WHAT HAPPENED? Last week, the White House and Congress reached a budget deal that doesn't appear to include any tax measures, raising questions for us about what the next vehicle might be for matters like extenders and technical corrections to the Tax Cuts and Jobs Act of 2017. That outcome leaves a range of advocates, including supporters of both the Affordable Housing Credit Improvement Act (AHCIA) and the New Markets Tax Credit (NMTC), looking for ways to get their priorities into law. And while the debt limit and omnibuses appear to be out as potential vehicles for the next couple years, there could still be a chance to add a tax bill on to slimmer spending measures by year-end.
Leaders from both chambers are increasingly confident that the two-year budget bill will clear Congress before the August recess. Last week, the sweeping budget deal passed the House 284-149 before they left town, and Senate action is expected this week. While it does not actually fund the government, it paves the way for a return to funding the government the old-fashioned way. The budget deal, which was hammered out with congressional leaders, is all of 24 pages and includes a range of spending increases and a debt limit suspension until the middle of 2021. It does not include extraneous riders like tax extenders or the retirement security legislation.
HUD PERSPECTIVE: For the Senate and House committees on transportation, housing, and urban development appropriations, the raised caps are a good sign, but at this point it is hard to know how it will play out for HUD funding. The deal would increase domestic spending by 4.5% but that appears to work out to be $15 billion less than the House provided in the bills they passed so far. The increased caps would pave the way for fiscal 2020 spending bills, but there are few days for lawmakers to complete action on all 12 measures before Sept. 30, once they return from recess on Sept. 6. The House has passed 10 of its 12 appropriations measures for next year, while Senate appropriators have been waiting for the topline numbers to finish crafting their bills.
COMMUNITY DEVELOPMENT: For the AHCIA bill, we continue to build co-sponsors (a total of 65 for H.R. 3077, and 13 for S.1703), and for the NMTC legislation (S.750 and H.R. 1680, 29 Senate co-sponsors and 90 in the House). Ways and Means Chairman Rep. Richard Neal, D-Mass., is a big fan of both bills, but future tax action will depend on finding a revenue source to pay for the legislation. Earlier this year, the House approved a rules change package 234 - 197 that eliminates the use of dynamic scoring by congressional estimators (Joint Committee on Tax) to calculate budgetary effects. In addition, the package reinstates the “pay as you go” rules that make it mandatory to offset spending increases and tax cuts. The overall size of the year-end tax package will be dependent on finding offsets such as increasing the estate tax, which is popular with Democrats but not as popular with Tax Cut and Jobs Act-oriented Republicans.
ANOTHER TRADE: While details of the package are still being worked out, the momentum for a new year-end tax bill will start to heat up. I expect the buzz for fixing the “retail glitch” to gain strength again on both sides of the aisle. Rep. Jimmy Panetta, D-Calif., teamed up in March with fellow Ways and Means member Rep. Jackie Walorski, R-Ind., to introduce H.R. 1869 to fix the mistake. Companion legislation in the Senate (S. 803) also has bipartisan support. Like the Omnibus of 2018 where a deal was cut to fix another technical correction in exchange for the 12.5% LIHTC cap increase, we may be looking at a similar situation if the entire AHCIA bill cannot fit into a tax action. At CohnReznick, we believe the 4% fixed rate component of the AHCIA is a high priority for our development clients.
LAST TRAIN IS LEAVING: With the August congressional recess almost upon us, we are working hard on the Hill to ensure our voices are being heard. The most powerful message is always delivered by constituents back at home. This means you! A simple call or short meeting encouraging the congressional member to support this legislation works best. Of course, if you are hosting a property grand opening in August, let’s work together to get your elected representative to attend. Congress works for you on behalf of your business. To look up a bill’s co-sponsors to see if the elected member of the House or Senate who represents you is already on the bill, go to www.congress.gov and enter the bill number listed above. If you need to bring or send your district or state fact sheet, you can find updated information here: http://rentalhousingaction.org/.
With the budget deal almost done, we can see the road ahead, and that is to get the AHCIA and NMTC bills into year-end tax legislation. It will be our last and best shot. CohnReznick is always here to help. Please call or write if you have questions.