House Ways & Means Chairman Kevin Brady (R-TX) has announced he has completed a draft tax measure to fix the “retail glitch” in the new tax law and address many tax extenders. The draft measure is expected to be circulated in the next few days. It is unclear at time of press whether any affordable housing, historic rehabilitation or New Markets Tax Credit provisions are included in Chairman Brady’s draft, which is said to include between 70-80 alterations to last year’s the tax law, HR 1. The measure is a potential vehicle for several NH&RA priorities including fixing the 4 percent LIHTC rate, basis adjustment provisions for the historic credit and an extension of the NMTC, which is set to sunset next year. We will update this story as it develops.
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Like many of you, I was up late watching the returns from yesterday’s mid-term elections. As I write this we are still waiting for final results on several races, but a few things are becoming clear. The following are some of my first impressions on what the elections could mean for affordable housing and tax credit developers:
To start, the Democrats will take back control of the US House of Representatives in January and as a result committee leadership will also shift back to Democrats.
- House Ways & Means Committee: Rep. Richard Neal (D-MA) is expected to take over the committee gavel and we are optimistic that given his past leadership sponsoring bipartisan LIHTC and NMTC legislation (including HR 1661, the current LIHTC vehicle in the House) we can expect some positive attention from the Ways & Means on community development issues in the coming Congress. At least five Ways & Means Committee Republicans lost their reelection bids, including Rep. Carlos Curbelo (R-FL), who is the current lead Republican sponsor in the House of Representatives of the Housing Credit Improvement Act. Educating and recruiting new members of congress and particularly new Ways & Means Committee members about the LIHTC, HTC and NMTC will be one of our highest priorities in the coming months. Current Ways & Means Chair Kevin Brady (R-TX) is expected to serve as Ranking Member in the coming Congress.
- Housing Financial Services Committee: Rep. Maxine Waters (D-CA) is expected to lead the Financial Services Committee in the next Congress. With current Committee Chair Jeb Hensarling (R-TX) retiring, there is still some uncertainty as to who will serve as Ranking Member. In terms of seniority, Rep. Peter King (R-NY) is next in line to serve as Committee Chair and is a likely candidate. There will be many new Republicans serving on the Committee in the next Congress — seven current members are retiring at the end of this Congress and at least three more lost their reelection bids.
Republicans built on their majority in the US Senate. Several races are still too close to call at the time that I am writing this so the exact margin remains unclear
- Senate Finance Committee: The Senate Finance Committee will have new leadership in the Congress with the retirement of Chairman Orrin Hatch (R-UT) at the end of this term. Since Hatch is the lead Senate Republican sponsor of the HCIA, advocates will be focused on identifying a new Republican Lead Sponsor. Leadership of the Committee will likely transition to Sen. Charles Grassley (R-IA); however, this is not yet certain. Sen. Grassley currently serves as Chairman of the Senate Judiciary Committee, and he would have to give up this Chairmanship to take over Senate Finance. If Sen. Grassley chooses to stay on as Judiciary Chair, Sen. Mike Crapo (R-ID) would likely assume the role of Finance Chair. Republican Committee Member Sen. Dean Heller (R-NV) lost his reelection bid, opening up at least one new spot on the Majority. Sen. Ron Wyden (D-OR) is expected to continue on as Ranking Member on the Finance Committee. Democrat Committee Member Claire McCaskill (D-MO) lost her reelection bid and at time of press, committee member Sen. Bill Nelson (R-FL) was in a race that was still too close to call. Notably, Senator Maria Cantwell (D-WA) also one reelection.
- Senate Banking Committee: Sen. Mike Crapo (R-ID) is likely to continue on as Chairman of the Banking Committee; however, things could get interesting on the Committee if Sen. Grassley opts to stay on as Chair of the Judiciary Committee and Sen. Crapo transitions to Chair of the Finance Committee. In this scenario, Sen. Richard Shelby (R-AL) has the next highest seniority, but because of Republican Senate Caucus rules he is term limited and may not assume the gavel (although the Caucus can waive this). This would put Sen. Pat Toomey (R-PA) next in line to lead the Committee. Sen. Sherrod Brown will almost certainly continue on as Ranking Member on the Banking Committee. Democrat Committee Members Heidi Heitkamp (D-ND) and Joe Donnelly (D-IN) both lost their reelection bids so there will likely be at least one new Democratic Member on the Committee as did Sen. Dean Heller (R-NV). With Sen. Corker’s (R-TN) retirement we can expect at least two new Republican Members in the next Congress.
