Real Estate Tax Reform Working Group

Published by Michael Novogradac on Monday, May 6, 2013 - 12:00am

The Joint Committee on Taxation’s Report on the Ways and Means Committee’s Tax Reform Working Groups is out.

Here are comments made to the Real Estate Working Group (pgs 538 & 539). 

Low income housing tax credit (“LIHTC”) (sec. 42 and Sec. 142)

  • Retain the LIHTC;
  • Make permanent the nine-percent fixed floor credit rate for property not financed with tax-exempt bonds;
  • Provide a permanent four-percent floor credit rate for property that is financed with tax-exempt bonds;
  • Increase allocation authority by 50 percent;
  • Amend the LIHTC “student rule” to allow formerly homeless youth who become students to stay.

New Markets Tax Credit (“NMTC”) (sec. 45D)

  • Make the NMTC permanent;
  • Increase credit authority (no specific level mentioned);
  • Index for inflation the annual level of allocations;
  • Allow NMTC to be applied against the AMT;
  • Do not replace NMTC in whole or part with a grant program.

Rehabilitation and Historic Tax Credits (sec. 47)

  • Retain the present-law credits with certain modifications including with respect to tax-exempt use property;
  • Increase the rehabilitation credit to 30 percent (from 20 percent) for certain smaller projects;
  • For the rehabilitation credit, require that the building be first placed in service no less than 50 years before the qualified rehabilitation expenditures are taken into account (rather than before 1936);
  • Add an energy-efficiency supplement to the credit;
  • Exempt from taxable income the proceeds from the sale, allocation, other transfer, or refund of a State Historic Tax Credit.