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Senate Extends Tax Provisions That Benefit Multifamily

Tax Provisions

Lawmakers on Capitol Hill kept busy last week with countless appropriations committee hearings on fiscal year 2015 budget requests for the nation’s bureaucracy of government departments and agencies. While former vice presidential candidate Representative Paul Ryan (R-Wis.) released a budget plan that proposes cutting $5 trillion in spending over a decade. 

In the middle of this laser focus on future budgets, the Senate Finance Committee was working diligently on extending tax provisions that expired at the end of last year. Specifically, on April 3 the Committee approved the “Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act” that renews several tax provisions benefiting the multifamily industry through 2015. The EXPIRE Act proposes extending the following:

  • Flat 9 percent Low-Income Housing Tax Credit (LIHTC) and 4 percent rate for LIHTC acquisitions; 
  • Bonus Depreciation; 
  • Deduction for Energy Efficient Commercial Buildings;  
  • Credit for Energy Efficient New Homes; and 
  • New Markets Tax Credit (NMTC). 

NAA/NMHC joined our industry partners on March 28 in sending a letter specifically advocating for many of these incentives. The real estate industry sent a follow up letter on April 1 asking Senators to restore the deduction for energy efficient commercial buildings once it had been learned the provision was not included in the original bill.

While action by the Committee to restore the expired provisions represents a positive step, the path to enactment remains uncertain and could be weeks or even months away. Senate Majority Leader Harry Reid (D-Nev.) has not indicated when he might schedule a vote by the full Senate. Meanwhile, House Ways and Means Chairman Dave Camp (R-Mich.), who on March 31 announced he is not seeking re-election, has indicated that he intends to hold hearings and markups focusing on which of the several dozen tax extenders currently in play are worthy of remaining in law permanently. 

See the following multifamily-related details of the Senate Finance Committee markup of the EXPIRE Act proposals and the modifications to the markup:

  • Flat 9 percent LIHTC and 4 percent rate for acquisitions: Due to low interest rates, the current 9 percent LIHTC is actually set at a 7.59 percent rate, reducing its value by nearly 16 percent. Accordingly, the proposal extends the minimum 9 percent rate for newly constructed non-Federally subsidized buildings for which an LIHTC allocation was made prior to January 1, 2016.  The proposal also calls for a 4 percent rate for LIHTC acquisitions advocated for by NMHC/NAA which, like the flat 9 percent rate, would make the credit more valuable because low interest rates are diminishing its value. 
  • Bonus Depreciation: While business property must be depreciated over a number of years, so-called bonus depreciation has enabled taxpayers to expense 50 percent of the cost of an investment in the year it was purchased. The provision extends bonus depreciation through 2015 for property with class lives of 20 years or less.
  • Deduction for Energy Efficient Commercial Buildings (Section 179D): Originally omitted from the “chairman’s mark,” an extension of the Section 179D energy efficiency tax deduction through 2015 was included in the measure that passed out of Committee. NMHC/NAA had advocated for the extension and also for expanding it to allow for retrofits of multifamily properties, but the expansion was not included due to budget concerns. 
  • Credit for Energy Efficient New Homes: This incentive provides up to a $2,000 tax credit for new multifamily buildings with three or fewer stories that meet certain energy efficiency standards. The EXPIRE Act renews the incentive through 2015.
  • NMTC: The NMTC provides a tax incentive for qualified equity investments in economically distressed areas and can be used for mixed-use projects. The proposal permits $3.5 billion in new investments for both 2014 and 2015. 

Provided by NMHC as part of the NAA/NMHC Joint Legislative Program