As we know, the President has signed what was originally titled Tax Cuts and Jobs Act, the most significant overhaul to the U.S. Tax Code since 1986. The President signed the Act into law after the first of the year in order to avoid some automatic spending cuts.
In its final form, this Tax Code overhaul retains private activity bonds and the the low-income housing tax credit. However, according to A Call To Invest in Our Neighborhoods (ACTION) Campaign, the amendment of other critical provisions of the Tax Code, especially, the lowering of the corporate tax rate from 35 percent to 21 percent and the creation of a base erosion and anti-abuse tax, present concern for affordable housing, as these provisions can impact an investor’s tax credit appetite. In an analysis performed by Novogradac and Company, the final version of the bill “would reduce the future supply of affordable rental housing by nearly 235,000 homes over 10 years.” Further, it is anticipated that other changes to the Tax Code, such as those relating to bonus depreciation, depreciation, and interest expense limitations, will impact equity pricing.
The legislation also retains the new market tax credit, with no change to its expiration which is after the 2019 allocation. The 20% historic tax credit was also retained, but with significant modification, including claiming the credit ratably over 5 years.
Ballard Spahr’s Tax Group is also following the legislative developments of other provisions of the bill. Late yesterday, the Tax Group issued a thoughtful analysis of the final bill.
Please use our Tax Reform Alert Center as a resource to find more information on the bill and/or reach out to us directly.