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Camp Tax Reform Discussion Draft Retains and Amends Housing Credit, Eliminates Private Activity Bonds

Published on February 26, 2014 by
Camp Tax Reform Discussion Draft Retains and Amends Housing Credit, Eliminates Private Activity Bonds

At 1:30 this afternoon, House Ways and Means Committee Chairman Dave Camp (R-MI) released a discussion draft and summary of legislation to reform our nation’s tax code.  Camp’s discussion draft would preserve but amend substantially the Low Income Housing Tax Credit and would eliminate private activity bonds and the 4 percent Housing Credit.

We are continuing to analyze Camp’s discussion draft and will provide additional information on its provisions later this week and at our Legislative Conference next week.

According to the Committee’s summary, the discussion draft would amend the Housing Credit in the following ways:

  • Credit allocating agencies would allocate qualified basis, rather than Credit amounts.
  • The annual amount of allocable basis for each State would be equal to $31.20 multiplied by the State’s population, with a minimum annual amount of $36,300,000.  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 would be eliminated.
  • The Credit period would be extended from 10 years to 15 years to match the current 15-year compliance period.
  • The recapture rules also would be repealed “as no longer necessary to ensure that the building continues to be a low-income housing project for the duration of the tax benefit.”
  • The 4 percent Credit would be repealed.
  • The 9 percent Credit for newly constructed property and substantial rehabilitations would be retained.
  • Federally funded grants would not be taken into account in determining the eligible basis of a building for purposes of the Credit.
  • The amount of the Credit would continue to equal the qualified basis in the qualified low-income building multiplied by the applicable percentage.  The IRS would determine the applicable percentage generally for the month that the building is placed in service, which would be equal to the percentage that would yield over a 15-year period a Credit amount that would have a present value equal to 70 percent of the qualified basis of the building.
  • The increased basis rule for high-cost and difficult development areas would be repealed.
  • The general public-use requirement would be revised to eliminate the special occupancy preference for members of specific groups under certain Federal or State programs and the special preference for individuals involved in artistic and literary activities.  Instead, occupancy preferences would only be permitted for individuals with special needs and for veterans.
  • The requirement that States include in their Credit allocation selection criteria the energy efficiency of the project and the historic nature of the project would be repealed.

The Credit amendments would be effective for State basis amounts and allocations of such amounts determined for calendar years after 2014.  A transition rule would translate credit allocations prior to 2015 into equivalent amounts of eligible basis for purposes of determining new allocations of basis after 2014.

The discussion draft also proposes to:

  • Terminate private activity bonds (PAB) by making interest on PABs issued after 2014 taxable.
  • Eliminate the Mortgage Credit Certificates (MCC) program by not allowing any federal tax credits for MCCS issued after 2014.

The discussion draft also proposes to reduce the cap on the amount of deductible home mortgage interest to $500,000 from $1,000,000, phased in over four years.

Future action on Camp’s discussion draft is uncertain.  Yesterday, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell both stated they did not expect Congress to complete action on tax reform this year.  Today, House Speaker John Boehner said he did not know if the House would vote on Camp’s bill this year and said House Republicans are still discussing Camp’s draft.

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