Unlike the white-out blizzard that occurred on Thursday on the East Coast, it seems like autumn leaves and colors were just here. The quicker-than-normal passage of time between Labor Day and New Year’s Eve was caused by a whirlwind of legislative advocacy for all of us.
The industry was on edge, holding its breath last fall as we waited for the Tax Cuts/Tax Reform package to be released. Finally, when the United Framework for Tax Reform was announced in September, the industry initially rejoiced in the fact that the Housing Credit was included in the summary. Advocates were then more than perplexed when the Ways and Means Committee’s definition of the program only outlined saving the allocated 9% credit, not Private Activity Bonds. This was November 2, and the push was on by House Republicans and the Administration to pass the tax bill immediately. In our conversations with Ways and Means members, we found the excuses varied from not liking many of the “uses” of the bonds, to stating that the House Committee knew the Senate Finance Committee would reinstate them. But, the fact is, bonds were not included.
It turns out that the United Tax Reform Framework contained many of the provisions originally put forth in a tax reform package by former Ways and Means Chairman David Camp in 2014, which also proposed to eliminate private activity bonds, but preserved the 9% credit. On November 16, the bill passed the House 227-205.
We knew all along that the Senate would be the likely chamber to support our cause, and we had prepared for the fight by working throughout 2017. Last year, #HousingParty advocates spent a large amount of time at home and in Washington working on gaining co-sponsorship of the Affordable Housing Credit Improvement Act. Both H.R. 1661 and S.548 were supported by many lawmakers: 122 House Members (62 Democrats, 60 Republicans) and 22 Senators, including Republican members on the Finance Committee, Sens. Rob Portman (OH) and Johnny Isakson (GA). It was hard work that paid off when the Senate Finance Committee first reported on December 2 that Private Activity Bonds would be included in their proposal. Ultimately, the Senate package won out (51-48) in the final bill: The Tax Cut and Jobs Act of 2017 (TCJA), signed into law by the President on December 22.
There is no doubt about it, the TCJA is among the least popular major legislation in recent U.S. history, with about 32% approval, nearly all of it Republican. For affordable housing and the housing credit itself, the easiest way to describe the aftermath is that we survived, albeit bruised. After a brief respite for New Year’s, we have several new issues to confront, among them ensuring that Private Activity Bonds and housing production be thought of in the same sentence by Congress as the approach of infrastructure legislation comes about.
Yes, there are continued rumblings by Congress about “fixing” Private Activity Bonds. We also will be pushing Congress to offset the effect of the 21% corporate rate on housing credit pricing. There are also concerns about the funding levels in 2018 for the National Housing Trust Fund, as the new corporate tax rate could reduce GSE contributions to the fund. Many of us are also examining the negative effects of the Base Erosion Anti-Abuse (BEAT) tax on Non-CRA Housing Credit investors, which is a complicated mess to simply explain in this piece.
Last, but not least, it appears that we may have a shot at increasing the 9% credit in the upcoming budget battle in a few weeks, if the tax extenders package is rolled into the Omni-Bus.
So where do we go from here? Our work continues to be won or lost at home, not in Washington. 2018 is an election year, and candidates love to attend grand openings or re-openings of affordable housing properties, especially when local media covers the event. Keep up the work at home as you made a difference in helping the program survive tax reform.
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