1. 2017 CAHEC Partners Conference Federal Legislative Discussion
Wednesday, May 17, 2017
Greensboro, North Carolina
Robert Rozen

2. The Future of the Low-Income Housing Tax Credit __________________________________
Tax Reform – Threats and Opportunities
Increased Resources
Program Modifications

3. House
238 Republicans
193 Democrats
Republicans can lose 22 votes and still pass legislation
Senate
52 Republicans
48 Democrats
Republicans can only lose 2 votes and still pass legislation

4. Tax Reform -- The Continuing Threat _________________________________________
Eight year bipartisan effort in Congress
Driven by desire to reduce top corporate income tax rate
Key trade off: lower tax rates paid for by “broadening the tax base” which means eliminating special tax provisions including business tax credits such as the LIHTC

5. Tax Reform
Republican majority expected to process tax reform through budget reconciliation process to facilitate passage through Senate with simple majority vote
Nevertheless, assuming Democrats stick together, the margin is quite narrow. Republicans can only lose 2 Senators and still pass legislation.
That gives each Senator tremendous power and will likely result in compromises on most controversial aspect of legislation.

6. Tax Reform – Major Initiatives _________________________________________
Trump Administration Plan
April Outline
15% corporate tax rate while proposing “elimination of tax breaks for special interests”
Administration says higher economic growth will offset costs
Almost all of the individual tax cuts accrue to highest income households
Scored by Tax Policy Center as costing $7 trillion over ten years

7. Tax Reform – Major Initiatives (cont
House Republicans
June 2016, House GOP conference releases tax reform blueprint to serve as policy position for campaign
20% maximum tax rate on corporations
20% border adjustable tax that raises significant revenues
Immediate expensing of capital investments
No deduction for net interest costs
Scored by Tax Policy Center as costing $3 trillion over ten years

8. Tax Reform – Major Initiatives (cont
Senate
No plan yet

9. Tax Reform -- LIHTC, Risk and Opportunity _____________________________________
The December decision of Ways and Means GOP to retain the LIHTC was enormously important
Given Finance Committee chairman Hatch’s cosponsorship of 50% increase bill, optimism for Senate is warranted
Nevertheless, the program can be saved, yet severely undermined
lower corporate rates
tax exempt bonds
interest deductibility
write-off period for real estate
tax capacity of LIHTC investors

10. Will There be Tax Reform. When
Prospects for tax reform have declined since immediately after the election
Not likely during 2017
Increasing odds that if anything is enacted it will be tax cuts rather than tax reform
Maximum corporate rate unlikely to be below 25%

11. The Campaign for More LIHTC Resources __________________________________
S Cantwell – Hatch legislation
50% cap increase
18 miscellaneous changes to section 42
H.R Tiberi--Neal legislation
Virtually identical to Senate bill but without 50% cap increase

12. Major Provisions of LIHTC Legislation
Permit up to 20% of units in project to serve tenants up to 80% of AMI as long as average resident qualification is 60% of AMI
Standardize income eligibility rule for rural properties to facilitate more rural Housing Credit development
Permit over-income tenants to stay in renovated property if they originally were income qualified
Conform Housing Credit student rule to HUD student rule
Create 50% basis boost for units serving ELI tenants
Change ROFR to purchase option

13. Major Provisions of LIHTC Legislation
Replace “10 Year Rule” prohibition with 10-year rule basis limitation
Include relocation expenses in eligible basis
Clarify that states have authority to determine the definition of a community revitalization
Prohibit elected officials from influencing allocation award
Allow states to award 30% “basis boost” to bond financed developments
Minimum 4 percent Housing Credit rate for acquisition and tax- exempt bond projects
Eliminate basis adjustment for using energy efficiency credits

14. Tax Reform -- LIHTC -- Risk and Opportunity
Ways and Means GOP has informally decided to retain the LIHTC
Considering modification to credit rate calculation to offset reduced value of Housing Credit due to lower corporate tax rate
Given Finance Committee chairman Hatch’s cosponsorship of 50% increase bill, optimism for Senate is warranted
Nevertheless, the program can be saved, yet severely undermined
lower corporate rates
tax exempt bonds
interest deductibility
write-off period for real estate
tax capacity of LIHTC investors

15. Threats on Horizon __________________________________
Early 2018 – Government Accountability Office report on cost of development
Opposition from those who oppose the federal government spending funds to affordable housing development
Continuing cuts in HUD programs