Spring 2016 issue of Horizons

REAL ESTATE

This past year ended with the enactment of major tax legislation, The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) , which made several expired tax provisions permanent, including the aforementioned 9% LIHTC floor and the military housing allowance exclusion for determining whether a tenant in certain counties is low income. This was a very significant victory for the affordable housing industry, not only for the impact of the legislation itself, but because it underscored the commitment of Congress to the LIHTC program. The PATH Act included other major items that drove prior extenders bills and that were also made permanent, such as the deduction for state and local taxes, the research credit and elements of the Earned Income Tax Credit, the Child Tax Credit and the American Opportunity Tax Credit. These permanent extensions were extensively negotiated between the Republicans and Democrats in Congress and with the Administration. Although a number of other provisions were extended for 5 years, such as the New Markets Tax Credit, many others were extended only until the end of 2016. The fate of those provisions and their potential extension is more uncertain than ever. Recently, the Obama Administration released its FY 2017 budget which included six proposals to expand and strengthen the LIHTC. There is only one new proposal for FY 2017 and it is related to affirmatively furthering fair housing. The remaining five were carried over from previous budget requests.

Great news came this past March as U.S. Senator Maria Cantwell (D-WA), joined by Seattle Mayor Ed Murray, Tacoma Mayor Marilyn Strickland, Everett Mayor Ray Stephanson and the A Call to Invest in Our Neighborhoods (ACTION) Campaign – a coalition of more than 1,300 national, state and local affordable housing advocates – urged Congress to expand the LIHTC. Cantwell, along with housing advocates kicked off a national campaign to increase federal resources for affordable housing. Senator Cantwell called for a 50% expansion of the LIHTC, reforms to better target the lowest income populations and unveiled her report, “The Housing Tax Credit: Addressing the Challenges of Affordable Housing & Homelessness.” Cantwell’s proposal would finance approximately 400,000 additional units of affordable housing nationwide over the next decade. In December of 2015, Cantwell championed the LIHTC and secured a critical fix to the program by permanently extending the credit rates to 9% of eligible costs on new construction. This ended the era in which variable rates made financing of affordable housing less predictable.

page 54 | horizons Spring 2016