Comprehensive tax reform is still alive and well. More than 50 hearings have been held by the Senate Finance Committee and House Ways and Means on the subject. And in early May, Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, and Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, joined together to launch www.taxreform.gov.
Here they are providing updates on what’s under way and why they think reform is needed. They are also asking Americans to share their stories and ideas regarding tax reform on the website as well as via social media. You can get tax reform updates on Twitter by following @simplertaxes.
“While we are from different political parties, we agree that America’s tax code is broken. That is why we have been working together as the chairmen of Congress’ two tax-writing committees to make it fairer for families and spark a more prosperous economy,” they said. “We are dedicated to writing bills in an open and transparent fashion. You get a say, employers get a say, and our colleagues—your representatives and senators—will get a say.”
With comprehensive tax reform being high on Congress’ to-do list, the low-income housing tax credit (LIHTC) is still under threat.
In late April, Bob Moss, senior vice president of Boston Capital and chairman of the Housing Advisory Group, testified during a Ways and Means Committee tax reform and residential real estate hearing on behalf of the LIHTC program. “Unlike most tax expenditures before this committee, which largely encourage activity at the margin—activity that would occur at some level without the tax support—there would be virtually no affordable housing development without the housing credit program,” he said.
Accounting firm Novogradac & Co. also released a report in early May about what’s at stake for affordable rental housing if comprehensive tax reform occurs. The Affordable Rental Housing After Tax Reform report bases its analysis on the LIHTC continuing to be part of the tax code, but factors in how lower corporate tax rates and longer depreciation periods would affect investor yields, investor equity pricing, and the amount of equity raised.
The key takeaway shows that if investor equity would remain stable, a lower corporate tax rate would lead to lower yields and create downward pressure on LIHTC equity pricing. An extended depreciation period would add another hit on pricing. According to Novogradac, this could mean a loss of $220 million to nearly $1 billion in LIHTC equity.
In this month’s Capitol Hill Update, Peter Lawrence and Emily Cadik of Enterprise Community Partners say Baucus’ and Camp’s call for input may be the final opportunity for stakeholder engagement before Congress drafts legislation.
LIHTC proponents need to make sure their message about the importance of the program is heard loud and clear by Congress.