For the past seven years, policy discussions around the Housing Credit have mostly revolved around the question of what tax reform would mean for the program since the bipartisan pursuit of lower tax rates for corporations was presumed to also require the elimination of most special deductions and tax credits. Yet, even as that debate persisted in Congress, conventional wisdom has been that tax reform would not be enacted as long as majorities in Congress were held by one party and the presidency by another.
That of course all changed with the election of Donald Trump in November at the same time Republicans held on to their majorities in Congress. As the Housing Credit community well knows, immediately after the election the conventional wisdom changed quite quickly to an assumption that tax reform would get done.
In 2016, before any of this was anticipated, the Housing Credit community decided to change its legislative orientation from one largely tailored on defending the program against possible elimination in tax reform, to a more aggressive posture of seeking a very much needed 50% increase in the allocation cap. This effort was undertaken at the same time that we sought numerous statutory changes in the program to both facilitate and simplify its use as the key means of developing new, and preserving existing, affordable housing. Two separate bills were introduced in the Senate in 2016, by Senator Maria Cantwell (D-WA) and Senator Orin Hatch (-R-UT), one bill was focused on the 50% increase in cap authority while the other bill included approximately twenty statutory changes to the Housing Credit, including creating a minimum 4% credit, permitting states to provide a 30% basis boost to bond projects, and a new 50% basis boost for units affordable to extremely low-income households.
Like all other tax bills, this legislation died with the end of the last Congress, but the effort has been renewed in 2017 with the introduction of one Senate bill, that includes both the 50% cap increase and the miscellaneous statutory changes. Already, as of the end of April the Cantwell-Hatch bill, S. 648, has garnered the cosponsorship of 17 Senators. Meanwhile, Congressman Pat Tiberi (R-OH) and Congressman Richie Neal (D-MA) have introduced almost identical legislation in the House, except without the 50% cap increase. That bill, H.R. 1661, as of the end of April has been cosponsored by 34 House members. The House and Senate bills carry the same title: The Affordable Housing Tax Credit Improvement Act of 2017.
These developments are quite positive and the industry should be encouraged by the number of cosponsors already on the two bills have as well as the key support from the Chairman of the Senate Finance Committee, Senator Hatch, the top Democrat on that committee, Senator Ron Wyden (D-OR), and the Senate Democratic Leader, Senator Chuck Schumer (D-NY). It is important for the entire affordable housing community to rally around this legislation and work hard to engage with their elected representatives in Congress to urge that they cosponsor the Senate and House bills.
Ultimately, the level of support built around this legislation will serve as a key line of defense for the Housing Credit program if and when Congress eventually passes tax reform legislation. The more members of Congress attach their names to these bills, the stronger our position will be if the future of the program is under threat.
Even with one party control of the Presidency, the House and the Senate, the likelihood, timing and content of tax reform is still very unclear. Nevertheless, since the potential impact on the Housing Credit is so great, the affordable housing community can leave nothing to chance. Based on our interaction with Congress so far, there is reason to be optimistic that the Housing Credit will survive intact if tax reform is enacted. But the basic program could be saved even as other tax code changes severely undermine its effectiveness. Ultimately, the display of support we show through the Affordable Housing Tax Credit Improvement Act will make it easier for us to preserve the effectiveness of the Housing Credit program no matter what happens with tax reform.
What this means of course is that everyone who works with the Housing Credit must continue to make a strong effort to ensure the effectiveness of the program and its support among elected officials.