With the election over, our attention turns to the Lame Duck session of Congress. There are still several must-pass legislative vehicles that Congress needs to address including several appropriations bills and tax extenders. We are hopeful that one of these measures will prove to be a vehicle to pass additional provisions from the HCIA including the flat 4% LIHTC for TEB financed transactions. These could also be potential vehicles for critical historic tax credit legislation and/or the extension of the the NMTC.
What will the tenure of the next Congress look like? One election result that may shape things is that many of the more ‘moderate’ voices from both parties retired or lost their reelection bids. Historically, split government has led to great compromises, like the deal making in the 1980s that led to the 1986 Tax Act. But it just as often results in more partisanship and gridlock. As they say, the proof will be in the pudding.
We will continue to update this story as we learn more information. Stay tuned and please feel free to reach out to me at email@example.com with your questions and observations!
Representative Steve Stivers (R-OH) and Representative Jose Serrano (D-NY) are circulating a “Dear Colleague Letter” request support for a permanent NMTC extension before the end of 2018. The letter is addressed to Ways and Means Chair Kevin Brady (R-TX) and is intended for members who are not on the Ways and Means Committee. The deadline to sign onto the letter is Friday, November 9. NH&RA urges our members to contact their member of Congress today to ask them to sign the letter.
On October 12, U.S. Senator Dean Heller (R-NV) introduced the Seniors Affordable Housing Tax Credit Act (S. 3580), legislation he authored to incentivize housing owners and developers to rent to low-income seniors. Heller’s proposed legislation would create a tax credit program that allocates credits to states, which, in turn, would be awarded to owners and developers who choose to rent their properties to low-income seniors. Under the Seniors Affordable Housing Tax Credit Act, those seniors who belong to renters’ credit units would pay no more that 30 percent of their income for rent and utilities, and the rental unit’s owner would receive a federal tax credit, based on the state’s determination, as compensation for any potential loss. The measure has been referred to the Senate Finance Committee and has no additional co-sponsors.
On October 16, NH&RA Executive Director Thom Amdur was recognized at the NHP Foundation 2018 Symposium & Dinner in Washington DC with their Advocacy Award. Additional honorees included, Senator Susan Collins, Representative Carlos Curbelo, Representative Suzan DelBene, Representative Jim Himes, former HUD Secretary Henry Cisneros, Michael Bodaken, President, National Housing Trust (1993–2018), Monica Mitchell, VP Community Development, Wells Fargo, Michael Novogradac, Managing Partner, Novogradac & Company and Maria Torres-Springer, Commissioner, NYC Department of Housing Preservation & Development.
The Senate Committee On Banking, Housing and Urban Affairs will meet in on October 18 to conduct a hearing entitled “Oversight of Pilot Programs at Fannie Mae and Freddie Mac.” The witnesses will be:
- Ms. Sandra Thompson, Deputy Director, Division of Housing Mission and Goals, Federal Housing Finance Agency;
- Mr. Timothy J. Mayopoulos, Chief Executive Officer, Fannie Mae; and
- Mr. Donald H. Layton, Chief Executive Officer, Freddie Mac.
It is unclear at time of press which Pilot Programs will be addressed during the hearing, which will be webcast live.
On September 25, 2018 Sen. Elizabeth Warren (D-Mass.), introduced the American Housing and Economic Mobility Act of 2018 which would dramatically expand funding for the for affordable housing.
The measure aims to use federal funding as leverage to build up to 3.2 million new housing units for lower-income and middle-class families – bringing down rents by 10% and creating 1.5 million new jobs according to an independent analysis from Moody’s Analytics. This bill will help address the shortage of millions of affordable homes nationwide by:
- Investing $445 billion in the Housing Trust Fund to build, rehabilitate, and operate up to 2.1 million homes for low-income families, including in rural areas and in Indian country where housing quality is especially poor.
- Investing $25 billion in the Capital Magnet Fund, which will be leveraged 10:1 with private capital, to build more than 835,000 new homes and develop vibrant communities for lower-income and middle-class families.
- Investing $4 billion in a new Middle-Class Housing Emergency Fund, which supports construction of homes for middle-class buyers and renters where there’s a supply shortage and housing costs are rising faster than incomes.
- Investing $523 million in rural housing programs to create 380,000 rentals and help 17,000 families buy homes.
- Investing $2 billion in the Indian Housing Block Grant to build or rehabilitate 200,000 homes on tribal land.
Additionally, the measures seeks to reduces the cost of housing across America by creating incentives for local governments to eliminate unnecessary land use restrictions that drive up costs. Local land use rules can significantly increase construction costs, making it unattractive to build housing for anyone but the richest Americans. The bill puts $10 billion into a new competitive grant program that communities can use to build infrastructure, parks, roads, or schools. To be eligible, local governments must reform land use rules that restrict construction of new affordable housing. The measure also seeks reforms to the Community Revitalization Act (CRA), provides funding for down-payment assistance and addresses voucher mobility.
