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Conferees Agree on Final Tax Reform Bill Preserving the Housing Credit and Bond Programs

Published on December 18, 2017 by Garth Rieman
Conferees Agree on Final Tax Reform Bill Preserving the Housing Credit and Bond Programs

In a major victory for NCSHA, HFAs, affordable housing stakeholders, and, most importantly, those who need housing help in this country, the final tax reform legislation that House and Senate conferees agreed to last Friday retains both private activity tax-exempt bonds, including single-family and multifamily Housing Bonds, and the Low Income Housing Tax Credit. The bill also preserves the Mortgage Credit Certificate (MCC) program.

Now that the conference report on the Tax Cuts and Jobs Act, H.R.1, is finalized, the House is likely to vote on final passage sometime Tuesday and the Senate is likely to vote soon after that, either later Tuesday or Wednesday. The bill is virtually certain to pass both chambers, and President Trump is likely to sign it very soon afterward.

The final legislation does not make any changes directly to the Housing Bond and Housing Credit programs.

The conferees rejected provisions included in the Senate bill authored by Senator Pat Roberts (R-KS), which would have established a new exception to the Housing Credit public use requirement for veterans, deleted the existing public use exception for artist housing, made rural 9 percent Housing Credit developments eligible for a basis boost, and reduced to 25 percent from 30 percent the Housing Credit basis boost allowable for all Credit-financed developments.

The conferees included the Senate’s "base erosion and anti-abuse (BEAT) tax" but attempted to mitigate its impact on Housing Credit and other investors with BEAT liability by exempting 80 percent of their credit investment from the BEAT tax. Under the Senate’s original version, the BEAT tax would have eliminated the benefit of all tax credits other than the Research and Development credit. NCSHA and our partners are analyzing the BEAT provision to determine the degree to which it will impact Credit investment.

New Markets Tax Credit

The conference report continues the New Markets Tax Credit (NMTC) by authorizing annual allocation rounds of $3.5 billion each in 2018 and 2019, identical to the Senate version. The House bill would have repealed the NMTC after 2017.

Historic Tax Credit

The final bill retains the Historic Tax Credit (HTC), as modified by the Senate bill. Investors would claim the HTC over five years instead of when placed in service, as under current law. The House bill would have repealed the HTC after 2017.

Mortgage Interest Deduction

The conference report lowers the cap on mortgage principal eligible for the mortgage interest deduction (MID) to $750,000 from $1 million. The new cap applies to new first and second home purchases after December 31. The conference report also reduces the number of taxpayers likely to take advantage of the MID by increasing the standard deduction to $12,000 for individuals and $24,000 for married couples. The House bill would have lowered the cap on MID-eligible principal to $500,000; the Senate bill would not have reduced the cap. Both the House and Senate bills proposed to eliminate the MID for mortgages on second homes.