TAX REFORM

hag

We wanted to let you know the House and Senate have passed what is now being dubbed the “Taxibus,” the combined tax and omnibus spending bills.  As we reported earlier, the House voted separately on the two packages, passing the tax bill on December 17 by a vote of 318-109 and the spending bill on December 18 by a vote of 316-113.  The LIHTC 9 percent minimum credit rate was made permanent in the tax bill, along with a provision making permanent the exclusion of military housing allowances for LIHTC qualification.

Following House passage of both the tax bill and the spending bill, the two bills were combined under a self-executing House procedure so that a single bill was sent to the Senate for approval.  The Senate passed the combined bill on December 18 by a vote of 65-33.  The President said he will sign the bill into law.

We want to thank our LIHTC House champions, Representatives Pat Tiberi (R-OH) and Richard Neal (D-MA), and Senate champions, Senators Maria Cantwell (D-WA) and Pat Roberts (R-KS), and their staffs for their leadership and perseverance on the permanency effort.  This is a major achievement for our industry and those that depend on quality affordable housing, and we are grateful for the strong congressional support for affordable housing.  We also want to thank you again for all you have done back home to show your elected officials the importance of the LIHTC. 

hagLate Wednesday evening, after many rounds of intense negotiations between the House and Senate, the eagerly-awaited details of the legislative package addressing expired tax code provisions were made public.  The Protecting Americans From Tax Hikes (PATH) Act makes permanent a number of provisions, extends a few for five years, and extends the remainder of the provisions for years 2015 and 2016.  We were very pleased to see our 9 percent minimum LIHTC credit in the permanency column.  The 9% provision is effective as of January 1, 2015. The bill also makes permanent the exclusion of military housing allowances for LIHTC qualification.  While we did not succeed in securing a fixed 4 percent minimum rate this time around, we are very pleased with the provisions included in the legislation. 

While Congress must still pass the bill and send it to the President to be signed into law, this is a major achievement for the industry, and is a tribute to your hard work and advocacy. The contacts you made with your Members of Congress to educate them on the program and to show them your affordable housing properties in their districts and states made a very real difference.  Your message that a permanent 9 percent minimum credit will provide much-needed predictability and financial feasibility for development of affordable housing was heard loud and clear. 

In coordination with the release of the extenders package, details also were released on the omnibus spending bill to fund the federal government through September 30, 2016.  We were pleased to see additional funding for some HUD programs.  Notably, the bill provides $950 million for the HOME program, a turn-around from earlier this year when Congress proposed devastating cuts to the program.  Homeless Assistance Grants are funded at $2.25 billion, and $10.62 billion is included for renewal of project-based rental assistance contracts.  Although the Senate had proposed increasing the cap on units from 185,000 to 200,000, the final legislation did not increase the number of public housing units authorized to convert under the HUD Rental Assistance Demonstration (RAD).

Omnibus Bill

Shortly after midnight, the House and Senate tax writing committees released the text to a bipartisan agreement on tax extenders.

The 2016 Omnibus also showed HOME receiving $950 million, $50 million more than fiscal 2015 appropriations. After threats to significantly cut the program in the Senate, NAHB worked with Members of Congress to ensure that HOME stayed intact.

For once, the wait was worth it, as the final agreement proposed to make the 9% minimum floor on federal housing credits permanent. This is a significant victory for affordable housing and will provide all developers with much needed certainty when planning future projects.

NAHB extends its appreciation to Representatives Pat Tiberi (R-Ohio) and Richie Neal (D-Mass.), along with Sen. Maria Cantwell (D-Wash.) for their many years of championing this effort in Congress.

The extenders legislation did not address the 4% credit used for financing the acquisition of existing properties, which will remain a top legislative priority for NAHB.

There were concerns surrounding the funding of Project Based Section 8 as HUD transitioned the program from a fiscal to calendar year funding schedule. Although Project Based Section 8 will be funded at $10.62 billion, slightly lower than HUD’s request of $10.76 billion, Congress has taken the schedule change into account by increasing appropriations by nearly $1 billion from fiscal 2015.

Congress is expected to take up the legislation in the coming days. NAHB will provide updates as the bill moves through both chambers.

CASSANDRA PALANZA
Director, Multifamily Council
National Association of Home Builders
1201 15th Street, NW
Washington, DC 20005

 

Rogers: Omnibus Funding Bill Provides Responsible Funding for the Federal Government, Helps to Stop Waste and Administrative Overreach

Washington, Dec 16 

The House Appropriations Committee today unveiled the fiscal year 2016 Omnibus Appropriations bill, the legislation that will provide discretionary funding for the federal government for the current fiscal year.

