Tax Extenders Package Advances in Senate
On April 3, the Senate Finance Committee amended and then approved by voice vote tax extender legislation known as the EXPIRE Act. This legislation extends dozens of expiring and expired tax provisions, including those relating to the LIHTC program. It was drafted by Finance Committee Chair Ron Wyden, D. Ore., and Ranking Member Orrin Hatch, R. Utah. The extension is through 2015. And now that the Senate Finance Committee has approved the bill, Wyden may introduce it to the full Senate for debate. The following provisions in the package pertain to the low-income housing industry:
- 9 Percent Credit Rate Freeze for the Low-Income Housing Tax Credit Program. The LIHTC program provides a tax credit over a period of 10 years after a housing facility occupied by low-income tenants is placed in service. The credit earned each year generally depends on three factors—the investment in the building, the portion of the building devoted to low-income units, and a credit rate. Initially, the applicable rate was 9 percent. However, as interest rates have declined, so has the amount of tax credits that can be used to build an LIHTC site. In 2008, Congress adjusted the formula and set a minimum credit amount of 9 percent, which is based on the original credit rate when the program was created. The provision, originally scheduled to expire at the end of 2013, was extended, and is effective for housing credit dollar amount allocations made before Jan. 1, 2014. This proposal would extend the expiration date by changing the deadline to allocations made before Jan. 1, 2016.
- 4 Percent Credit Rate Floor for Allocated Tax Credit. The Chairman’s modification establishes a 4 percent minimum credit rate under the LIHTC program for the acquisition of existing housing that is not federally subsidized. Any existing housing that is also financed with tax-exempt bonds is not eligible for the 4 percent minimum credit rate. The minimum credit rate applies to buildings placed in service after the date of enactment with respect to which credit allocations are made before Jan. 1, 2016.
- Treatment of Military Basic Housing Allowances. The bill extends a provision whereby any military basic housing allowance received by an active member of the military is not considered income for purposes of calculating whether an individual qualifies as a low-income tenant for the LIHTC program. The provision expired at the end of 2013. The proposal would continue this treatment for two additional years.