With 2013 underway and the 9% credit floor secured for another two years under the new tax bill, the RubinBrown Real Estate Industry Group would like to gain insight into what our affordable housing clients and colleagues are thinking about today’s trending topics.
Please take a few minutes to complete this short survey and we will share the results and insights with you soon. Click here to complete survey.
As we started the New Year, Congress completed passage of the American Taxpayer Relief Act, which side steps certain elements of the fiscal cliff and included a number of tax extenders important to the affordable housing, economic development, and renewable energy industries.
9% Housing Tax Credit (LIHTC) Floor Extension
Last week, both the Senate and the House passed the fiscal cliff compromise. We were fortunate that the fiscal cliff compromise included the 9% housing credit floor for all projects receiving a LIHTC allocation made before January 1, 2014.
This important provision fixes the credit percentage at 9%. This provides the industry a two-year extension for projects receiving 2013 allocations. The provision, however, does not apply to forward allocations for 2014 or after, even if received in 2013.
The affordable housing industry worked very hard to ensure this provision would be included and many thanks go to the strong leadership and support by Senators Maria Cantwell (D-WA) and Olympia Snowe (R-ME) who were able to include the provision in the Senate finance committee bill.
New Markets Tax Credit (NMTC) Extension
The bill extends for two years the NMTC, permitting a maximum annual amount of qualified equity investments of $3.5 billion each year. The extension is for years 2012 and 2013.
Bonus Depreciation
The new tax legislation extends the 50% bonus depreciation for certain eligible properties placed in service before 2014.
Basic Allowance For Housing
The bill also renews a provision of the Housing and Economic Recovery Act of 2008, to exclude Basic Allowance for Housing (BAH) payments received by military personnel from the definition of household income for purposes of determining income eligibility for LIHTC buildings (9% and 4%).
The provision applies to income determinations for projects that receive housing credit allocations before 2014 and to bond-financed projects placed in service before 2014.
Renewable Energy
The deadlines for facilities generating electricity from certain renewable energy sources are extended and modified for qualification of the Section 45 production tax credit.
The bill extends the deadline for wind power facilities to wind facilities placed in service before 2014. It modifies the deadline for other types of qualified energy facilities to those that start construction before 2014.
Hurricane Sandy Relief
On December 28, the Senate passed a $60.4 billion Hurricane Sandy supplemental spending bill, H.R. 1. The bill originated as a general appropriations measure in the House and was amended in the Senate as a legislative vehicle for considering Hurricane Sandy supplemental appropriations.
The Senate-passed version includes the administration-requested $17 billion for disaster Community Development Block Grants.
Last week, House Republican leaders passed a bill to provide $9 billion to shore up the National Flood Insurance Program and the House is to consider a $51 billion Hurricane Sandy supplemental spending bill on January 15.
House Ways and Means Committee member Bill Pascrell (D-NJ) introduced H.R. 6683, the Hurricane Sandy Tax Relief Act of 2012, which would waive certain mortgage revenue bond program requirements, increase allocations of LIHTC and NMTC, and provide new tax-exempt bond authority for “Hurricane Sandy bonds” for use in disaster-impacted areas.
What’s Next?
Although the bill is very positive, there is still much work to do by the affordable housing, economic development and renewal energy industries as we face a brutal debate on tax reform.
The next several months are crucial as this compromise only provides temporary relief of the pending “cliff.” Although very positive, the bill only delays for two months the automatic spending cuts (sequester) that would have began on January 2.
Congress is already gearing up for what will likely be some of the toughest negotiations we seen on spending. Congress will need to determine whether or not it wants to make changes to avoid the sequester.
In February, the debt limit will be reached which will require action by the Congress to increase the country’s borrowing limit to prevent default while March brings expiration of continuing resolution that has kept the government operating.
Senators Charles Schumer (D-NY) and Robert Menendez (D- NJ) are introducing The Hurricane Sandy and National Disaster Tax Relief Act of 2012. The bill is expected to increase allocations of low income housing, historic rehabilitation and New Markets Tax credits to the affected areas for the next 3 years.
For more information, please click here.
On Friday, December 7, the Tax Credit Review Commission (TCRC) will be making recommendations at their meeting. Earlier in the week, the three members of the commission that serve on the Historic Committee voted to recommend a cap of $90M and maintain the exemption for small projects under $275K in credits. Many other language clarifications were also recommended.
The commission will hold a public hearing Thursday, December 6 at the State Wainwright Building at 5:00p. They will vote on recommendations of the committees and finalize a report to deliver to Missouri Governor Jay Nixon by the 15th of December.
RubinBrown’s Real Estate Group is following this closely and will keep you posted.
RubinBrown’s 2012 Apartment Statistical Analysis was featured in an article by National Real Estate Investor related to the improving the affordable housing market. The article also captures a number of comments from Bryan Keller, Partner-In-Charge of the RubinBrown Real Estate Services Group.
To read the full article, please click here.
To receive a download of the 2012 Apartment Stats, please click here.
A study completed by the Moelis Institute for Affordable Housing Policy at New York University indicates that households earning 30% or less of the area median income comprise over 40% of LIHTC units, which indicates the program may be more impactful than most people realize.
For the full article, please click here.
Missouri Governor Jay Nixon has reactivated the Tax Credit Review Commission which was created in 2010.
The commission has had several meetings, and is planning to present a new report to the Governor by December 15th. The report is expected to be used as a basis for new legislation which will impact state tax credits in Missouri. The Historic Tax Credit (HTC) is very much a part of the discussion. The drama continues on HTC’s and expect much more debate leading up to this spring’s legislative session in Jefferson City.
For more information, click here.
In the wake of Hurricane Sandy, the IRS is temporarily removing low-income housing tax credit tenant income limitations to provide project owners with the ability to rent vacant units to displaced individuals and families.
To view the entire article, please click here.
HUD has extended the Real Estate Assessment Center’s (REAC) authority to approve or deny requests to defer partial year submissions of financial statements.
The original notice was scheduled to expire earlier this year but authority has now been granted until further notice is given. To review the notice in detail, please click here.
HUD announced its plans to broaden the scope of its new Multifamily Housing Credit Loan Program to include more geographic areas as well and enhancing the lending industry’s participation.
For more details, please click here.
