The Senate Finance Committee has approved a tax extenders package that includes setting minimum 9% and 4% rates for low-income housing tax credits (LIHTCs) for two years.
Passed this week, the extenders would be for allocations made in 2015 and 2016. The bill also calls for the New Markets Tax Credit to be extended for two years.
However, the next step for the legislation may have to wait until after Congress’ August recess. Right now, attention is focused on the July 31 expiration of the Highway Trust Fund. It’s possible that an extenders package could make it on to a “must-pass” highway bill in the next week and a half, but that seems remote considering how contentious the highway bill has been and the amount of work still needed to reach a compromise, says David Gasson, executive director of the Housing Advisory Group and vice president at Boston Capital.
Gasson and other LIHTC advocates have been seeking a permanent minimum rate for the LIHTC. Bills have been introduced in both the House and Senate to set fixed 9% (for new rental construction property) and 4% (for existing property) rates. The bills would apply to buildings placed in service after Dec. 31, 2014.
In 2008, the Housing and Economic Recovery Act created a temporary 9% floor for projects, allowing developers to receive additional credits during the economic downturn. However, the fixed rate has since expired, so the LIHTC industry has had to go back to using a floating rate that’s been about 7.5%. At the lower rate, a project may receive as much as 20% less equity.
A permanent fix is the best-case scenario. Short of that, LIHTC advocates are pursuing a possible two-year extension of the fixed rate as part of an extenders package. The highway bill was seen as a possible vehicle for the tax extenders.
On the House side, the Ways and Means Committee is not expected to advance extenders until after the August recess.
"Without a vehicle like the Highway Trust Fund, it is déjà vu again for our housing provisions," says Bob Moss, principal and national director of governmental affairs at CohnReznick. "We know there is a lot on Paul Ryan's plate when they return from recess, and hope the budget talks do not take the oxygen out of the air for 2015."
Ryan (R-Wis.) chairs the House Ways and Means Committee.
Gasson says pursuing a permanent fix in the House is important even if the Senate doesn't act. It would set the table for the permanent fix to be negotiated. "When they go to conference on the extenders package, we know there’s bipartisan support for many of these permanent extenders in the Senate,” he says.
If the permanent fixed rates have passed the
House, it makes it a little easier for the Senate to adopt those.