• What the law did
  • How NCSHA’s strategy paid off
  • State housing finance agencies’ role
  • A look at what’s ahead

Back in December 2000, lobbyists fighting for increases in the volume caps on tax credits and private-activity tax-exempt bonds thought they would end the year like a baseball fan in Boston, saying “Wait until next year.” But after a four-year battle, they won a surprise victory. Many Washington insiders give the bulk of the credit to the National Council of State Housing Agencies (NCSHA) and its leadership. Here’s their story.

What the law did

The community renewal tax package included in the omnibus funding bill approved just before Congress finally adjourned gives the housing industry its long-sought increases in the low-income housing tax credit and tax-exempt private-activity bond caps.

The legislation also makes several changes in the tax credit program and provides new tax incentives for investment in low-income and distressed communities.

The per capita tax credit cap, which has remained at $1.25 since the program was created in 1986, will rise to $1.50 this year and $1.75 in 2002, with indexation for inflation beginning in 2003. In addition, each state will receive a minimum allocation of $2 million in 2001 and 2002, with inflation adjustments starting in 2003.

The bond cap, which is now the greater of $50 per capita or $150 million per state, will rise to $62.50 or $187.5 million this year and $75 or $225 million in 2002 and will also be indexed for inflation beginning in 2003.

Tax credit program changes include a revision of the stacking rules governing the order in which credits are considered allocated. Previously, current-year credits were allocated before unused prior-year credits, meaning an agency that didn’t use all of its current-year and prior-year credits would lose credits to the national pool. The new legislation reverses the allocation order, so that prior-year credits are the first to be used.

The bill also gives developers who receive credits in the second half of the year six months to meet the 10% expenditure test for a carryover allocation. Previously, the test had to be met by the end of the year, regardless of when the credits were awarded.

Other changes expand the definition of qualified census tract, where projects can receive a 30% increase in the credit, to include tracts with a poverty rate of at least 25%; allow part of a building used as a community service facility to be included in eligible basis; and exclude Indian housing block grants from the definition of federal assistance, meaning they can be combined with the 9% credit without a reduction in basis. The legislation also makes certain changes in the selection criteria for qualified allocation plans (QAPs).

The community renewal provisions of the tax package provide a New Markets tax credit for equity investments in community development entities, which in turn will invest in low-income communities.

Qualifying equity investments have yearly caps of $1 billion in 2001, $1.5 billion in 2002 and 2003, $2 billion in 2004 and 2005, and $3.5 billion in 2006 and 2007. The annual tax credit is 5% of the investment for the first three years and 6% for the next four years.

How NCSHA’s strategy paid off

When President Clinton toured underdeveloped communities in 1999 to launch his campaign for new economic development tax incentives, John McEvoy and Barbara Thompson sensed an opportunity.

McEvoy was executive director and Thompson was director of policy and government affairs at NCSHA, which led the multi-year lobbying effort for increases in the tax credit and tax-exempt bond volume caps. In 2000, they already had won over a large majority in both houses of Congress to the cause: 456 of the 535 members of Congress as tax credit increase cosponsors and 462 as bond increase cosponsors, more than 85% of Congress.

The cause had become so popular that some members of Congress saw the tax credit and bond cap increases as a sweetener to help win votes for the overall budget package of which it finally became a part.

But, early in 2000, one thing blocked the increases: the lack of a legislative vehicle that might survive the fierce political cross-currents in a presidential election year.

The cap increases initially were attached to a bill to increase the minimum wage, but that was controversial. Then, Clinton’s so-called New Markets Initiative, a community development measure, was combined with a similar proposal by Rep. J.C. Watts (R-Okla.) with the support of Rep. Dennis Hastert (R-Ill.), speaker of the House.

McEvoy and Thompson went to work to try to get the credit and bond cap increases included in the New Markets bill. That gave the increases a better chance of enactment since it was the only tax bill Clinton said he was willing to sign. It was a delicate, step-by-step process. Like chess players, NCSHA staff moved their cause forward one step at a time, unsure of the size and speed of increases Congress would accept.

Thompson used her knowledge of the position and desires of each player to advance the cause. “The reason she could get her calls taken is that she would always know better than anyone else what the other guys were doing,” said McEvoy.

NCSHA started by convincing the Clinton staffer in charge of the legislative effort to make a tax credit increase part of the bill. Because Clinton had included it as a free-standing item in his budget, having it grouped together with closely related economic development incentives was relatively easy.

