Senate Majority Leader Chuck Schumer, D-New York, and Sen. Joe Manchin, D-West Virginia, announced a deal on sweeping reconciliation legislation that includes several major renewable energy provisions, including extensions of the production tax credit (PTC) and investment tax credit (ITC). The Inflation Reduction Act of 2022 also includes a 15% corporate minimum tax, increased tax enforcement resources, an extension of the Affordable Care Act premium tax incentives and prescription drug reform.
The U.S. Department of Treasury today announced new guidance to increase the use of American Rescue Plan (ARP) funds to boost the supply of affordable housing. The guidance permits State and Local Fiscal Recovery Funds (SLFRF) to fund the full principal amount of long-term affordable housing loans and expands the list of federal programs for which the SLFRF can be used for affordable housing. Treasury earlier encouraged governments to dedicate part of the overall $350 billion in SFLRF to affordable housing and through March 31, Treasury data indicates that more than 600 state and local governments had budgeted $12.9 billion in SLFRF funds to meet housing needs and to lower housing-related costs. A Notes from Novogradac blog post will provide more information on the guidance.
The California Debt Limit Allocation Committee (CDLAC) will propose several emergency regulations at a meeting next week to address issues related to the allocation of private activity bonds (PABs), which pair with 4% low-income housing tax credits (LIHTC) to finance affordable housing. CDLAC cites a survey in which the demand for PABs was nearly three times the volume cap in 2021, requiring a competitive process to award the bonds. Several changes concern how CDLAC determines scoring for the awards.
A white paper from Freddie Mac Multifamily reports that multifamily properties that exit the low-income housing tax credit (LIHTC) incentive generally continue to provide housing at rents lower than those charged in the broader market, thereby serving as a valuable source of workforce housing. The report, Low-Income Housing Tax Credit (LIHTC) at Risk, examines factors correlated with properties leaving the LIHTC program and what happens to the units once they are no longer subject to LIHTC affordability restrictions.
According to an estimate by Novogradac, income limits for the low-income housing tax credit (LIHTC) program, properties financed by tax-exempt bonds and properties in many U.S. Department of Housing and Urban Development (HUD) programs are currently anticipated to increase 3.11% on average in 2023 if the HUD uses five-year American Community Survey (ACS) data.
Stopgap measures put in place to address the COVID-19 pandemic underscore the need for substantial, consistent investment in affordable rental housing, according to The State of the Nation’s Housing 2022 report released today by the Joint Center for Housing Studies of Harvard University. With government protections ended, housing instability is on the rise and evictions are back near pre-pandemic levels in early 2022. American Community Survey 2020 data shows that about 46% of renter households are at least moderately cost-burdened (spending 31-40% of income on housing), with 24% of renter households severely cost-burdened (spending 51% or more on housing). These figures reflect the first substantial increase in national cost-burden rates in 10 years.
Legislation introduced in the House of Representatives would provide a temporary expansion of the federal low-income housing tax credit (LIHTC) for healthcare-oriented housing. The Healthy Homes Act (H.R. 7990) would increase the annual allocation of LIHTCs to states by $1 per capita for three years and allow the increase of the state credit ceiling by the aggregate amount allocated by the state housing agency to healthcare-oriented housing. The legislation would also provide an increase of 50% of eligible basis for healthcare-oriented housing under the LIHTC. The legislation defines healthcare-oriented housing as meeting one of five standards, including providing healthcare screening, health and nutrition workshops or having a healthcare service coordinator. The bill was introduced by Rep. Terri Sewell, D-Alabama, and three co-sponsors.
The proposed global minimum tax and its potential effect on community development tax credit equity investments is the subject of this week’s Novogradac Tax Credit Tuesday podcast episode. Michael Novogradac, CPA, and Novogradac partner Brad Elphick, CPA, discuss the proposal and potential approaches to mitigate the damage to tax credit equity investment. They also examine next steps in the proposal and for community development tax credit stakeholders. Novogradac has also published a white paper on the subject called Pillar Two and Tax Credit Equity Investments and is seeking public comment on the paper. Comments may be sent to [email protected]
The weekly Tax Credit Tuesday podcast offers an in-depth discussion of various tax incentive topics with expert guests.
An evaluation of the Georgia state low-income housing tax credit (LIHTC) concludes that the state incentive costs Georgia $362.2 million per year, absent the “but for” analysis of development. Tax Incentive Evaluation: Georgia Low-Income Housing Tax Credit, by Georgia State University Fiscal Research Center, examines the state and federal LIHTC, other affordable housing programs and their benefit to the public. The report concludes that the federal LIHTC has a much larger positive economic impact on the state and that 25% of LIHTC units placed in service since the enactment of the incentive in 2000 are attributable to the state credit.
Multiple affordable housing stakeholders sent letters to the Internal Revenue Service (IRS) this week, recommending action concerning the low-income housing tax credit (LIHTC) as part of the IRS 2022-2023 Priority Guidance Plan as sought in IRS Notice 2022-21. The LIHTC Working Group, National Council of State Housing Agencies (NCSHA), members of the A Call to Invest in our Neighborhoods (ACTION) Campaign and a group of advocates including Enterprise Community Partners and Local Initiatives Support Corporation (LISC)/National Equity Fund all sent the letters.
