A Yearlong Reprieve for LIHTC

In April I wrote an article concerning the potentially devastating impact the Bush Administration’s proposal to eliminate taxes at the corporate level would have had on the Low Income Housing Tax Credit (LIHTC) and municipal bonds (See Shelterforce #128).

The very good news is that the LIHTC truly dodged a bullet last month. Although the fate of these credits weren’t known until the very last hours of the Senate-House Conference on the bill, the $350 billion tax package now signed by the president does not harm low-income housing tax credits. The capital gains and dividend cuts are taken at the shareholder level and, hence, should not have an impact on corporations seeking to shelter income via investment in affordable housing for working families and the elderly. Hurrah!

However, before we start the celebration, we should be aware that the pressure on domestic appropriations, particularly HUD and HHS, will be significant, especially in 2005 and beyond.

Moreover, in order to get all of the tax cuts the Congress and the Administration wanted and stay at a “cap” of $350 billion, the tax cuts expire in three years. There will obviously be a tremendous amount of pressure to keep these tax cuts in place, putting even further pressure on the federal budget and leaving affordable housing programs even more vulnerable than they currently are. Also, it’s been widely reported that the current administration intends to introduce a tax cut every year, which could create even greater pressure on the domestic budget.

In the end, affordable housing won a yearlong reprieve. But we would be foolhardy to believe that the LIHTC is totally out of the woods. Stay tuned.

—Michael Bodaken
President
National Housing Trust

Copyright 2003