At that stage, no bond cap increase was included, but McEvoy was not worried. He knew that Rep. Bill Archer (R-Texas), chairman of the Ways and Means Committee, supported the bond increase and would not report the bill until it was added.

But when Clinton and Hastert began to negotiate the final shape of the bill, Archer was left out. Last spring, they announced an agreement, but when each side issued its press release, the agreement appeared to evaporate.

The White House said it had agreed to a full immediate increase in tax credits, but made no mention of bonds. Hastert and Watts said they had agreed to a five-year phase-in on both increases. Meanwhile, Archer expressed little enthusiasm for the bill.

That’s when NCSHA called in state governors to call for full, immediate increases in both programs. McEvoy and Thompson also recruited Rep. Charles Rangel (D-N.Y.), senior Democrat on the House Ways and Means committee and a staunch tax credit supporter. He insisted on the inclusion of the bond increase.

Rangel’s involvement proved key. He “deserves as much credit as anyone in Congress except for Hastert,” said McEvoy.

When the bill reached the House floor in July 2000, it included a phase-in of both caps, because Rangel had been unable to overcome Archer’s resistance to making the increases immediate. However, he did obtain Hastert’s commitment to try to change the bill later to provide for immediate increases.

In the Senate, Sens. Rick Santorum (R-Pa.) and Chuck Robb (D-Va.) both introduced similar legislation. Then Sen. William Roth (R-Del.), chairman of the Finance Committee, put immediate increases in his own tax bill. That led to the compromise, which has passed Congress, incorporating two-year phase-ins.

State housing finance agencies’ role

Outside of Washington, who deserves the most credit for bringing about the increases? McEvoy points to officials of state housing finance agencies. As he observes, the state agencies had “no political money.” All they had was “a good cause.”

He praised William Erickson, executive director of the Utah Housing Finance Agency, for winning the early support of Sen. Orrin Hatch (R-Utah). He also lauded Joe Lynch, commissioner of housing in New York, who persuaded former Sen. Alfonse D’Amato (R-N.Y.) to introduce increases in the 1997-98 session, as well as recruiting Rep. Amo Houghton (R-N.Y.) as a principal sponsor of the bond cap measure in the House.

Another HFA executive McEvoy cited as furthering the cause was Theresa Parker, executive director of the California Housing Finance Agency. She enlisted almost all the members of California’s congressional delegation to sign on as early co-sponsors, including Rep. Bill Thomas. As a high-ranking Republican member of Ways and Means, his sponsorship was “a huge signal to other members of the panel,” McEvoy said.

Finally, McEvoy credited Peter Dwars, executive director of the Illinois Housing Development Authority. He capitalized upon his relationship with Hastert throughout the run-up to the vote Dec. 15, 2000.

Executives at many other state housing agencies did a great deal of arm-twisting with their members of Congress, showing them what the increases could achieve.

But it was Thompson who followed through with congressional staff members. “Nothing has been achieved in the last 12 years on housing credits and bonds that Barbara has not been central to,” said McEvoy. “If she had not been here, we would have got very little of what we achieved.”

Thompson has “credentials on Capitol Hill that are without equal,” he said. “She has the trust of members and their staffers.” Members of Congress see Thompson as “someone who brings stuff to the table,” not merely someone who “is just asking for things.”

A look at what’s ahead

Enactment of the cap increases marks the end of a four-year battle. It began soon after NCSHA won the earlier fight to make the tax credit and bond programs permanent parts of the tax code. Prior to 1993, the programs had been subject to “sunset” dates and had required annual renewal by Congress. In one case, authority for both programs lapsed for a period before it was restored.

Passage of the cap increases helps compensate for the effects of inflation on the programs, since the original volume limits were set when the programs were created in 1986.

McEvoy was succeeded as NCSHA executive director by Thompson on July 1, 2001.

Since 1988, Thompson has been NCSHA’s director of policy and government affairs. Before joining NCSHA, Thompson was a vice president with the National Cooperative Business Association, where she concentrated on housing and tax policy and legislative advocacy.

Prior to that, Thompson served in the New Jersey governor’s Washington office as the senior housing lobbyist. Thompson began her career in Washington on Capitol Hill, where she worked for former Rep. Andrew Maguire of the 7th District of New Jersey. Thompson received a bachelor of arts in political science from Syracuse University.

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