On February 26, House Ways and Means Chairman David Camp (R-MI) revealed his long-awaited tax reform proposal, which includes some version of the Low Income Housing Tax Credit.

The Camp plan, including proposed changes to the LIHTC program, remains under examination by lawmakers and housing industry participants alike, however, early analysis indicates that the LIHTC has met the litmus test put forth by Chairman Camp which preserves “expenditures that can prove they provide for an activity that would not otherwise occur in the marketplace” and that serve as a clear “safety net”.

Proposed modifications to the LIHTC program include the following

(prepared and released by the Ways and Means Majority Staff):

• The credit period would be extended from 10 years to 15 years to match the current initial compliance period and recapture rules would be repealed as they would no longer be necessary to ensure that the building continues to be a low-income housing project for the duration of the tax benefit;
• The 4-percent credit would be repealed but the 9-percent credit for newly constructed property and substantial rehabilitations would be preserved;
• Federally funded grants would not be taken into account in determining the eligible basis. The amount of credit would be equal the qualified basis in the qualified low-income building multiplied by the applicable percentage; and
• State and local housing authorities would allocate qualified basis, rather than credit amounts. The annual amount would continue to include unused basis allocations from the prior year plus basis allocations returned to the State during the calendar year from previous allocations. The national pool of unused credits, however, would be eliminated.

To read the full proposal from Chairman Camp go the following link: Camp Proposal

TCAM continues to monitor developments in federal tax reform efforts and the potential impact on housing programs. For the latest updates on tax reform efforts, contact us at Steve Spall (sspall@tcamre.com) and Allen Feliz (afeliz@tcamre.com) — (617) 542-1200.