Country / Language

Two Issues Weigh on California’s Low-Income Housing Tax Credit Program


10/13/15

Synopsis
 
The governor’s veto of two bills, along with pending changes to the state’s low-income housing tax credit program, will impact the future of affordable housing in California. 
 
Issue
 
Brown Vetoes Affordable Housing Bills
On Saturday, October 10, 2015, California Governor Jerry Brown vetoed two bills that supporters believe would have increased the number of affordable apartments in the state. AB35 would have boosted the annual state low-income housing tax credit by $100 million for each of the next five years, while SB377 would have permitted the certification of that credit. Both bills had overwhelming support in the state legislature and were part of a larger package that would have expanded already existing tax credits or created new ones. 
 
In the governor’s veto message, he cited the need to maintain California’s fiscal stability. The governor’s veto represents yet another blow to affordable housing advocates in the state. They had been previously unsuccessful in garnering the required two-thirds vote needed in the legislature earlier this year to establish a permanent funding source for affordable housing in the state. This would have partially replaced the loss of redevelopment funds.
 
TCAC to Consider Regulation Changes
On Wednesday, October 21, 2015, the California Tax Credit Allocation Committee (TCAC) is set to adopt a series of changes to its low-income housing tax credit program. Potential changes have been in the works for several months and have evolved over time – particularly those related to so-called “back end” provisions which had drawn multiple comments.
 
From proposing to significantly limit the amount of equity that could be withdrawn from a development after the initial 15 year compliance period,  to required “equity sharing”, TCAC has now withdrawn the majority of these proposals . It currently proposes that both short-term and long- term rehabilitation needs of these developments be addressed before it will grant its approval for refinancing, sale, or preservation.
 
There are multiple suggested changes to the program and users are strongly encouraged to visit TCAC’s website (www.treasurer.ca.gov/ctcac) to review them, particularly once the final version of the regulations are adopted. A few other proposed changes include the maximum permitted developer fee, the tie-breaker, and increasing the special needs “goal” to 25% of the total annual competitive credit.
 
What does CohnReznick think?
It is unfortunate that Governor Brown chose to veto AB35 and SB377, seemingly without recognizing the desperate need for more affordable apartments throughout the state and the economic benefits, including job creation that the housing tax credit creates. CohnReznick will continue its involvement in efforts that result in increased production of affordable housing in the state and around the country. 
 
With respect to TCAC’s regulations, we will work with our clients to educate them in understanding how best to work within TCAC’s framework going forward.
 

Contact
 
For more information, please contact Jeanne Peterson, Director, at 916-442-9100 or jeanne.peterson@cohnreznick.com.
 
To learn more about CohnReznick’s Affordable Housing Industry services, please visit our website.


Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. 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.

Search Our People

Search Our People

Look ahead. Gain insight. Imagine more. Is your business ready to break through?

View our new TV commercial..

Industry Outlooks

Industry Outlooks

Gain insight into what is ahead for the Commercial Real Estate, Technology and Middle Market Private Equity industries.

READ MORE

Learn about our upcoming events.

READ MORE

Working With Us

Working With Us

What makes CohnReznick different from others in our profession? And what should our clients come to expect when working with us? The answer is The CohnReznick Advantage. Contact us to learn how we can out the CohnReznick Advantage to work for your business.


People

The value of an organization is determined by the skills and qualities of its leaders. With more than 280 partners serving clients nationwide, CohnReznick is renowned for the diverse experiences, knowledge and backgrounds of its leadership.

Learn More

Services

We align our services in three segments: Accounting and Assurance, Tax, and Advisory. This approach allows us to provide holistic solutions to complex business problems and to seize upon opportunities requiring an integrated approach.

Learn More

Industries

Accounting and tax issues different significantly based on an organization's industry. We provide clients with expertise in nearly two dozen industries – we know the opportunities, the obstacles, the competitive landscape.

Learn more

Insights

CohnReznick professionals are thought leaders in their industries. Clients benefit from relevant and timely economic, legislative and industry insights that can keep them a step ahead of competition.

Learn More

Global Reach

Our involvement in the Nexia International network of firms enables us assist our clients wherever they do business-providing local expertise and connections wherever they needed. Nexia is comprised of 20,000 professionals operating in over 100 countries.

Learn More