/default/files/Sec5.10_LIHTC_2015.pdf