Housing Reform Should Restore, Enhance Lapsed Tax Breaks, House Taxwriters Told

With the deadline now passed for public stakeholders to submit comments to members of the House Ways and Means Committee Tax Teams, Republican lawmakers heard various proposals to consider ahead of the expiration of certain Tax Cuts and Jobs Act (P.L. 115-97, TCJA) provisions next year.

Tax Teams.

In April, Ways and Means Chair Jason Smith (R-MO) announced the formation of 10 topic area-specific groups dubbed “Tax Teams” comprised of exclusively Republican members of the committee. From issues impacting working families to small business owners and domestic manufacturers, the teams were created to crowdsource tax policy suggestions before the kickoff of what has been called the “Tax Superbowl.” That is, the looming debate awaiting the next Congress on what to do about sunsetting TCJA provisions before the end of 2025.

In an October 18 update, the committee boasted about the outreach efforts of the Tax Teams, which have conducted more than 120 events in 20 states, according to the release. In addition to these briefings, roundtable discussions, and other discussions with taxpayers and industry leaders, the committee opened a comment portal in the form of a dedicated email address to encourage the general public to weigh in on tax issues.

Supply-side housing credit.

The Affordable Housing Tax Credit Coalition (AHTCC) in a October 15 letter told the Tax Teams that “any upcoming tax legislation” should include its proposal to restore and enhance a housing tax credit program in effect from 2018 through 2021.

The 2018 Consolidated Appropriations Act (P.L. 115-141) amended the Low-Income Housing Tax Credit (LIHTC) program in response to the effects of other tax provisions in the TCJA on the housing market. Generally, the LIHTC — originally established by the Tax Reform Act of 1986 (P.L. 99-514) — was awarded to developers of affordable rental housing units to “offset the cost of constructing rental housing in exchange for agreeing to reserve a fraction of rent-restricted units for lower income households,” as explained by the Congressional Research Service. There is the 9% new construction tax credit intended to provide a 70% subsidy, as well as the 4% rehabilitation tax credit worth up to a 30% subsidy.

The AHTCC supports the Affordable Housing Credit Improvement Act (AHCIA, S. 1557/ H.R. 3238) introduced this session by Ways and Means member Darin LaHood (R-IL) in May 2023. The House bill’s original 66 cosponsors included 34 Republicans and 22 Democrats and the AHCIA is “supported by over half of Congress,” according to the AHTCC.

Specifically, the proposed legislation would modify the LIHTC by 1) restoring the 12.5% increase to the Housing Credit allocation and phase in another 50% boost over two years; 2) lowering the private activity bond financing threshold to 25%, down from 50%; and 3) providing targeted basis boosts to rural and tribal areas (30%) and extremely low-income renters (50%).

“These provisions, combined, would produce or preserve nearly 2 million additional affordable rental homes over the next decade — homes that would not otherwise be developed due to the rising costs and limited resources available to housing agencies,” wrote the AHTCC. “This would not only address the growing housing shortage, but would also create millions of jobs and generate billions of dollars in wages and tax revenue, strengthening our national and local economies.”

Mortgage insurance premiums.

Also commenting on housing taxation policies were a coalition of organizations representing members in the banking, real estate, and mortgage industries. The group includes the American Bankers Association, the NAACP, and U.S. Mortgage Insurers. In an October 15 letter to the Tax Teams and an identical letter to Ways and Means Ranking member Richard Neal (D-MA), the coalition expressed its support for another proposed bill, the Middle Class Mortgage Insurance Premium Act of 2023 (H.R. 4212/S. 1938), sponsored by Ways and Means member Vern Buchanan (R-FL).

The bill would make permanent the tax deduction for mortgage insurance premiums that was in effect from 2007 through 2021, as well as increase the adjusted gross income (AGI) phaseout. Under the previous law, mortgage insurance premiums were treated as qualified residential mortgage interest, and the AGI cap was $109,000, with an income-based phaseout beginning at $50,000 for single or separate filers, or $100,000 for married, joint filers. These levels would be doubled under the proposed legislation.

“The AGI cap was static for the entire 2007-2021 period (not indexed for inflation) and an increase is necessary and appropriate to compensate for the natural erosion of the value of the dollar over time,” wrote the coalition. “This is particularly true as families have contended with rising household costs over the past several years.”