Tax Reform Bill Signed into Law, Preserving Affordable Housing & Community Development Programs

On December 21st, President Trump signed tax reform legislation into law. The final legislation preserves the Low Income Housing Tax Credit (LIHTC) as well as the tax exemption for private activity bonds. This means both the 9% and 4% housing credit will remain. The final bill also keeps the New Markets Tax Credit and Historic Tax Credit, both of which faced elimination under the original House tax reform proposal.

While the final tax reform bill avoids the worst threats to affordable housing and community development activities, the value of LIHTC will be negatively impacted by the dropping of the corporate tax rate from 35% to 21%. This will diminish the demand for LIHTC by investors and reduce investment in affordable housing. 

The legislation keeps the LIHTC basis boost at 30%, omitting a change that would have reduced the basis boost in certain rural and urban areas that have either high production costs or lower incomes 25%.

Housing advocates were also concerned about the Base Erosion and Anti-Abuse Tax (BEAT) provision that would have discouraged foreign tax credit investors from investing in affordable housing. However, the final bill mitigates those concerns by allowing 80% of the housing credit to be used against the BEAT.

Although the preservation of LIHTC, private activity bonds, and other community development resources is a victory for affordable housing in tax reform, there is work left to be done in expanding and strengthening these programs. Also, the increased deficits created by the tax cuts may threaten future spending cuts for other affordable housing and community development programs.

CHAPA thanks all our members who contacted their elected officials to ask them to protect affordable housing in tax reform. We also thank the Massachusetts Congressional Delegation for supporting these critical resources. CHAPA appreciates the work of the members of the tax reform conference committee for including these programs in the final legislation.

Finally, thanks to our national partners, including the National Low Income Housing Coalition, the Housing Advisory Group, and the ACTION Campaign, for their tireless advocacy protecting the programs that help some of our most vulnerable households in the Commonwealth find a safe, healthy, and affordable place to call home.