The bill includes full Appropriations legislation and funding for the 12 annual Appropriations bills through the end of the fiscal year, September 30, 2016. This level reflects the increased domestic discretionary funding provided by the Bipartisan Budget Act of 2015, which was enacted on November 2. In addition, the legislation includes a myriad of important policy items to stop waste and abuse, increase transparency and accountability at federal agencies, and halt administrative overreach that hinders economic growth.

The package also contains emergency Global War on Terror (GWOT)/Overseas Contingency Operations (OCO) funding to combat the emerging real-world threat brought by the Islamic State of Iraq and the Levant (ISIL) and other U.S. enemies, to conduct successful military operations, and to maintain a well-equipped and prepared military force.

In addition to the 12 Appropriations bills, the package also includes other legislative language, including reforms to the Visa Waiver program, and a lifting of the ban on U.S. oil exports.

Appropriations Chairman Hal Rogers made the following statement on the legislation:

“This bill provides responsible funding for nearly all of the federal government, while helping to stop wasteful and unnecessary spending and reining in regulatory overreach that hinders growth and job creation.

“The road to this final bill has not been easy, but it has been an open process that followed ’regular order’ to the maximum extent possible. Over the course of the last year, the Appropriations committee held over 100 hearings, and approved each of the 12 individual funding bills through an open Committee process where dozens upon dozens of amendments were debated. Seven of these bills were taken up by the full House under open rules – including over 78 hours of debate on the floor and 456 considered amendments.

“The legislation today is a result of this extensive work and of Member involvement on behalf of their constituents around the country. While an end-of-the-year Omnibus is not the preferred way to do business – it is always better to complete individual bills in a timely fashion – this bill will allow Congress to fulfill its constitutional duty to responsibly fund the federal government and avoid a shutdown.

“This package reflects conservative priorities in both funding and policy – including support for critical areas such as our national defense, halting many harmful regulations, and trimming wasteful spending. But it also represents a compromise that Members on both sides of the aisle can and should get behind. It will help move our country in the right fiscal direction as we embark on a new year, and I urge its quick consideration and enactment.”

Bill Highlights –

Funding Level  The bill abides by all the terms set by the Bipartisan Budget Act of 2015, which was enacted on November 2. The legislation provides a total of $1.149 trillion in base and Global War on Terror (GWOT)/Overseas Contingency Operations (OCO) funding for the operations of the federal government, meeting the $548 billion defense and $518 billion non-defense base budget caps.

The bill includes $73.7 billion GWOT/OCO funding to provide needed resources and training for our troops in the field, to combat the threat of ISIL and other enemies around the world, to support U.S. allies, and to support diplomatic missions.

Timing – The funding included in the bill will extend to the end of the fiscal year on September 30, 2016.

Policy Items – The legislation includes many policy items to help rein in bureaucratic and regulatory overreach, to protect the rights of Americans, and to encourage economic growth and job creation. For details of these items, please see the summaries below.

Omnibus Summaries  For detailed summaries of the 12 Appropriations bills within the Omnibus, including funding levels and policy items, please visit the following:

Transportation/Housing and Urban Development 

November 17, 2014

cohnreznick logo16CohnReznick Capitol Connection: The Times They Are a-Changin’

