January 31 2017 wwwnovococom 1 Peter Lawrence Novogradac amp Company LLP novocopolicy Agenda Tax Reform LIHTC legislation amp GAO LIHTC reports HUD Budget Better Way Poverty Agenda ID: 681469
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Slide1
Post-Election Update
for the HAND Tax Exempt Bond Seminar
January 31, 2017
www.novoco.com
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Peter Lawrence
Novogradac & Company LLP
@novocopolicySlide2
Agenda
Tax ReformLIHTC
legislation & GAO LIHTC reportsHUD BudgetBetter Way Poverty Agenda
Housing Trust Fund/Capital Magnet FundAdvocacy
January 31, 2017
www.novoco.com
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January 31, 2017
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Infrastructure
Military Spending
$$
PRESIDENT ELECT DONALD TRUMP
Tax Reform Slide4
January 31, 2017
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CHAIRMAN KEVIN BRADY
SPEAKER
PAUL RYAN
Repeal & Replace
Comprehensive
Tax ReformSlide5
DEC
Sep. 30
Fiscal year end
2016
2017
Jan.
31
Today
JAN
FEB
MAR
APR
MAY
JUNE
JULY
AUG
NOV
OCT
SEP
Apr. 28
CR expires
Mar. 15
Debt ceiling suspension expires
Pushed to Aug/Sep
Debt ceiling suspension
expires
Apr. 15
FY 18 budget resolution “due”
Tax reform reconciliation instructions?
Treasury to employ measures to avoid breaching the limit
February
Report ACA Repeal reconciliation bill to budget committee
April 30
100th Day
June 18
150th
Day
January 31, 2017
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August 8
200th
DaySlide6
House GOP Tax Reform Task Force
Calls for top 20% corporate tax rate
No deduction for net interest expense, but immediate depreciation of new investments (excluding land
)
Top 33% individual tax rate, with 50%
exclusion for capital gains and investment
income
Silent on LIHTC, NMTC, HTC and tax-exempt bonds
Document does say that tax reform as proposed
“generally will eliminate special-interest deductions and credits in favor of providing lower tax rates.”
Tax Reform Task Force describes the blueprint as
“the beginning of our conversation about how to fix our broken tax code.”
Legislative language by the first quarter of
2017
W&M Republican tax reform retreat informal “vote” on retaining LIHTC in tax reform blueprint legislation
January 31, 2017
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January 31, 2017
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www.novoco.com/blogSlide8
January 31, 2017
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COMPREHENSIVE
(business &
indiv
.)
Infrastructure &
International
Business
tax reform
OBSTACLES TO TAX REFORMSlide9
Obstacles to Tax Reform
Many tax preferences in the Code have substantial Congressional support and key defenders, and well organized and funded advocacy effortsLast substantial tax reform proposals from former Chairman Camp went nowhere as Members and Congressional leadership ran away
Border adjustability provisionThe process will be lengthyQuestions as to process—Budget Reconciliation or regular order
January 31, 2017
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Affordable Housing Credit Improvement Act of 2016
January 31, 2017
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Sen. Cantwell
D-Washington
Sen. Hatch
R-UtahSlide11
Affordable Housing Improvement Act of 2016
January 31, 2017
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S. 3237
Sen. Cantwell
D-Washington
Additional Resources
Increases Housing Credit authority by 50 percentSlide12
Affordable Housing Improvement Act of 2016
January 31, 2017
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S. 3237
Sen. Cantwell
D-Washington
Strengthening the 4 Percent Credit/
Tax Exempt Bonds
Establishes the minimum 4 percent rate
Establishes a state-determined 30 percent basis boost for bond-financed properties
Increased Resources:
Increases Housing Credit authority by 50 percentSlide13
Affordable Housing Improvement Act of 2016
January 31, 2017
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S. 3237
Sen. Cantwell
D-Washington
Preservation of Existing Affordable Housing
Provides flexibility around existing tenant income eligibility when Credit is used to preserve affordable housing
Replaces the right of first refusal with a purchase option
Modifies the 10-Year rule
Allows states to include relocation expenses in Credit-eligible expendituresSlide14
Affordable Housing Improvement Act of 2016
January 31, 2017
www.novoco.com
14
S. 3237
Sen. Cantwell
D-Washington
Facilitates Development for Hard-to-Reach Populations and in Challenging Markets
Gives states the flexibility to provide up to 50 percent basis boost for ELI households
Permits income-averaging within Housing Credit properties
Encourages development in Native American communities
Standardizes income eligibility for rural properties
Repeals the QCT population capSlide15
Affordable Housing Improvement Act of 2016
January 31, 2017
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S. 3237
Sen. Cantwell
D-Washington
New Flexibility and Streamlining Program Requirements
Simplifies the Housing Credit student rule
Gives states the flexibility to determine a reasonable replacement period after a casualty loss
Specifies that states have the authority to define “concerted community revitalization plans”Slide16
Affordable Housing Improvement Act of 2016
January 31, 2017
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S. 3237
Sen. Cantwell
D-Washington
Other Policy Changes
Addresses Fair Housing concerns
Renames the program
Conserves affordable housing resources (Section 8 overhang)
Promotes energy efficiencySlide17
Government Accountability Office (GAO) Housing Credit Reports
January 31, 2017
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#1
#2
#3
#4
Late Feb./Early March
Investors & Syndicators
First Quarter 2018?
