Happy Spring to everyone at CHC.
Congress is returning to Washington after the Passover/Easter recess and hopes are high, among some, that the recess will have refreshed batteries, attitudes, and interest in pursuing a reconciliation bill.
With the shrinking legislative calendar, the industry is looking at two potential vehicles for our LIHTC agenda. The first is the aforementioned reconciliation bill and the second would be a tax extenders package. The former could come together in the next month or so while the latter would likely not see consideration until after the November mid-term elections.
If a reconciliation bill (Build Back Better lite) comes together it will likely be much smaller than the original BBBA that was passed by the House late in 2021. Senator Manchin is the key to this process (big surprise) and he is focused on inflation and deficit reduction, thus no grandiose spending programs or massive appropriations will be included. What is likely to be included is legislation reducing the cost and increasing competition in prescription drugs, green energy and fossil fuel incentives and perhaps something on childcare/wellness. It is just a guess, but the programmatic portion of the bill will likely top out at around $500 – $750 billion. The larger part of the bill will be tax increases, perhaps as high as $1 trillion, thus providing excess revenue to pay down the debt. All of this is conjecture as no substantive talks have taken place so we will see what comes together.
Our Hill advocates are working with us to advocate for the LIHTC being included in the tax title of this bill to tackle the well documented lack of affordable housing, and as a hedge against inflation. Housing as a cause of inflation has received considerable press over the last many months and was the focus of a report from the San Francisco Federal Reserve. This talking point has been presented to Senator Manchin as well and reports are he accepts that housing should be addressed as they work to tackle inflation. The road ahead is precarious, but we are working diligently to restore the 12.5% reduction in 9% allocations and pass the reduction of the 50% test as part of this package.
Other issues the industry is working on include the Pillar Two Model Rules for the proposed International 15% AMT, lumber costs and the utilization of ARPA funds.
Pillar Two: The potential for the current rules to hinder investment in General Business Credits (GBC’s) including the LIHTC are real and we have been working with Hill advocates, the tax writing committees and Treasury on a remedy to this issue.
Lumber: Following conversations with the administration and at our urging, a call was convened between the Domestic Policy Council, National Economic Council, National Security Council and Commerce with industry advocates (developers) to discuss the situation on the ground. It was a very educational exercise for the administrative staff to hear the real-world challenges, including the actual causes of high lumber costs, and how it is negatively affecting our industry’s ability to produce housing. These conversations continue and we hope to have actions of some kind taken by the administration to address the situation.
ARPA: We are working with Hill advocates to have language included in pending legislation that would allow states to allocate ARPA funds to LIHTC developments, no matter the sponsor, in the form of long-term interest free loans. A bill has been introduced in the House, HR. 7078, and we expect a companion bill in the Senate soon. This has bi-partisan support and the administration is on board as well.
So, there is much going on and we continue to push our affordable housing agenda in Washington. We so appreciate your advocacy with elected officials at all levels as this is the real key to our success. Thank you sincerely and have a wonderful Spring. If you can, join us in Washington for our Housing Advisory Group/Affordable Housing Tax Credit Coalition Affordable Housing Symposiumon June 15th.
