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House Infrastructure Legislation Includes Major LIHTC Boosts, Permanency for NMTC, Increase in HTC Percentage and Delay of ITC Phasedown
Sweeping infrastructure legislation released today in the House of Representatives includes provisions to establish a permanent minimum 4 percent rate for the low-income housing tax credit (LIHTC), increase the annual LIHTC allocation amount, temporarily reduce the 50 percent test for bond-financed housing to 25 percent and permanently extend the new markets tax credit (NMTC) at $5 billion (with additional allocation in 2020 and 2021). H.R. 2, the Moving Forward Act, also would increase the historic tax credit (HTC) applicable percentage from 20 percent to 30 percent for five years and delay the phasedown of the renewable energy investment tax credit (ITC) until 2026.
Among the affordable housing provisions, the bill would increase the annual 9 percent LIHTC allocation amount from $2.81 to $4.56 per capita and boost the state private activity bond ceiling from $105 per capita to $135 per capita. Both provisions would increase the small-state minimum. The legislation would also provide a 150 percent first-year LIHTC award to address issues related to COVID-19 and provide several basis boosts for LIHTC properties, similar to proposals in the Affordable Housing Credit Improvement Act (H.R. 3077/S. 1703). It would also provide more than $100 billion in supplemental appropriations for various HUD programs, mostly notably $70 billion for the public housing capital fund.
The NMTC would be permanently extended, with an additional $500 million allocation for the 2019 round (for a total of $4 billion) and temporary increases for 2020 (for a total of $7 billion) and 2021 (a total of $6 billion) before settling at $5 billion 2022, with an annual adjustment for inflation. The bill would also allow the NMTC permanently to be taken against the alternative minimum tax, and instructs Treasury to ensure that tribal areas receive a proportional allocation, similar to existing policy for non-metro areas.
The legislation would increase the HTC from its current 20 percent to 30 percent for 2020 through 2024, before beginning a phasedown for most HTC properties back to 20 percent through 2027. The bill would also permanently increase the HTC percentage for certain small projects to 30 percent, and several other proposals from the Historic Tax Credit Growth and Opportunity Act (H.R. 2825/S. 2615).
The bill would delay the phasedown of the renewable energy ITC until 2026 and allow many uses of the production tax credit to cover facilities that begin construction by the end of 2025. A section-by-section summary of the bill is available.
The affordable housing provisions will be discussed at the Novogradac Affordable Housing Friday Forums, which begin June 26. The proposed NMTC extension will be a focus of the July 23 Novogradac 2020 New Markets Tax Credit Virtual Conference. The ITC and PTC provisions will be discussed at the Novogradac 2020 RETC Industry Update Webinar, Thursday.