Tax Reform - Tax-Exempt Bonds & 4% LIHTCs Appear to be Preserved in Current Version
The Wall Street Journal is reporting that the House and Senate committees have agreed in conference to a tax reform bill that would preserve the 4% LIHTCs and tax-exempt bonds. I have also heard the same from a few affordable housing industry sources today. As it appears this version of the bill or something close to it is headed for a vote next week, the worst for the affordable housing industry may have passed.
As many have noted the tax reform bill still impacts the affordable housing industry heavily by reducing the corporate tax rate from 35% to 21% in the latest version. Thankfully most of the industry had already adjusted to post-tax reform expectations over the last year and the actual drop in corporate tax rates shouldn't greatly impact projects currently in underwriting. It's increasingly likely that the affordable housing industry can return to normalcy and predictability in 2018, albeit at somewhat reduced production levels, and breathe a collective sigh of relief.
In my next post I will explore some of the ideas that exist to offset the impact of the corporate tax rate drop. While the politics for such changes are likely not present now, these changes could be implemented in the future to restore affordable housing production that will be lost due to tax reform.