Click here for the legislative text
Click here for Senator Warren’s summary of the measure
Click here to read additional coverage in the Atlantic.
, legislation that would invest $445 billion in the Housing Trust Fund, $523 billion in rural housing programs and strengthen provisions in the Community Reinvestment Act to hold more financial intuitions accountable and strengthen sanctions for failure to follow rules. The legislation also limits zoning laws that make housing expensive and includes investment in the Capital Magnet Fund, the Indian Housing Block Grant program and creates a new Middle-Class Housing Emergency Fund. A summary of the legislation says it would fund as many as 3.2 million new housing units for lower- and middle-income families.
The Committee on Financial Services will hold a hearing entitled “Oversight of the Federal Housing Finance Agency’s role as conservator and regulator of the Government Sponsored Enterprises” on Thursday, September 27, 2018, at 10:30 a.m. in room 2128 of the Rayburn House Office Building. This will be a two-panel hearing with the following witnesses:
- The Honorable Laura Wertheimer, Inspector General, Federal Housing Finance Agency
- The Honorable Melvin Watt, Director, Federal Housing Finance Agency
- Mr. Timothy Mayopoulos, CEO, Federal National Mortgage Corporation (Fannie Mae)
- Mr. Donald Layton, CEO, Federal Home Loan Mortgage Corporation (Freddie Mac)
The Housing and Economic Recovery Act (“HERA”) of 2008 created the Federal Finance Housing Agency (“FHFA”). FHFA is an independent agency charged with the supervision, regulation, and oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Bank System, which includes the 11 Federal Home Loan Banks. On September 7, 2008, then-FHFA Director, James Lockhart, used the statutory authority provided by HERA to place both Fannie Mae and Freddie Mac into conservatorship.
This hearing will examine the FHFA’s performance as the regulator and conservator of the Government Sponsored Enterprises, which include Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Specifically, the Committee will examine FHFA’s policies and procedures used to supervise Fannie Mae and Freddie Mac, the FHFA’s structure, and the need to reform the housing finance system in the United States.
On Monday, Sept. 10, House Ways & Means Committee Chair Kevin Brady (R-TX) introduced a three bill follow-up to the Tax Cuts and Jobs Act. These bills constitute Republicans’ Tax Reform 2.0 package and primarily lock in individual and small business tax cuts made in the legislation passed in December 2017, and reform savings- and education-related tax provisions. The measures as introduced do not make any enhancements or changes to the LIHTC, Historic Rehabilitation Tax Credit or New Markets Tax Credit. A markup was scheduled for September 13 and the measures were approved by the House Ways & Means Committee on a party-line vote. Speaking to reporters after the markup, Brady declined to predict whether the bills would go to the House floor. “We have it ready for them, and in our conference I see strong support for permanency, savings, and innovation,” he said. “We’re hopeful that the Senate can pick the various bills up as they see the 60-vote support.” The legislative package was adopted by the House of Representatives on September 28 by a largely party-line 220-191 vote. Democrats have indicated that the measures would be “dead-on-arrival in the Senate.”
The following bills were introduced as part of this Tax Reform 2.0 package:
H.R. 6760, the Protecting Family and Small Business Tax Cuts Act of 2018, sponsored by Rep. Rodney Davis (R-IL), and cosponsored by Rep. Mark Meadows (R-NC), Rep. Mark Walker (R-NC), House Ways and Means Committee Chairman Kevin Brady (R-TX), and all other Ways and Means Committee Republicans. This measure further modifies tax rates, impacts deductions for pass-thru entities, amends a number of family and individual focused tax breaks, removes or amends a number of deductions, increases the estate tax and gift tax exemption and increases the exemption for AMT for individuals.
H.R. 6757, the Family Savings Act of 2018, sponsored by Rep. Mike Kelly (R-PA), and cosponsored by Rep. Paul Mitchell (R-MI), House Ways and Means Committee Chairman Kevin Brady (R-TX), and all other Ways and Means Committee Republicans. This bill amends various provisions related to retirement and educational savings.
H.R. 6756, the American Innovation Act of 2018, sponsored by Tax Policy Subcommittee Chairman Vern Buchanan (R-FL), and cosponsored by House Ways and Means Committee Chairman Kevin Brady (R-TX) and all other Ways and Means Committee Republicans. The measure creates incentives primarily oriented for start-up businesses.
According to the Joint Committee on Taxation estimates, the three measures would cost $657.3 billion over the next 10 years.