Now that the U.S. Senate has approved its own tax reform bill replete with hastily scribbled hand-written notes, which you can read here, Congress has entered the final stage in which the Senate and House will attempt to reconcile differences between their two bills through a conference committee. While significant differences between the two bills remain, all expectations are that they won’t be enough to stop the leaders from the majority party from ramming through a final version of this complicated and deeply unfair bill sometime between now and December 25th.
Since a final vote could come as early as this week, the clock is now ticking on all last attempts to fix some of the many provisions that would harm low- and moderate-income Californians. The good news is that the Senate version retains tax-exempt private activity bonds, a large portion of which are used to construct affordable rental housing in conjunction with the Low Income Housing Tax Credits (“Housing Bonds and Housing Credits”). The bad news for low- and moderate-income Californians is almost everything else, as documented by the California Budget and Policy Center and many others.
Not only did Senate leaders fail to include any of the requested modest provisions to offset the loss of the Housing Credit’s value due to the lowering of the corporate tax rate and related changes, but they said they were forced to drop the even more modest, non-controversial, no-cost provisions from the Cantwell-Hatch Affordable Housing Credit Improvement Act of 2017 (S. 548) because of a conflict with the Byrd Rule.
Under the guise of helping rural communities, the Senate added a new provision that could significantly hurt the feasibility of all Housing Credit-financed affordable housing in California by reducing the basis boost available to properties developed in “high cost” areas from 130% to 125%, making it more difficult to develop affordable housing in rural and urban parts of the state with higher costs, lower incomes or both. Adding insult to injury, the provision would apply to properties placed in service after the date of enactment, meaning that properties that previously received Housing Credits and are well into the development process will have to return credits already awarded, find alternative sources of funds, and scramble to avoid financial calamity.
Worse, they created another potentially huge problem by not fixing a provision that would not permit business credits other than the R&D credit to be used against the “base erosion and anti-abuse tax” (BEAT). This means that banks with significant foreign operations such as Union Bank, could lose their interest in purchasing Housing Credits, disqualifying banks and other investors that account for between 10% and 25% of the capital invested in the Housing Credit market.
What Californian’s Can Do: McCarthy and Nunes are Our Last Hope
We know that California will have two members of Congress who will have a strong voice in shaping the final bill: House Majority Leader Kevin McCarthy (R-Bakersfield) and Devin Nunes (R-Visalia), who is a senior member of both the Ways and Means and Joint Taxation Committees, and was just named to the Conference Committee.
TAKE ACTION: If you live or work in McCarthy’s or Nunes’ districts or know someone who does, please call via the Capitol Switchboard (202-224-3121) and email their lead tax staffers using the information below. If you don’t have a connection to either, you can still affect the outcome if you have connections to any of the other majority-party Representatives by calling them via the Capitol Switchboard (202-224-3121) and emailing them with the following message:
Please ask Majority Leader McCarthy and Representative Nunes to do the following three things:
- Support the Senate’s preservation of tax-exempt multifamily Housing Bonds and the linked 4% Housing Credits, which are creating more than 20,000 affordable homes in California annually and are far and away the most important tools we have to address our affordable housing crisis and to create local construction jobs and revenue;
- Remove the reduction in the cap on Housing Credit basis from 130% to 125% specified by the Senate because it won’t help rural areas in California and will harm the rest of the state; and
- Fix the base erosion and anti-abuse (BEAT) provision in the Senate Bill so that it does not damage the Housing Credit market by preventing major banks with foreign ownership such as Union Bank from investing.
This is the last chance to affect the outcome of the tax reform bills, so please take a few minutes today to contact at least one California Representative from the following list with these requests:
To maximize the effectiveness of your emails, I suggest you download the fact sheet documenting the benefits that the Housing Credit has delivered to each Representative’s district by clicking here and selecting their names individually.
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