WASHINGTON UPDATE · May 23, 2017 WASHINGTON UPDATE for the CHFA 2017 Housing Credit Summit...

May 23, 2017 www.novoco.com

WASHINGTON UPDATE for the CHFA 2017 Housing Credit Summit

Michael Novogradac Managing Partner Novogradac & Company LLP

@Novogradac

Outline

Tax Reform

House of Representatives

Senate

Presidency

Affordable Housing Credit Improvement Act

Advocacy Efforts

HUD Budget

Focus: Tax Reform

HOUSE SENATE PRESIDENT TRUMP

Broaden the base, lower the rates

Expensing/ Interest Expense

Special rules for financial institutions

1 2 3 4 5

Ways and Means Republicans believe the low-income housing tax credit is important and they are working through how this credit will fit in our next system.

Emily Schillinger, communications director for the House Ways and Means Committee.

WSJ – March 21, 2017

“ “

LIHTC Pricing Sensitivity Analysis

www.novoco.com/blog

LIHTC Pricing Sensitivity Analysis

www.novoco.com/blog

And, Our Two Step Recommendation

www.novoco.com/blog

A Two Step Recommendation

STEP 1 Increase allocable LIHTCs

STEP 2 Modernize Credit Percentage Formula

Plans from the Senate

• House of Representatives to take the lead

• Awaiting President Trump’s feedback

Plans from the White House

“ “ Tax reform plan released on April 26th Prior to it’s release:

It will be a massive tax cut. It will be bigger, I believe, than any tax cut ever. Maybe the biggest tax cut we’ve ever had.

Business tax rate – applies to corporations and small businesses

Tax brackets

Tax deductions Estate tax Alternative minimum tax and Obamacare taxes

15 % 3

ELIMINATE THE MAJORITY OF

ELIMINATE ELIMINATE

WHAT ABOUT LIHTCs?

A White House Perspective

Will Tax Reform Happen?

With Republican control of the White House, Senate and House, chances for some type of tax law changes have increased.

We always knew some type of tax reform would be likely beginning in 2017, even if the Democrats won the presidency and controlled the Senate. ‘17

? Question is—what type of tax reform? Corp. Indiv. Corp. Indiv. Both

& Int’l

Congress can call any change to the tax code “tax reform.”

Care to Make a Prediction?

NO ONE KNOWS!

Tax bill in December

Some Democrats, but not 60 Budget

Reconciliation Lower Rates

Pay-Fors – Towards Revenue Neutrality

•Extenders •Dynamic Scoring • International Dollars

• Infrastructure could affect this •State Income Tax Deduction

Tax bill in December

Some Democrats, but not 60 Budget

Reconciliation Lower Rates

Pay-Fors – Towards Revenue Neutrality

•Extenders •Dynamic Scoring • International Dollars

• Infrastructure could affect this •State Income Tax Deduction

More LIHTCs via

May 23, 2017

50 percent increase

Income-averaging

Minimum 4 percent

CANTWELL HATCH

TIBERI NEAL www.novoco.com

More LIHTCs via

May 23, 2017

50 percent increase

Income-averaging

Minimum 4 percent

CANTWELL HATCH

TIBERI NEAL www.novoco.com

More LIHTCs via

Additional Resources • Give states discretion to provide 30% basis

boost for bond-financed projects

• Repeal QCT population cap

• Relocation costs included in eligible basis

• No basis reduction for certain energy tax incentives

• Indian areas generally treated as DDAs

More LIHTCs via

Financial Feasibility • 50% basis boost for ELI units

• Modify student occupancy rules

• Codify increased tenant income guidance

• Modify 10-year rule

• Limits apply to acquisition basis

• Adopt uniform income eligibility for rural projects

More LIHTCs via

Other • Modify the rent-setting rule

• Clarify the community revitalization plan

• Prohibit local approval or contribution requirements

• Change the official name of the LIHTC to Affordable Housing Tax Credit

Advocacy Efforts

www.taxcredithousing.com

www.novoco.com

Frontline Unit Count Critique

May 23, 2017

www.novoco.com/blog

www.novoco.com

HUD Budget Update

May 23, 2017

FY 2015 Enacted

FY 2016 Enacted Senate FY 2017

THUD Bill House FY 2017

THUD Bill FY2017

Enacted Bill

Housing Choice Voucher $19,304 $19,628 $20,431 $20,189 $20,292

Project Based Section 8 $9,730 $10,620 $10,901 $10,901 $10,816

Public Housing Operating Fund $4,440 $4,500 $4,675 $4,500 $4,400

Public Housing Capital Fund $1,875 $1,900 $1,925 $1,900 $1,942

Section 202 $420 $433 $505 $505 $502

Section 811 $134 $150 $154 $154 $146

HOPWA $330 $335 $335 $335 $356

CDBG $3,000 $3,000 $3,000 $3,000 $3,000

HOME $900 $950 $950 $950 $950

Homeless Assistance $2,135 $2,250 $2,330 $2,487 $2,383

Choice Neighborhood Initiative $80 $125 $80 $100 $138

Overall $45,372 $46,978 $48,434 $47,955 $48,055

Note: amounts in millions HUD Budget

FY 2015 Enacted

FY 2016 Enacted Senate FY 2017

THUD Bill House FY 2017

THUD Bill FY2017

Enacted Bill

Housing Choice Voucher $19,304 $19,628 $20,431 $20,189 $20,292

Project Based Section 8 $9,730 $10,620 $10,901 $10,901 $10,816

Public Housing Operating Fund $4,440 $4,500 $4,675 $4,500 $4,400

Public Housing Capital Fund $1,875 $1,900 $1,925 $1,900 $1,942

Section 202 $420 $433 $505 $505 $502

Section 811 $134 $150 $154 $154 $146

HOPWA $330 $335 $335 $335 $356

CDBG $3,000 $3,000 $3,000 $3,000 $3,000

HOME $900 $950 $950 $950 $950

Homeless Assistance $2,135 $2,250 $2,330 $2,487 $2,383

Choice Neighborhood Initiative $80 $125 $80 $100 $138

Overall $45,372 $46,978 $48,434 $47,955 $48,055

Note: amounts in millions HUD Budget

WASHINGTON UPDATE for the CHFA 2017 Housing Credit Summit

Michael Novogradac Managing Partner Novogradac & Company LLP

@Novogradac

WASHINGTON UPDATE · May 23, 2017 WASHINGTON UPDATE for the CHFA 2017 Housing Credit Summit...

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