Bipartisan Agreement on Housing – Jan. 29, 2024
Industry groups have thrown their support behind a bipartisan agreement to include provisions that expand and strengthen the Low-Income Housing Tax Credit (LIHTC) in the proposed Tax Relief for American Families and Workers Act of 2024. The agreement was struck by Senate Finance Committee Chairman Ron Wyden (D-OR) and House Ways and Means Committee Chairman Jason Smith (R-MO).
The Ways and Means Committee held a hearing on the legislation on Jan. 19 and voted 40-3 to advance it. That’s a meaningful step forward but doesn’t clear up questions surrounding the bill’s prospects for enactment by both houses of Congress.
“The broad bipartisan support in Ways and Means could mean the bill will move quickly to the House Floor,” according to the CRE Finance Council. “The Senate process could be murkier, especially since the Senate GOP was not involved in negotiations.” Moreover, as the National Multifamily Housing Council (NMHC) pointed out, the bill may have to be attached to a larger legislative package.
The Wyden-Smith agreement includes two measures adopted from the Affordable Housing Credit Improvement Act of 2023 (H.R.3238/S.1557). The provisions are intended to address the nation’s housing crisis by boosting the production of affordable rental homes. They would restore a 12.5% allocation increase to the Housing Credit that expired at the end of 2021 and reduce from 50% to 30% the amount of private activity bond financing required to access the 4% Housing Credit.
“Congress is taking important steps to address our nation’s affordable housing crisis by building on what we know works,” said Emily Cadik, CEO of the Affordable Housing Tax Credit Coalition. “The Low-Income Housing Tax Credit provisions included in the bipartisan tax agreement would finance over 200,000 more affordable homes at a time of skyrocketing need, using a bipartisan tool with a nearly 40-year track record of success.”
Together with the National Apartment Association, NMHC sent Smith and Richard Neal, ranking member on the Ways and Means Committee, a letter endorsing the LIHTC provisions. The letter also cited other provisions that would benefit the multifamily industry. They include the following:
- Deductibility of Business Interest: Section 202, which would extend through 2025 the 30% of EBITDA limitation for taxable years beginning after 2023 (and, if elected, taxable years beginning after 2021). “Importantly, the provision would not affect the option for real estate businesses to opt out of the limitation in exchange for a longer depreciation period,” the comment letter states.
- Bonus Depreciation: Section 203 would extend 100% bonus depreciation for qualified property placed in service after 2022 through 2025 to enable taxpayers to deduct the full cost of certain capital investments with a class life of 20 years or less (e.g., equipment and machinery) included in multifamily buildings.
- Small Business Expensing: Section 204 would increase the amount of qualified property that a taxpayer may expense under Section 179 of the tax code.
- Increase in 1099 Reporting Thresholds: Section 601 would increase to $1,000 from $600 the reporting threshold applicable to Forms 1099-NEC and 1099-MISC. Additionally, the threshold would apply on a calendar-year basis as opposed to the current law’s taxable-year basis. The proposal would be effective for payments made after 2023, and the $1,000 threshold would be adjusted for inflation annually.
Bob Broeksmit, president and CEO of the Mortgage Bankers Association, also endorsed the bipartisan proposal. “MBA and its members have long called for enacting tax provisions that address our nation’s housing affordability crisis and the acute shortage of homes for owning and renting,” he said in a statement. “We support this bill, particularly for its meaningful enhancements to the Low-Income Housing Tax Credit (LIHTC) that will produce an estimated 200,000 additional rental units over the next two years.”
He continued, “Specifically, the increased state allocations for affordable housing projects and reduced tax-exempt bond financing requirement will help more borrowers and lenders to use the LIHTC program to construct and rehabilitate housing for low- and moderate-income households. The LIHTC program is a successful public-private partnership that has supported the production of nearly three million rental units since its inception.”