The California Tax Credit Allocation Committee (CTCAC) today voted to extend the readiness-to-proceed deadline for 4% federal and state low-income housing tax credits (LIHTCs). The automatic extension of the readiness-to-proceed deadline will align with bond issuance deadline extensions for the third round of 2021 California Debt Limit Allocation Committee (CDLAC) issuance.
Colorado Gov. Jared Polis signed legislation extending the state low-income housing tax credit (LIHTC) through 2031. H.B. 1051 extends the sunset date from Dec. 31, 2024, to Dec. 31, 2031, and also permits the allocation of state LIHTCs in counties impacted by federally declared disasters to not count against the annual state cap if those credits are used to leverage state and federal natural disaster funds.
Legislation in the North Carolina House of Representatives would reinstate the state low-income housing tax credit (LIHTC) incentive. H.B. 1124 would create a state LIHTC equal to the federal allocation amount with a sliding percentage of the basis for which the credit is allowed, based on the percentage of units affordable to various income levels. Any carryover allocation would receive credits as a nontaxable loan generated by transferring the credit to the state housing finance agency. A bill introduced in the Senate in 2021 would also reinstate the North Carolina LIHTC, but with different provisions. The state LIHTC expired in 2015.
Sens. Michael Bennet, D-Colorado, and Todd Young, R-Indiana, led a bipartisan group of nine Congressional leaders to submit a letter to the U.S. Department of the Treasury and the Internal Revenue Service (IRS) requesting the finalization of the average income test rule for the low-income housing tax credit (LIHTC) incentive. The letter urges Treasury and the IRS to ensure that the final rule is user-friendly to support the expansion of affordable housing.
Maryland Gov. Larry Hogan signed legislation extending the state historic tax credit (HTC) by seven years, altering annual caps for specific uses of the state HTC, increasing funding for the HTC reserve fund and increasing the annual set-aside for a small commercial project trust account. H.B. 27 extends the credit sunset from 2024 through the end of fiscal year 2031 and increases the annual state HTC cap for developments in a Level 1 opportunity zone (OZ) to $5.25 million, Level 2 OZ to $5.5 million and any other commercial rehabilitation outside a Level 1 or Level 2 OZ to $5 million. The annual budget set-aside for the reserve fund will increase from $12 million to $20 million for 2023 through 2031 and the annual funding for the small commercial project trust account will have an annual appropriation of $2 million.
Legislation to extend the state low-income housing tax credit (LIHTC) through 2031 passed both houses of the Legislature and is on the desk of Gov. Jared Polis. H.B. 1051 extends the sunset date for the credit from Dec. 31, 2024, to Dec. 31, 2031. The legislation also provides that state credits allocated to developments in counties impacted by federally declared disasters–solely for leveraging state and federal natural disaster funds–do not count against the annual state cap.
South Carolina Gov. Henry McMaster signed into law H. 5075 on May 16, restricting the allocation of the state low-income housing tax credit (LIHTC) to $20 million annually and defining specific areas and types of housing that must receive at least a minimum amount of credits. The total amount of state LIHTCs allocated to qualified developments using the federal 9% LIHTC cannot exceed 40% of the $20 million limit. Of those, not less than 50% of the state LIHTCs must be allocated to qualified developments in eligible rural areas, with the remainder allocated to developments serving older persons or persons with special needs, workforce development and other qualified developments.
The Biden administration today announced its Housing Supply Action Plan to close the housing supply shortfall in five years, including the creation and preservation of hundreds of thousands of affordable homes in the next three years. The plan calls for investments in housing production and preservation, such as those outlined in the House reconciliation bill to increase the annual low-income housing tax credit (LIHTC) allocation cap and create the Neighborhood Homes Tax Credit. The White House cited Novogradac analysis that found that the reconciliation bill could finance nearly 1 million affordable homes over 2022-2031.
Bipartisan legislation introduced Wednesday in the U.S. Senate would allow governments to use Coronavirus State and Local Fiscal Recovery Funds (SLFRF) to make long-term loans to low-income housing tax credit (LIHTC) developments. The LIHTC Financing Enabling Long-Term Investment in Neighborhood Excellence (LIFELINE) Act would allow states and local governments to use SLFRF funds to make long-term loans to LIHTC developments. The bill seeks to ease financing gaps due to rising construction costs, price increases, supply chain issues, workforce difficulties and more related to the COVID-19 pandemic. Sens. Patrick Leahy, D-Vermont, and Susan Collins, R-Maine, introduced the legislation. A companion bill, H.R. 7078, was introduced in the House in March.
Kansas Gov. Laura Kelly signed legislation Thursday to create a state low-income housing tax credit (LIHTC) for up to the amount of the federal LIHTC award to a property. The legislation also increased the state historic tax credit (HTC) percentages for certain properties. H.B. 2237 would create the state LIHTC effective for tax years beginning Jan. 1, 2023 or after. The state HTC percentage–which is currently 25%–will be increased to 30% of qualified rehabilitation expenditures (QREs) in cities of 9,500 to 50,000 residents and to 40% in cities of less than 9,500 residents. The legislation also creates the Kansas housing investor tax credit, which is a credit of up to $35,000 per unit for single-family homes with an annual cap of $13 million.
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