On January 18, 2024, the U.S. House and Senate passed a temporary extension of government funding until March to avoid a government shutdown. Additionally, Ways and Means Committee Chairman Jason Smith (R-Mo.) and Senate Finance Committee Chairman Ron Wyden (D-Ore.) unveiled a compromise tax package that contained both Democrat and Republican policy priorities. Notably, the deal included important provisions related to the Low-Income Housing Tax Credit (LIHTC) programs. Here are the key takeaways for the rental housing industry.
Government Funding
President Biden signed the continuing resolution (CR) extending government funding for several government agencies including the U.S. Department of Housing and Urban Development (HUD) until March 1. A separate funding package with a March 8 deadline was approved for all other agencies, and included the National Flood Insurance Program (NFIP). This stop-gap agreement will give lawmakers additional time to hopefully finish funding packages for all federal agencies through the end of the 2024 fiscal year.
Tax Package
On January 19, the House Ways and Means Committee passed a $70 billion tax package with several business-focused provisions, an extension of the Child Tax Credit and enhancements to the LIHTC. Key provisions include:
- Extension of a more favorable Business Interest Deduction calculation;
- Extension of 100% bonus depreciation;
- Increase in the small business expensing allowance;
- Increase to the 1099 reporting threshold and
- Improvements for Low-Income Housing Tax Credits.
The LIHTC provisions included in the tax bill stem from the Affordable Housing Tax Credit Improvement Act, which features a number of items strongly supported by the National Apartment Association (NAA) and every major rental housing organization. These provisions include an extension for three years of the 12.5% increase in the nine percent credit cap and a reduction in the threshold for LIHTC transactions to qualify for bond financing.
Lawmakers want to move quickly on the tax package so that individuals may take advantage of the Child Tax Credit as the tax filing season begins. However, the timeline to get the tax package over the finish line is still to be determined. Full consideration by the House could come as soon as this week (the week of January 22, 2024), while the Senate traditionally requires more time to move such bills. Lastly, it’s worth noting that this bill is just a warmup for the much larger conversation that will happen in 2025 when Congress deals with the many expiring tax provisions of the 2017 Tax Cuts and Jobs Act.
NAA is advocating for full funding of crucial federal housing programs in the HUD budget and the extension of the NFIP. At the same time, we are strongly urging Congress to pass the tax bill as soon as possible. It is estimated that as many as 200,000 new affordable homes could be built as a result of the LIHTC provisions in this bill.