LIHTC Reforms Clear First Hurdle in Passed House Reconciliation Bill

The House of Representatives narrowly passed a sweeping reconciliation bill early Thursday morning. The bill, which encompasses President Trump’s 2025 economic agenda and includes several key Low-Income Housing Tax Credit (LIHTC) reforms, will now be sent to the Senate for further consideration. The legislation advanced by a single vote after days of intraparty negotiation.

What You Need to Know: The LIHTC provisions in the bill passed on May 22 include the following:

• Temporary 12.5% increase in credit allocations. The bill reinstates and extends a 12.5 percent boost to annual 9 percent Housing Credit allocations from 2025 through 2029. This increase had previously expired in 2021;
• Lowering the private activity bond (PAB) threshold. The “50 percent test” for PAB-financed developments is reduced to 25 percent for bonds issued from 2025 to 2029. This change allows more projects to qualify for the 4 percent LIHTC;
• 30 percent basis boost for underserved areas. Projects located in rural or Native American areas will qualify for a 30 percent basis boost between 2026 and 2029, increasing the credit available and improving project feasibility.
• New treatment for rehabilitation expenditures. Beginning in 2026, rehabilitation costs will be treated as a separate placed-in-service property for LIHTC purposes, making it easier to finance substantial rehab efforts.

What’s Next: The bill now heads to the Senate, where Republicans hold a narrow majority but are expected to propose modifications before bringing the bill to a vote. Any changes would require reconciliation between the two chambers before the bill can advance to the president’s desk. Senate deliberations are expected to unfold over the next month or longer, with final passage timelines still uncertain.