CostSlide18
FY 2015 Enacted
FY 2016 Enacted
President’s FY 2017 Proposed
Senate FY 2017 THUD Bill
House FY 2017 THUD Bill
Housing Choice Voucher
$19,304
$19,628
$20,854
$20,431
$20,189
Project Based Section 8
$9,730
$10,620
$10,816
$10,901
$10,901
Public Housing Operating Fund
$4,440
$4,500
$4,569
$4,675
$4,500
Public Housing Capital Fund
$1,875
$1,900
$1,865
$1,925
$1,900
Section 202
$420
$433
$505
$505
$505
Section 811
$134
$150
$154
$154
$154
HOPWA
$
330
$335
$335
$335
$335
CDBG
$3,000
$3,000
$2,800
$3,000
$3,000
HOME
$900
$
950
$950
$950
$950
Homeless Assistance
$2,135
$2,250
$2,664
$2,330
$2,487
Choice Neighborhood Initiative
$80
$125
$200
$80
$100
Overall
$45,372
$46,978
$48,911
$48,434
$47,955
Note: amounts in Millions
HUD Budget
January 31, 2017
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Outlook of Federal Funding for HUD
Trump expected to release budget in MayBipartisan Budget Act of 2015 set to expire this year – sequestration returnsHUD’s project-based & tenant-based rental assistance program – 3-4% increase per year
Parity as a policySet to change – caps to be lifted for spending on defense programsCutting non-defense spending by additional 1% each year over the next 10 years
We need to educate Members of Congress about the potentially devastating impacts of cutting domestic programs & urge them to raise the spending caps & maintain parity between defense & non-defense
programsWe need to urge Congress not to short-fund PBRA, and to oppose cuts to vouchers, HOME & CDBG
FY 2018
January 31, 2017
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Potential Impact of the Ryan Poverty Plan on Housing
Calls for aligning federal housing programs with Temporary Assistance for Needy Families (TANF)Additionally, time limits and work requirementsOur immediate concerns:
56% of residents are elderly or disabledOnly 25% of eligible Americans are currently being served – risks for further cuts in assistance
January 31, 2017
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2016
2016 State Housing Trust Fund Allocations
Coincidentally, the absolute minimum needed for statutory allocations
California
$10,128,143
New York
$7,013,963
Texas
$4,778,364
Florida
$4,598,821
Illinois
$4,302,012
Pennsylvania
$3,862,285
Ohio
$3,740,578
New Jersey
$3,733,566
Michigan
$3,522,622
Massachusetts
$3,419,569
Top 10 State HTF Allocations
$174M
$93M
January 31, 2017
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2017
Preliminary 2017 estimate using
1
st
, 2
nd and 3
rd quarter of 2016 10-Q filings from Fannie/Freddie
Coincidentally, the absolute minimum needed for statutory allocations
California
$11,166,661
New York
$7,939,376
Texas
$5,264,187
Florida
$5,060,640
Illinois
$4,779,210
Pennsylvania
$4,282,574
Ohio
$4,163,824
New Jersey
$4,067,448
Michigan
$3,877,193
Massachusetts
$3,789,231
T
op
10
State
HTF
Allocation
E
stimates
$183M
$98M
With Diversion
January 31, 2017
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2018
Coincidentally, the absolute minimum needed for statutory allocations
Watt announced his intention to remain FHFA Director until end of his term (Jan. 2019)
Unless, of course, Congress reforms FHFA to be a commission structure rather than single director
If Watt leaves, status of HTC and CMF would be uncertain
New appointee could decide to suspend GSE contributions
Mel Watt
Federal Housing
Finance Agency
Director
January 31, 2017
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January 31, 2017
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January 31, 2017
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www.taxcredithousing.comSlide26
January 31, 2017
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January 31, 2017
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www.novoco.com/productsSlide28
January 31, 2017
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www.novoco.com/productsSlide29
January 31, 2017
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29Slide30
Post-Election Update
for the HAND Tax Exempt Bond Seminar
January 31, 2017
www.novoco.com
30
Peter Lawrence
Novogradac & Company LLP
@novocopolicy