The Senate Finance Committee released the text of the tax portion (Section-by-Section Summary) of the reconciliation bill Monday night. LIHTC-specific highlights include:
- Housing Credit allocation increase: the nine percent LIHTC allocation will change to a 12 percent increase (instead of 12.5 percent in the House bill), but will be permanent.
- Bond test: The 50 percent test will be lowered to 25 percent permanently. According to Novogradac, a permanent 25 percent test alone will finance 1.14 million affordable homes over the next decade than otherwise possible.
- The rural and Native basis boosts are no longer included. The Senate prioritized permanence for tax policy and this was a tradeoff for permanence on the other two provisions.
Other notable provisions include:
- New Markets Tax Credit made permanent;
- Opportunity Zones made permanent, on a rolling ten-year basis, with a lowered substantial rehabilitation test from 100 to 50 percent for rural Opportunity Zones;
- Bonus depreciation made permanent; and
- Extends the phase-out period and preserves the transferability of most green tax credits. The Senate and the House have about a six month difference for the 45L credit expiration date.
What’s Next: The House and Senate will need to reconcile the substantial differences, most notably around the State and Local Tax (SALT) deduction and Medicaid.
