Capitol Connection - Draft One: Affordable Housing Faces a Catastrophe
Last week, the House Republicans offered up their plan for reforming the code with a major cut in corporate tax rate from 35% to 20%, and were still meeting through the weekend to trim up many of the provisions. Ways and Means Chairman Kevin Brady expects to have his plan finalized this week. Cutting the corporate tax rate so dramatically comes with a $1.5 trillion price tag. The affordable housing industry has seen both promise and severe disappointment within the House plan; the initial framework retained the Low Income Housing Tax Credit, but proposed to eliminate private activity bonds which fuels 50% of the current production annually. There is no doubt, without the bond financing the industry, a catastrophe looms at a time when an estimated 25 million families and seniors are paying more than 50% of their monthly income in rent.
The Republican Senate tax writers are not far behind in readying their plan, a plan that could look vastly different in many aspects. They are certainly onboard with the House when it comes to authoring a package that simplifies and lowers taxes for both individuals and businesses, but face budget rules that stop them from adding to the deficit. They are also facing major opposition on several fronts, including from the National Federation of Independent Business, on the issue that a majority of businesses would not be eligible to utilize the lower 25% rate. Almost 70% of businesses would not be able to take advantage of the proposed 25% pass-through rate.
The real estate industry, which opposes the House GOP plan to cut the mortgage interest deduction in half and cap property tax deductions at $10,000, has weighed in with the Senate as well. The affordable housing advocates have been vocal as well in getting our message across on the elimination of tax exempt financing and its devastating effects on affordable housing production. At the same time, we have made it clear that tools like the Historic Tax Credit and the New Markets Tax Credit should be retained.
Both Senate Finance Chairman Orrin Hatch and Chairman Brady have stated that they hope to reconcile their tax bills at the end of the day, and that day is coming soon. Now is the time to pick up your phone and let your Senators know how important tax exempt financing is to create affordable housing utilizing the Low Income Housing Tax Credit, as well as the other tools that help communities. Don’t forget you have constituent power, and your call could very well make a difference in helping families, seniors, and special needs populations have a place to call home.
Democratic leaders have made no secret that they’re relying on a playbook similar to the one they used in the Obamacare fight, during which Senator Chuck Schumer and House Minority Leader Nancy Pelosi ensured that Democrats hung together throughout a seven-month roller coaster of GOP repeal attempts. But taxes are a different animal because Republicans’ end-game is more of a moving target, as one Democratic aide put it, rather than the ultimate goal of demolishing Barack Obama’s signature health care law.
This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.