House Committee Includes LIHTC Provisions in Reconciliation Package

The House Ways and Means Committee recently released legislative text of the $3.5 trillion reconciliation bill related to Low Income Housing Tax Credits. The legislation includes a number of key provisions from the Affordable Housing Credit Improvement Act of 2021.

What's next: Once reported by the committee, the legislation will be combined with legislation being considered by other committees into a single bill, which will move under special "reconciliation" rules allowed by the $3.5 trillion budget resolution the House and Senate Democrats passed in August. Reconciliation allows legislation to pass the Senate with a simple majority vote.

One level deeper: The bill increases annual state LIHTC allocations by 60 percent, phased in over four years (2022 to 2025). For calendar years 2026, 2027, and 2028, the housing credit volume cap will be the amount provided in 2025 with inflation adjustments for each year. The legislative text also provides up to a 50 percent basis boost for developments serving Extremely Low-Income (ELI) households for 10 years (2022 to 2031). And it authorizes states to provide a 30 percent basis boost for 4 percent credit properties, in addition to a 30 percent basis boost for rural and Native communities if needed for financial feasibility.

The bill also makes several changes to keep third-party investors from using the right of first refusal provisions under the LIHTC program to keep mission-driven nonprofits from taking full ownership of LIHTC sites at year 15. The bill converts the right to purchase into a purchase option and it expands the definition of “property” to include the partnership assets. The option holder can exercise the right of first refusal without requiring the approval of an investor or requiring a bona fide third-party offer.