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Affordable housing industry groups are among 30 organizations calling on Treasury secretary Janet Yellen to protect the low-income housing tax credit (LIHTC) and other key financing tools from potential effects of a global corporate minimum tax.

The concern comes after the international Organization for Economic Cooperation and Development (OECD) released model rules for the implementation of a 15% global minimum tax on large multinational businesses. Under the OECD’s Pillar 2 model rules, these companies paying less than a 15% tax rate domestically would be at risk of paying a “top up” tax to foreign countries where they also do business.

This is troubling to housing and community development leaders because it could diminish the incentive for companies to invest in low-income housing, historic, New Markets, and other business tax credits as well as tax-exempt bonds and other programs.

The concern goes beyond future investments, according to Emily Cadik, executive director of the Affordable Housing Tax Credit Coalition, one of the organizations signing a letter to Yellen.

“It’s not just an issue of taking away the incentive,” she says. “Companies could potentially be penalized for having the credits on their books.”

If an investor’s tax liability drops below 15%, the investor could then face paying a tax to foreign countries as a “top up” tax, explains Cadik.

“We are now at major risk of upending the investor market if the Biden administration does not take steps to protect the housing credit and similar credits in this new tax policy,” she says.

The administration has endorsed the idea of a global minimum tax. Overall, nearly 140 countries have reportedly agreed to the tax, but Poland recently objected to a European Union directive.

Other organizations expressing their concerns in the recent letter include the ACTION Campaign, Affordable Housing Developers Council, Affordable Housing Investors Council, Council for Affordable and Rural Housing, Council of Large Public Housing Authorities, Historic Tax Credit Coalition, Housing Advisory Group, Housing Partnership Network, National Apartment Association, National Association of Affordable Housing Lenders, National Association of Home Builders, National Council of State Housing Agencies, New Markets Tax Credit Coalition, and Stewards of Affordable Housing for the Future.

“A survey of major investors in the [housing credit] market found that minimally 48% of the equity financing, and likely much more, would be at risk if the new OECD rules were to move forward,” reads the letter. “Risking the loss of anywhere near this magnitude by disincentivizing these investments would devastate the impact of the [housing credit], which is responsible for virtually all the affordable rental housing built or preserved in America since its inception more than 36 years ago. It is very likely that such a disincentive will extend to other development finance tools.”

The 48% figure represents information from nine major LIHTC investors based on 2021 investments.

The industry organizations are continuing to track the issue and are asking the Treasury Department and the administration to protect the different tax credits and other financing tools as it moves forward on the issue.