We have reached that point in the seemingly endless debate over tax reform when reality hits us that it might just happen. Whether you go by the alignment of stars or ducks in a row, it seems the pieces are falling into place for something substantial happening on the tax front. To my friends in the industry who begged me to put a fork in the reform effort months ago, this is why I hesitated. Why did I hesitate? It is not because I see tax reform as a bad idea. To the contrary, we do need to simplify our system but not in a way that penalizes economic engines like the LIHTC or goes down rabbit-holes which time and experience have proven to be false theories of growth. In short, what I fear is bad policy for the sake of politics and this often happens when you go it alone and do so under the pressure of artificial deadlines.

As of the drafting of this update, the House is poised to accept the FY 2018 Budget as passed by the Senate, without the usual conference committee process by which the two very different budgets would be negotiated into a single product. Why would fiscal conservatives in the House agree to approve a budget more the $200 billion more expensive than the one passed in the House? The politics and lure of once in a generation tax reform. Without getting into every aspect of what tax writers may propose holistically in their final tax reform legislation, I will focus on my concerns as they relate to affordable housing.

We are very pleased that the Big 6 working group included the LIHTC in their tax reform framework. Our industry has been making the case for many years as to why this is appropriate and necessary. What we are unsure of is what the tax writers may do to the program to fit it within their vision of reform, including how they might change the LIHTC to raise revenue for their base broadening goals. You may recall that then Ways and Means Chairman Dave Camp (R-MI) maintained the LIHTC in his tax reform proposal, but did so it a way that severely hindered our ability to produce affordable housing. We met with tax writing staff after that exercise and explained why this was the case but we are not at all confident that the current staff might not revisit that proposal as they draft the new legislation. Our efforts for some time have been focused on maintaining and expanding the programs ability to produce housing but when politics gets in the way of good policy, those arguments can easily be drown out for the sake of raising revenue. We are working on getting details of the tax reform proposal and hope our fears are unfounded. Either way we are prepared to advocate for a robust LIHTC that substantively addresses the affordable housing crisis.

Another area of concern is the continued silence within the tax proposal on private activity bonds. Bonds make up a significant portion of affordable housing production which we have made known to Members of Congress and tax staff. While housing bonds have not been a target for legislators other industries have come under scrutiny for how they utilized PAB’s. We continue to follow this debate and will be watch closely to see if and how they deal with PAB’s in the tax reform legislation.

This debate will pick up steam and momentum in the coming weeks as the House would like to vote on the tax reform legislation before Thanksgiving. It is possible the timeline may move even faster. The Senate will be more deliberative as issues of deficit spending, senate rules and political complications weigh on the debate. That being said, Republican leadership would like to have tax reform tied up in a pretty bow by the holidays so stay tuned and be prepared for a fast and wild ride.