Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
By Che Odom
State affordable housing advocates will wait to see if the Senate or House treatment of private-activity bonds ultimately becomes part of U.S. tax law as members of Congress begin reconciling their two plans.
“Now that the Senate has chosen to preserve private activity bonds, it is time for the House to follow suit and protect this key source of financing for affordable housing and job creation,” the Council of Independent State Housing Associations (CISHA) said Dec. 4 in a statement emailed to Bloomberg Tax.
While the Senate-amended version of H.R. 1, passed Dec. 2, preserves the exemption on private-activity bonds, the House tax reform plan ( H.R. 1) would repeal it, which could lead up to a 50 percent reduction in certain public-works projects and the loss of tens of thousands of low-income housing units, developers and state affordable-housing advocates say.
Eliminating the exemption on the bonds used for construction, transportation, and water infrastructure projects in which a private entity either owns, manages, or leases the project would earn the federal government about $38.9 billion over the next decade, according to a Nov. 11 Joint Committee on Taxation report estimating the revenue effects of the House bill.
However, developers and state officials argue the negative effects on public-private development—such as low-income housing and nonprofit education and medical projects—would be “devastating” for local government.
The Council of Development Finance Agencies said a survey of its project development members found that more than half of recent infrastructure projects using private-activity bonds—a market of about $84 billion— wouldn’t have gone forward without the tax exemption for interest earned on the bonds, Tim Fisher, legislative and federal affairs coordinator for CDFA, told Bloomberg Tax.
CISHA, an umbrella group of state housing associations that advocate on issues concerning their affordable housing programs, told Bloomberg Tax that it is urging lawmakers to go with the Senate’s preservation of the exemption.
“As we have made clear to members of Congress, eliminating private-activity bonds would mean losing around one million affordable homes and one million jobs nationwide over the next decade,” the group said.
Jon Penkower, managing director of the California Statewide Communities Development Authority, told Bloomberg Tax that local governments and project sponsors will be “forced to borrow at higher interest rates” if House Republicans get their way on private-activity bonds.
Wiping out the exemption could “lead to the loss of 20,000 affordable homes annually,” he said.
GOP senators are meeting in conference with their counterparts in the Republican-led House to negotiate a compromise bill for President Donald Trump to sign before year’s end.
“We are one step closer to delivering MASSIVE tax cuts for working families across America,” the president wrote on Twitter about the Senate vote. “Special thanks to @SenateMajLdr Mitch McConnell and Chairman @SenOrrinHatch for shepherding our bill through the Senate. Look forward to signing a final bill before Christmas!”
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