The House of Representatives in Congress recently introduced legislation called the “Tax Cut and Jobs Act,” which makes drastic changes to our country’s tax code. Unfortunately, some of the proposed changes might have a negative impact on the Low Income Housing Tax Credit (LIHTC). The LIHTC is an affordable housing program administered by the Internal Revenue Service that awards tax credits to the private sector to spur construction that benefits low-income individuals. The LIHTC is responsible for around 90 percent of all current affordable housing construction in the United States, and has help create around 3 million apartments since it was established.
In particular, the LIHTC has benefited seniors in the B’nai B’rith Housing Network in St. Louis at Convent Place Apartments, and in Massachusetts at the Coolidge at Sudbury Apartments. The U.S. has an affordable housing shortage, particularly amongst seniors. It is predicted that by 2025, 12.2 million seniors will spend more than half of their incomes on housing.
While the tax reform legislation has no direct changes to the existing LIHTC, the other proposed changes could have unfortunate indirect consequences for affordable housing. First, the legislation lowers the corporate tax rate from 35 percent to 20 percent which means that corporations will have less incentive to purchase the tax credits. After the 2016 presidential election, the mere threat of tax reform caused the value of the LIHTC to go down. Tax reform that brings the corporate tax rate down to 20 percent without other modifications could be problematic for the tax credit.
Secondly, the tax reform proposal could threaten affordable housing by eliminating the use of private activity bonds that utilize the four percent credits from the LIHTC. Private activity bonds help finance around half of all LIHTC construction, therefore eliminating these bonds will have very serious consequences on the creation of new affordable housing, and the rehabilitation of existing stock.
Tax reform legislation should be viewed as a golden opportunity to strengthen the LIHTC, and it’s a shame that the current proposal does not accomplish that goal. For instance, the House’s bill could include parts of LIHTC legislation in the House and Senate that would fortify this affordable housing program. In addition, both these affordable housing bills have broad bi-partisan support in the House and Senate, which only increases their likelihood of passage if included as part of the greater tax reform effort.
The LIHTC is critically important to making sure that older Americans have a place to call home, and the tax reform legislation should not include proposals that could potentially make affordable housing for seniors more difficult to come by.
Evan Carmen, Esq. is the Assistant Director for Aging Policy at the B’nai B’rith International Center for Senior Services. He holds a B.A. from American University in political science and a J.D. from New York Law School. Prior to joining B’nai B’rith International he worked in the Office of Presidential Correspondence for the Obama White House, practiced as an attorney at Covington and Burling, LLP, worked as an aide for New York City Council Member Tony Avella and interned for Congressman Gary Ackerman’s office. Click here to read more from Evan Carmen.
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