Housing Credit Provisions Included in Senate Build Back Better Act
On December 11th, in anticipation of Senate action on the Build Back Better (BBB) Act, Finance Committee Chairman Ron Wyden (D-OR) released text of the tax provisions that will be included in the bill. All decisions on the tax title have not been made, so this is not the final version that will be considered by the Senate. Outstanding items, among others, include a decision on changes to the cap on state and local tax deductions. The good news is that the text released by Chairman Wyden includes a substantial investment in the LIHTC program.
Along with our industry partners, we have been working with our Senate champions and the Senate Finance Committee to clarify and fine tune the significant LIHTC provisions that were in the House-passed Build Back Better Act. We also suggested changes to the House bill to further enhance affordable housing production and are pleased that the Senate bill includes some of our suggestions. Significantly, in the newly released Senate text, the annual 9 percent allocation increase is extended another year through 2025. This will provide an opportunity for the allocation increase to be considered along with a number of other tax provisions that are scheduled to expire after 2025.
The Wyden text includes the following affordable housing credit provisions:
Increases the annual 9 percent credit allocation as follows:
Calendar Year 2022: $2.93 per capita; $3,346,875 small state minimum.
Calendar Year 2023: $2.98 per capita; $3,425,625 small state minimum.
Calendar Year 2024: $3.04 per capita; $3,504,375 small state minimum.
Calendar Year 2025: $3.86 per capita; $4,481,950 small state minimum.
Reduces the “50 percent bond financing test” to 25 percent for five years (2022-2026).
Provides a permanent 30 percent basis boost for properties located in Native American areas.
Provides a permanent maximum 50 percent basis boost for developments serving extremely low-income households, with an 8 percent minimum set aside for ELI properties taking advantage of the boost. The basis boost option for 9 percent LIHTC properties would be limited to no more than 13 percent of the state’s housing credit ceiling. For 4 percent properties, no more than 8 percent of a state’s annual Private Activity Bond cap can be used. The Wyden text includes technical clarifications to the House-passed language.
In addition, the text includes the following provisions:
Repeals the Qualified Contract option for properties receiving LIHTC allocations after January 1, 2022, and modifies the specified statutory price for those properties that still make use of the qualified contract option.
Modifies and clarifies rights related to building purchases (Right of First Refusal).
Creates a Neighborhood Homes Investment Tax Credit to encourage building or rehabilitation of affordable homes (for home ownership) in distressed neighborhoods.
Creates a New Markets Tax Credit for low-income communities in tribal areas.
Allows the Section 48 Energy Tax Credit to be taken on renewable energy equipment without reducing the eligible basis for the LIHTC.
This week, the Senate parliamentarian will review the tax provisions, including the LIHTC provisions, in what is known as the Byrd Bath process. Under that process, a determination will be made as to whether a provision violates the Senate’s rules for what can be included in a budget reconciliation bill.
Following the Byrd Bath process, timing for Senate consideration is uncertain. Majority Leader Charles Schumer (D-NY) continues to press for action before Christmas, but it is unclear whether there will be the time or the votes to accomplish that. With the 50-50 Senate split, all 48 Democrats and two Independents will have to be on board. To date, Senator Joe Manchin (D-WV) continues to express his view that consideration of the bill should be held off until 2022, but discussions to persuade him otherwise are ongoing.
We will keep you posted on any developments, but we do want to again thank you for all you have done to help garner support for a strong affordable housing package. You make a difference, so keep up the good work!