Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa) announced on June 17, 2008, that they intend to offer tax measures as part of a larger amendment to a housing bill, H.R. 3221. We reported on the House passage of the H.R. 3221 on May 11, 2008. To view all of the changes proposed by the Senate Finance Committee click here.
These are the proposals that impact on Rebuilding the Low-Income Housing Industry:
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Temporary increase in low-income housing tax credit. The Low-Income Housing Tax Credit (LIHTC) program helps finance the development of rental housing for low-income families.Under current law, there is a state-by-state limit on the annual amount of Federal low-income housing tax credits that may be allocated by each state. This limitation is currently set at $2.00 for each person residing in the state. The bill would increase this limitation in 2008 and 2009 by an additional 20 cents for each person residing in the state for large population states and increase by 10 percent the small state set-aside. The estimated cost of this proposal is $1.084 billion over 10 years.
Low-income housing tax credit simplification. This bill contains numerous proposals to simplify the technical rules relating to the Low-Income Housing Tax Credit (LIHTC). In particular, the bill would: establish a minimum credit rate for non-Federally subsidized buildings (expires 12/31/2013); clarify the circumstances under which a building is considered to be Federally subsidized and the circumstances in which Federal assistance will be taken into account in calculating the LIHTC; provide State housing agencies with greater flexibility to select sites for low-income housing projects and allocate adequate amounts of credit for projects; clarify the rules relating to determinations of current income; provide developers with more time to begin construction of low-income housing projects after the credits have been awarded (one year instead of current law 6 months); reform rules pertaining to sales of low-income housing buildings; allow projects to restrict housing units to individuals who share common characteristics; relax income rules for rural areas; and eliminate technical barriers to rehabilitating low-income housing projects. The estimated cost of these proposals is $254 million over 10years.
One time recycling of multifamily housing bonds and housing bond simplification. The bill contains two proposals to simplify the technical rules relating to tax-exempt housing bonds. Under current law, there is a limitation on the annual amount of tax-exempt housing bonds that each state may issue. In the construction and development of low-income housing projects, states may find that it is most efficient to finance projects using a series of short-term bonds. The bill would allow a one time refunding of bonds reissued within 4 years of the original issuance. The bill would also update the tax-exempt housing bond rules to conform certain aspects of these rules to the low-income housing tax credit rules. The estimated cost of these proposals is $592 million over 10 years.
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