On Tuesday, July 21, the Senate Finance Committee approved a tax extender bill that fixes the 9% credit rate floor for allocations made in 2015 and 2016. The bill would also fix the 4% credit rate for acquisition of existing housing that is not federally subsidized.
The bi-partisan, two year tax extender bill also includes New Markets Tax Credit and energy provisions. Key highlights from the legislation include:

  • 9% Credit Rate Freeze for the Low-Income Housing Tax Credit Program. The low-income housing tax credit program provides a tax credit over a period of ten years after a housing facility occupied by low-income tenants is placed-in-service. The credit earned each year generally depends on three factors – the investment in the building, the portion of the building devoted to low-income units, and a credit rate (called the “applicable rate”). When the program was created, the applicable rate was 9%. As interest rates have declined, so has the amount of tax credits that can be used to build a LIHTC project. In 2008, Congress adjusted the formula and set a minimum credit amount of 9%, which is based on the original credit rate when the program was created. This proposal would extend the expiration date by changing the deadline to allocations made before January 1, 2017. A two year extension of this provision is estimated to cost $2 million over 10 years.
  • Treatment of military basic housing allowances under low-income housing credit. The bill extends a provision whereby any military basic housing allowance received by an active member of the military is not considered income for purposes of calculating whether an individual qualifies as a low-income tenant for the low income housing tax credit program. The provision expired at the end of 2014. The proposal would continue this treatment for two additional years. A two year extension of this provision is estimated to cost $42 million over 10 years.
  • New Markets Tax Credit. The bill extends the New Markets Tax Credit for two years, permitting a maximum annual amount of qualified equity investments of $3.5 billion. A two year extension of this provision is estimated to cost $1.844 billion over 10 years.
  • Renewable Production Tax Credit. Under current law, taxpayers can claim a 2.3 cent per kilowatt hour tax credit for wind and other renewable electricity produced for a 10-year period from a facility that has commenced construction by the end of 2014 (the production tax credit). They can also elect to take a 30 percent investment tax credit instead of the production tax credit. The bill extends these credits through December 31, 2016. A two year extension of this provision is estimated to cost $10.492 billion over 10 years.
  • Credit for construction of new energy efficient homes. The bill extends for two years, through 2016, the credit for the construction of energy-efficient new homes that achieve a 30% or 50% reduction in heating and cooling energy consumption relative to a comparable dwelling constructed within the standards of the 2003 International Energy Conservation Code (including supplements). A two year extension of this provision is estimated to cost $760 million over 10 years.
  • Energy efficient commercial buildings deduction. The bill extends for two years, through 2016, the deduction for energy efficient commercial buildings. Taxpayers may deduct up to $1.80 per square foot for an efficiency improvement of at least 50 percent. The improvement can be made through efficient lighting systems, heating, cooling, ventilation, and hot water systems. A two year extension of this provision is estimated to cost $324 million over 10 years.

The Chairman’s Mark of the tax extenders bill can be found here. A revenue table for the tax extenders bill can be found here. A summary can be found here.