On July 21, the Senate Committee on Finance voted 23 to 3 to extend a package of tax provisions that were set to expire, including two provisions that would set minimum tax credit rates for housing projects that receive Low Income Housing Tax Credits (LIHTCs) before 2017. The bill would extend the minimum tax credit rate at a fixed 9% for new construction and substantial rehabilitation projects. It would also establish a minimum fixed 4% tax credit rate during the extension for acquisition projects. This 4% rate initially was left out of the bill, but was later added to the modified bill that Finance Committee Chair Orrin Hatch (R-UT) introduced at mark-up. Without these extensions, LIHTC projects would continue to receive floating tax credit rates based on a formula that uses the federal cost of borrowing, which for July are 7.53% and 3.23%, respectively.
As previously reported (see Memo, 7/20), the bill also includes a two-year extension of the New Markets Tax Credit, and a two-year extension of a provision allowing recipients of the military basic allowance for housing to exclude that allowance from their income for the purpose of determining eligibility for LIHTC-assisted housing.
Two amendments that would have affected the LIHTC program were filed, but neither were brought to a vote. Senators Maria Cantwell (D-WA) and Pat Roberts (R-KS) filed an amendment that mirrors their proposed S. 1193 that would make the 9% tax credit rate permanent and establish a 4% fixed tax credit floor rate for acquisition projects. Senator Schumer (D-NY) introduced an amendment that would have increased LIHTC availability for communities impacted by recent federally declared disasters. Senator Schumer also filed an amendment to permanently extend the New Markets Tax Credit, but the amendment was not brought up for a vote.
Chair Hatch stated, “I believe we should be working to make a number of these tax extender provisions permanent. However, for the sake of making this mark-up less contentious and to ensure we can more quickly provide much needed relief to taxpayers, I’ve agreed to defer litigating the issue of permanence until a later time. But, make no mistake, as Chairman of this committee, my goal is to see many of these provisions made permanent.”
An amendment, offered by Senators Debbie Stabenow (D-MI) and Dean Heller (R-NV), was adopted that prevents homeowners with underwater mortgages on their principal place of residence from being taxed on any amount of mortgage principal forgiveness they receive as part of an arrangement made prior to 2017.
A description of the bill is at http://www.finance.senate.gov/imo/media/doc/JCX-103-15%20%20Chairman's%20Modification.pdf
The archived webcast of the hearing is at http://www.finance.senate.gov/hearings/hearing/?id=19ebd115-5056-a055-6476-dfa0734f0773