LIHTC Provisions Included in Bipartisan Tax Package Deal

House Ways and Means Committee Chairman Jason Smith and Senate Finance Committee Chairman Ron Wyden recently announced a bipartisan and bicameral tax package deal to be introduced as The Tax Relief for American Families and Workers Act of 2024. If passed, it would revive three business tax credits, expand the child tax credit, and give a boost to low-income housing. 

The deal includes two LIHTC provisions from the Affordable Housing Credit Improvement Act (AHCIA). The AHCIA was last introduced in 2023, and it contained long-sought changes to the LIHTC program. 

One level deeper: The tax package deal contains two LIHTC provisions. The first is the temporary restoration of the 12.5 percent LIHTC ceiling that was cut the in 2022 after a temporary allocation increase expired. So instead of the 9 percent ceiling states had between 2018 and 2021, the proposed tax framework would allow states to give up to 12.5 percent of the credits to developers building affordable housing between 2023 and 2025, allowing more credits toward affordable housing projects.

The second provision is a temporary change to the Private Activity Bond (PAB) threshold test, lowering it from 50 percent to 30 percent for 4 percent properties financed with multifamily Housing Bonds that have an issue date before 2026. To qualify, buildings must be placed in service after Dec. 31, 2023.

What to watch: In a floor speech given on Jan. 16, Senate Majority Leader Charles E. Schumer endorsed the package, particularly the low-income housing credit expansion, which he said was critical to gaining his backing. “I support this bipartisan tax framework because it makes important progress to expand the child tax credit, helps address our affordable housing crisis, and helps keep U.S. businesses competitive against the Chinese Communist Party,” Schumer, D-N.Y., said. However, Minority Leader Mitch McConnell, R-Ky., made no mention of the tax deal in his opening floor remarks.

Senate Finance Chair Ron Wyden and House Ways and Means Chairman Jason Smith are aiming to pass the tax package before Jan. 29 to avoid disruptions to the 2023 tax filing season. However, the path to passage remains unclear. The bill could be positioned as a standalone bill or attached to another legislative vehicle such as the appropriations continuing resolution, both of which present logistical challenges.