Bipartisan Tax Breakthrough: AHCIA Provisions Secured in Congressional Negotiations

The chairs of the House Ways and Means Committee and Senate Finance Committee have completed their negotiations on a bipartisan tax bill. We wanted to share the great news that two of our priority provisions from the Affordable Housing Credit Improvement Act (AHCIA) are included in the package.  

Specifically, the 12.5 percent allocation increase that expired at the end of 2021 for the 9 percent credit is restored for 2023, 2024, and 2025, and the bond financing threshold required to access the 4 percent credit is reduced from 50 percent to 30 percent for 2024 and 2025. *It is estimated that the additional 12.5% - 9 percent allocation in 2023-25 and lowering the bond financing threshold to 30% over 2024-25 will result in the production of an additional 202,573 units. 

Senator Maria Cantwell and Majority Leader Chuck Schumer worked with the industry to get the bond test included and hoped it would be at 25%, but it came down to not enough pay-fors or revenue to get the test to 25%. We still consider the 30% bond test a significant success for the program. The decision to sunset the provisions after 2025 will align these provisions with the 2025 expiration of measures enacted as part of the 2017 Tax Cut and Jobs Act (TCJA).  

As we reported earlier, negotiations on the tax package initially focused only on an expanded child tax credit and three business tax provisions enacted in TCJA. Additions to the package appeared unlikely, but our congressional champions and industry mounted a massive campaign to send the message that tax legislation moving through Congress must include bipartisan affordable housing tax credit provisions.  

Coordinated messaging by the industry and our Hill champions, along with support from the White House economic team, helped drive the inclusion of the LIHTC in the final package. Your advocacy was instrumental, and we thank you for your quick response to the call for action. Significantly, only a small number of provisions were added to the initial package. You made a difference. We also cannot laud enough the efforts of Senator Cantwell to ensure the LIHTC was included in the package. Her determination, along with the efforts of our LIHTC champions, cannot be overstated. 

While we are over the first hurdle, there are several challenges ahead, including what legislative vehicle will be used to advance the bill and whether there will be sufficient votes to pass even a small bipartisan tax package. We will continue to work closely with our champions on the path forward and will keep you posted on any developments. Again, thank you for all you do.

*Estimate per Novogradac & Company LLC