Call to Action on Tax Bill Containing Housing Credit Provisions; President Biden Releases FY 2025 Budget
After sailing through the House of Representatives on January 31, 2024, by a 357-70 vote, the Tax Relief for American Families and Workers Act (H.R. 7024) has stalled in the Senate. Republican Senators have raised concerns regarding some of the House provisions—most notably—the expansion of the child tax credit (CTC). Finance Committee Ranking Member Mike Crapo (R-ID) also noted his concerns about efforts to move the bill without giving the Finance Committee an opportunity to consider it under “regular order.”
At a March 12th hearing, Finance Committee Chairman Ron Wyden (D-OR) noted the strong House vote and stated that “The Senate needs to get this done.” He said he would “talk to anybody who wants to work in good faith to move this forward quickly.” Chairman Wyden and Ranking Member Mike Crapo (R-ID) have discussed issues around the CTC and there were press reports that both offered proposed changes to the CTC that were rejected. Senator Crapo has said he hopes to resolve concerns on his side, but it is unclear if further discussions between Chairman Wyden and Ranking Member Crapo will take place this week. The Senate is scheduled to begin its spring recess the week of March 25th.
We are concerned that time is running out for the tax bill and our housing credit provisions that are included in it. Members of Congress currently are completing their “must pass” bills and then will turn most of their attention to the November elections. We need your help in contacting the Senators in your state or where you have properties to urge them to act on the tax bill as soon as possible. It is crucial that they stand up in support of the bill and ask Leadership to schedule floor time for its consideration.
It is critical that the housing provisions in H.R. 7024 are enacted before Congress begins its 2025 consideration of expiring tax provisions passed as part of the 2017 Tax Cuts and Jobs Act. With action on the bond threshold test and allocation increase this year, we will be in a much better position next year to improve and make permanent our provisions. Please reach out to Senate Republicans and Democrats and let them know how important these provisions are to their states. Please let us know if we can assist you with your contacts.
On March 11, 2024, President Biden sent his $7.3 trillion FY 2025 Budget to Capitol Hill. The President’s Budget is not binding on Congress but does indicate the Administration’s spending and revenue priorities for the year, including a proposal to expand and enhance the Low-Income Housing Tax Credit (LIHTC). In conjunction with the FY 2025 Budget, the Treasury Department released its Green Book, which contains detailed descriptions of the revenue proposals in the Biden Budget, as well as revenue estimates for the tax proposals.
The $36.6 billion LIHTC proposal in the Budget is very similar to the President’s FY 2024 proposal, which totaled $28.2 billion. Specifically, the Budget proposes an increase in annual credit dollar amounts (ACDAs) to $4.37 per capita for 2025, subject to a minimum of $5,039,154 for smaller states. For 2026, the per capita minimum amount would be $4.99, and the state minimum amount would be $5,754,271. For 2027 and later years, the ACDAs would be the amounts for the prior year, indexed for inflation.
In identical carryovers from the FY 2024 Budget, the new Budget includes a key industry priority that reduces the bond financing requirement from 50 percent to 25 percent on a permanent basis (effective for buildings placed in service in taxable years beginning after December 31, 2024); repeals the qualified contract provision (effective from the date of enactment); and repeals the ROFR safe harbor provision, replacing it with an optional safe harbor (effective for agreements entered into, or amended, after the date of enactment). The Budget also proposes $18.8 billion for a new Neighborhood Homes Tax Credit, which is intended to, in conjunction with the LIHTC proposal, expand the supply of safe and affordable housing, bring new units to market, and help curb cost growth across the broader rental market.
The FY 2025 Budget calls for a number of revenue raisers, including many proposals that are carried over from President Biden’s FY 2024 Budget. The revenue raisers include a 25 percent minimum tax on households worth more than $100 million, an increase in the corporate income tax rate from 21 percent to 28 percent, an increase in the top individual income tax rate to 39.6 percent for individuals making over $400,000; an increase in the stock buyback excise tax from 1 percent to 4 percent; an increase in the capital gains rate from 20 percent to 39.6 percent for individuals earning more than $1 million; elimination of the carried interest tax break and a limitation on the deferral of gain from like-kind exchanges.
On the spending side of the ledger, the Budget includes a robust, affordable housing agenda to address the supply shortage. Housing and community development highlights include the following:
$7.5 billion for Project-Based Rental Assistance funding
$2.9 billion for the Community Development Block Grant Program.
$1.25 billion for the HOME Investment Partnerships Program.
$50 million for a HOME down payment assistance pilot program for first-generation and low-wealth first-time homebuyers.
$13 billion in mandatory funding for the Housing Choice Voucher Program.
$10 million for the Eviction Protection Grant program.
$4.1 billion to prevent and reduce homelessness with Homeless Assistance Grants.
$505 million for Housing Opportunities for Persons with AIDS.
$1.1 billion for Native American Programs to support tribal efforts to expand affordable housing, improve housing conditions and infrastructure, and increase economic opportunities for low-income families, with $150 million allocated to prioritize activities that advance resilience and energy efficiency in housing-related projects.
$350 million for states, local governments, and nonprofits to reduce lead-based paint and other health hazards in the homes of low-income families, with $67 million specifically allocated to prevent and mitigate housing-related health hazards in HUD-assisted housing, such as lead-based paint, fire safety, and mold.
$26.5 billion to support HUD-assisted multifamily properties and Public Housing to serve 2.2 million low-income families.
$86 million for state and local fair housing enforcement organizations and to further education, outreach, and training on rights and responsibilities under federal fair housing laws.
Although Biden Administration officials are appearing before key committees of Congress to discuss the FY 2025 Budget, Congress currently is focused on passing the remaining FY 2024 spending bills to avoid a shutdown of the federal government on March 22nd. It is likely that lawmakers will not have the momentum to quickly pivot to FY 2025 spending bills, but the President’s Budget does provide a preliminary window into the Administration’s policy priorities heading into the election year.