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Tax Reform is on the Move – Robert Moss Shares Insight

July 2013

Despite everything you may have heard or read about Congressional gridlock, legislators are now working on the biggest re-write of the U.S. tax code in more than three decades.

“Tax reform is still very much alive,” says Robert Moss, an affordable housing industry leader who is joining CohnReznick as Principal and National Director of Governmental Affairs. As the Chairman of the Housing Advisory Group, an advocacy group for affordable housing issues,  Moss testified this year on tax credit reform before the full Ways and Means Committee in the U.S. House of Representatives, speaking on behalf of 450 housing organizations. He has 28 years of experience in the affordable housing business, most recently as Senior Vice President and Director of Affordable Housing Origination for Boston Capital.

There’s a real chance Congress might produce a serious proposal for comprehensive tax reform this fall, according to Moss. In both the House and Senate, stand-alone tax bills are currently on hold while legislators work on comprehensive tax reform. Serious negotiations are now underway in the Ways and Means Committee led by Rep. David Camp (R-Mich.). Similar negotiations are underway in the Senate.

So, what are the possible outcomes of reform for affordable housing? “Comprehensive tax reform could wipe out programs like the federal low-income housing tax credit (LIHTC) or New Market Tax Credits (NMTCs). Alternatively, it could bring new resources to these programs. Or stalled negotiations could freeze Congress again, keeping even inexpensive extensions to expiring provisions in the tax code from being enacted,” Moss said.

Despite wide support, programs like LIHTCs or NMTCs might be annihilated in the rush to make a deal. It’s happened before – tax reform in the 1980s wiped out of the tax code a whole generation of programs that produced new affordable housing.

However, tax reform also creates opportunities as affordable housing advocates go on the offensive with proposals to increase – or even double – the size of the LIHTC program, according to Moss. A deal on comprehensive tax reform could also resolve the automatic spending cuts being referred to as the Sequester that have been ravaging the budgets of federal agencies like the U.S. Department of Housing and Urban Development.

Congress could still grind to a halt before tax reform is accomplished. In early July, for example, Senate Democrats threatened to weaken the filibuster in a fight over nominees and Republicans threatened. “All legislation would have been off the table through the mid-term election in 2014”, said Moss. “The two sides resolved their differences over the nominees, but the Senate is probably not finished with brinksmanship and obstruction. The Congress has passed very little significant legislation since 2010.”

A frozen Congress would be bad news for investors counting on tax provisions that expire at the end of this year, including the fixed rate at which developments generate LIHTCs over the ten year life of the credit. The law that fixes the rate at 9 percent for competitive LIHTCs and at 4 percent for tax-exempt bond deals will expire at the end of the year. This will once again create confusion and anxiety for professionals who depend on the programs. It wouldn’t cost Congress much to extend the fixed rate – just $8 million, according to the Congressional Budget Office. But legislators are unlikely to pass extensions like these on their own while there is still a chance for comprehensive reform.

Most recently, on June 27 the top legislators on the Senator Finance Committee, Max Baucus (D-Mont.) and Orrin Hatch (R-Utah), asked their colleagues to write letters by July 26 that list which federal programs they support. “They’re calling this the blank slate approach,” said Moss. The approach turns the usual budget process on its head. Instead of targeting programs that don’t work and need to be cut, senators are being asked to show which programs are good enough to save. Many conservatives already look at the list of federal housing programs and assume the list is too long.

Knowledge is Power: What to Do
Moss encourages affordable housing advocates to call the offices of their U.S. Senators and inform them about the positive economic, jobs and housing impact of the LIHTC. Contact information for elected officials can be found at “Encourage the staff person who answers the phone to include both the federal LIHTC program and the federal NMTC program in the letter requested by Senators Baucus and Hatch. Everybody needs to place a call,” said Moss. There is no time to send a letter before the deadline, and an email might be lost.

For more information on the specific proposals under discussion by Congress, please visit CohnReznick’s Tax Reform Resource Center.

Robert Moss has 28 years of experience with affordable, multifamily housing including syndication, preservation and development, debt financing, tax credit applications, and property management. Most recently, he was the Senior Vice President and Director of Origination, Affordable Housing for Boston Capital. He served as the Chairman of the non-partisan Housing Advisory Group, which is active in preserving the Low Income Housing Tax Credit (LIHTC) program in Congress, and also served as the Federal Legislative Subcommittee Chair for the Housing Credit Group of the National Association of Home Builders (NAHB). Moss also recently provided testimony on the LIHTC on behalf of over 450 national housing organizations before the full House Ways and Means Committee on tax credit reform and residential real estate hearings.

For more information, please contact Beth Mullen, Partner and Affordable Housing Industry National Director, at 916-930-5750. For more information on CohnReznick’s Affordable Housing Industry Practice, visit the webpage.

This article was distributed as part of the July 2013 Affordable Housing News and Views newsletter.

Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

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.

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