Highlights of Tax Proposals in the Proposed Fiscal Year 2013 Budget

Published by Michael Novogradac on Wednesday, February 15, 2012 - 12:00am
  • In his proposed budget for fiscal year 2013, President Barack Obama includes several tax provisions of interest to the affordable housing, community development and renewable energy communities.
  • Extend 100 Percent First-Year Depreciation Deduction. Applies to property acquired and placed in service through 2012 (2013 for property eligible for a one-year extension of the placed-in-service date).
  • Provide Additional Tax Credits for Qualifying Advanced Energy Manufacturing Projects. Authorizes an additional $5 billion of credits, over two years.
  • Provide Tax Credit for Energy-Efficient Commercial Building Property Expenditures.  Tax credit rate of $0.60 to $1.80 a square foot.
  • Reform and Extend Build America Bonds.  Subsidy level of 30% through 2013 and 28% thereafter.  Use of bonds expanded also.
  • Provide a New Manufacturing Communities Tax Credit.  For investment in communities that have suffered a major job loss event.  Could be structured like NMTC.  Provides $2 billion in credits a year for 3 years, 2012 to 2014. 
  • Extend and Modify Certain Energy Incentives.  Extends production and investment tax credit for wind facilities for property placed in service in 2013.  Extends cash grant program for property placed in service in 2012 (including property where construction begins in 2012).  Makes credit refundable for property where construction begins in 2009 to 2013.  
  • Extend and Modify the New Markets Tax Credit (NMTC).  $5 billion a year for two years, allows NMTC from QEIs made after 12/31/ 2011 to offset the AMT. 
  • Low-Income Housing Tax Credit Provisions:
  • Allow LIHTC Properties to Use Average Income Restrictions.
  • Allow Real Estate Investment Trusts (REITS) to benefit from the LIHTC. Allows REITs to use LIHTCs to treat otherwise taxable dividend as tax-exempt.
  • Provide 30%  Basis “Boost” to Certain Tax-Exempt Bond Financed Properties. For projects in difficult to develop areas, basis could be increased to 169% (130% * 130%).  To be eligible, property must receive “Federal-Investment Protection Designation” from housing credit agency.  Designation could be given only to projects that satisfy the following requirements:
  1. The project involves the preservation, recapitalization, and rehabilitation of existing housing;
  2. The project demonstrates a serious backlog of capital needs or deferred maintenance;
  3. The project involves housing that was previously financed with Federal funds or benefited from LIHTC; and
  4. Because of that Federal support, the housing was subject to a long-term use agreement limiting occupancy to low-income households.  
  • Require LIHTC-Supported Housing to Provide Appropriate Protections to Victims of Domestic Violence.