Since 1986, the housing industry has built a well-oiled machine around the Housing Credit. The public/private partnership structure, which places the construction and operating risk upon the private sector, has resulted in a very long period of housing stability and enterprise. Both the 9% and 4% credit have produced remarkable housing communities of either new construction or preserved housing. In this time, we have also seen many changes and improvements to the program, and we have survived various legislative battles.   However, one thing we have not faced since 1986: major tax reform. In fact, it is tax reform itself that helped to create an environment for the housing credit to be born. When it happens again, either in this Congress or the next, the status quo for housing programs may not be good enough. In fact, it may shatter your windows and rattle your walls.   The return of a Republican majority in both houses Tuesday night has already fired up thoughts of tax reform for many lawmakers. On Wednesday, Senate Minority Leader Mitch McConnell said an ambitious overhaul of the tax code was his number one priority in terms of a cooperative agenda with President Obama. In fact, he spoke by phone with the President and said they agreed tax reform could be an area of common agreement. All of a sudden the discussion draft put forward by Chairman Camp and the modifications to the Housing Credit come alive again.   Yes, we were included as a program in the draft, where many other programs did not even make the cut. But the way we do things—all of the things that developers and not-for-profits do to produce housing, including the way state agencies allocate credits—could change unless we evolve and create ideas that can survive a corporate rate reduction (35% to 25%) and the loss of accelerated depreciation. Is it true that our old, trusted road is rapidly aging? Just take a look at the modifications again because I can tell you they are very real.   While in DC on election night, I spoke with many long-time Washington folks who believe tax reform cannot happen until after 2016—it is such a Sisyphean task. But I had the privilege and pleasure to watch the election returns with Speaker Boehner and his team. He has a five-point plan for resetting the country’s economic foundation and number one on his list is reforming our tax code. In 1986, tax reform had the support of President Reagan and the leadership in both the Senate and House. Some 28 years later, we have that once again.   The time is now for the affordable housing industry to take a good look “outside of the box” and bring all creative ideas to the table. Certainly, the Ways and Means committee did that with the Camp Housing Credit modifications. If we can envision and create such a great program that has stood the test of time, then we can certainly improve upon it. Let’s not let others do it for us, for he that gets hurt will be he who has stalled.   Bob Moss is a CohnReznick Principal and National Director of Governmental Affairs. Bob leads the Firm’s federal and state government relations efforts, particularly in the area of affordable housing. He can be reached at bob.moss@cohnreznick.com or 617-648-1406. For more legislative insight from Bob, visit our Capitol Connection webpage.

August 10, 2014

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On September 9, Rep. Pat Tiberi (R-OH), chair of the House Ways and Means Subcommittee on Select Revenue Measures, convened a small working group to discuss the LIHTC modifications proposed earlier this year by Ways and Means Committee Chairman Dave Camp (R-MI) in his tax reform discussion draft.  Housing Advisory Group Chairman Bob Moss (CohnReznick) was invited to participate in the roundtable.  Other participants included Brian Tracey (Bank of America), Kevin Kelly (NAHB Chairman of the Board), Doug Garver (Executive Director of the Ohio Housing Finance Agency), and Phillip Swagel (University of Maryland School of Public Policy).

Joining Rep. Tiberi were Ways and Means Committee members Tom Reed (R-NY), Erik Paulsen (R-MN), and Kenny Marchant (R-TX).  Staff from the Ways and Means Committee and Joint Committee on Taxation participated as well.

The LIHTC participants were asked to comment on the discussion draft modifications, their potential impact, and what improvements could be offered within the budgetary constraints.

Bob commented that, within the discussion draft, several key elements of the program were included.  First, state housing finance agencies administer the program.  This ensures that properties are developed according to local housing needs.  Bob complimented the Committee for recognizing the role of the state housing finance agencies. Second, he said, is that the private sector provides market discipline throughout the P3 structure.  Finally, he noted that the Housing Credit program is well designed within the Internal Revenue Code. Tax credits are not earned until the development is completed, in operation, and housing qualified residents. This means the real estate construction and other risks are borne by the private sector not the federal government.

Doug Garver mentioned that in Ohio, there is a red hot need for affordable rental properties, and that in the past four years, 50 of the 174 properties funded by the agency were 4% bond deals. Brian Tracey supported the idea that the Committee should support new construction and acquisition rehab properties, and that the P3 structure should be retained.  According to Kevin Kelly, who has development experience with both the 9% and 4% bond credits, the elimination of private activity bonds in the discussion draft would hurt production by over 40%.

Chairman Tiberi asked Mr. Kelly to expand on which types of existing housing benefit from the 4% bond structure, and Mr. Kelly mentioned the 515 (rural) program, as well as a variety of HUD-assisted properties such as the 236 program.  Rep. Reed asked what would happen if the Committee retained only the 9% credit and asked what properties would not be rehabbed.  He requested examples of “before and after” photographs of 4% transactions.  Rep. Marchant stated that his district needs more seniors housing, and expressed interest in rehab.  The Members seemed surprised that the discussion draft’s elimination of private activity bonds would reduce production as much as 40%.

There was much discussion on HFA administration in terms of HFAs ensuring that properties receive only the allocation amount needed to be feasible, and are not over-sourced.  Our LIHTC participants concluded with a sharing of ideas and concepts.  Bob Moss noted that in the short term, the 9% and 4% fixed rates would ensure financial feasibility against interest rate increases, and suggested that in the long term, Congress should set a course that either includes private activity bonds or raises the per capita amount from $31.20 to $42.70 initially and indexes upward annually by 10% over 10 years.  “Let’s not get behind in housing like we have with transportation infrastructure,” he concluded.

August 4, 2014

2014 Competitive 9% Housing Tax Credit Program Award Recommendations

 March 7, 2014

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