April 15th, 2013
As previously reported, the House Committee on Ways and Means is currently considering ways to reform the Internal Revenue Code. As part of this effort, the Committee has created 11 tax reform working groups which will each review specific portions of the Tax Code. The Working Groups provided an opportunity for the general public to submit comments for their consideration – those comments were due today, April 15, 2013.
The comments submitted on behalf of the Affordable Housing Tax Credit Coalition can be found here. The comments were drafted by legislative counsel Rick Goldstein and reviewed by the new AHTCC Legislative Committee led by Committee chairman Todd Crow of PNC Real Estate.
Please contact Coalition legal counsel Rick Goldstein (202-585-8730 or email@example.com) or Coalition legislative counsel Jim Miller (202-489-3711 or firstname.lastname@example.org) with any questions concerning this submission or AHTCC’s legislative priorities.
April 10th, 2013
On April 10, 2013, President Obama released his FY2014 budget which included five provisions related to the Low Income Housing Tax Credit (Housing Credit) program. Specifically, the budget provisions included are:
- States would be empowered to convert some private-activity-bond volume cap into authority to allocate additional Housing Credits. This proposal would give each State more flexibility to address its highest affordable housing priorities.
- To serve households in greater need and to provide incentives for creating mixed-income housing, the Administration proposes to allow projects to comply with an income-averaging rule under which the income limits for at least 40 percent of the units in a project could average to not greater than 60 percent of area median income (AMI). None of these units could be occupied by an individual with income greater than 80 percent of AMI. A special rule would apply to rehabilitation projects that contain units that receive ongoing subsidies (e.g., rental assistance, operating subsidies, or interest subsidies) administered by the U.S. Department of Housing and Urban Development or the U.S. Department of Agriculture. If a tenant, when admitted to such a property, had an income not more than the current income limit for the building and if, when the tenant’s income is measured for purposes of Housing Credit qualification, the income is greater than the current income limit for the building but not more than 80 percent of AMI, then the proposal would make it possible for that tenant to remain in residence without impairing the Housing Credits earned by the project. The provision would apply to elections under section 42(g)(1) of the Internal revenue code that are made after the date of enactment.
- Third, the Administration proposes to change the formulas that produce the rates for the 70-percent-present- value credits and for those 30-percent-present-value credits that are subject to the Housing Credit allocation cap. In lieu of the nine-percent floor that is scheduled to sunset for allocations made after 2013, the revised formulas would produce annual allocated-credit rates that are somewhat higher than the rates that today’s present-value formulas produce and would result in a more consistent benefit over the interest rate spectrum than under current law. The proposal would apply to allocations made after December 31, 2013.
- Fourth, the Administration proposes to add preservation of federally assisted affordable housing to the selection criteria for Housing Credit allocation. This factor would join the ten criteria that state allocating agencies must include in the qualified allocation plans that they follow in deciding which applicants receive Housing Credits. The proposal would apply to allocations made in calendar years beginning after the date of enactment.
- Finally, to increase the demand for Housing Credits, the Administration proposes to make them beneficial to real estate investment trusts (REITS). If a REIT is entitled to Housing Credits for a taxable year, the REIT would be able to designate as tax exempt some of the dividends that it distributes to its shareholders. the maximum amount of dividends that could be designated in this fashion would be the quotient of the REIT Housing Credits for the year, divided by the highest corporate tax rate. Thus, the after-tax result for the REIT’s shareholders would resemble the result as if the REIT had distributed both a taxable dividend and the Housing Credits themselves. If the REIT does not have sufficient earnings and profits to support a dividend for this entire amount, it could carry forward indefinitely the ability to make the designation. A REIT that receives such a tax-exempt dividend would itself be able to distribute to its shareholders that amount of tax-exempt dividends. The proposal would be effective for taxable years that end after the date of enactment.
Item numbers one and three are new for the FY14 budget. AHTCC counsels believe item numbers two and four are repeat proposals from the FY13 budget. AHTCC never took formal positions on the latter two proposals though AHTCC believes these proposals to be evidence of the Administration’s support for the Housing Credit generally.
If you have questions concerning the President’s FY14 budget or AHTCC legislative proposals please contact Coalition legislative counsel Jim Miller (202-489-3711 or email@example.com) or Coalition legal counsel Rick Goldstein (202-585-8730 or firstname.lastname@example.org).