Overview
Title
To amend the Internal Revenue Code of 1986 to enhance the low-income housing tax credit, and for other purposes.
ELI5 AI
The "Affordable Housing Construction Act" wants to give more money help to make homes for families who don't have a lot of money. It does this by increasing the money available and giving extra rewards to buildings that are really good, like using clean energy or being close to buses.
Summary AI
The bill, titled the "Affordable Housing Construction Act," seeks to amend the Internal Revenue Code of 1986 to enhance tax credits for low-income housing projects. Key changes include increasing the state housing credit ceiling and providing additional credit amounts for buildings that pay prevailing wages, use renewable energy, are near public transportation, or serve people with disabilities or extremely low-income families. It also requires a portion of state housing credit allocations to be reserved for these types of projects, modifies tax-exempt bond financing requirements, and extends the use period for low-income housing from 15 to 35 years. These amendments aim to encourage more affordable housing development by providing greater financial incentives.
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AnalysisAI
The bill titled "Affordable Housing Construction Act," introduced in the 118th Congress, seeks to amend the Internal Revenue Code of 1986 to enhance the low-income housing tax credit, among other purposes. The proposal centers on increasing the financial incentives and support for the development of affordable housing across the United States. Below is an exploration of the bill's key provisions and the potential implications for the public and various stakeholders.
General Summary
This legislative proposal aims to increase the effectiveness of the low-income housing tax credit by significantly raising the state housing credit limits. It also proposes additional credit amounts for buildings that meet specific criteria, such as those utilizing renewable energy or located near public transportation. Moreover, the bill addresses tax-exempt bond financing requirements and extends the duration of agreements related to low-income housing commitments.
Summary of Significant Issues
One of the main points of concern is the substantial increase in the state housing credit ceiling from $1.75 to $9.79 per capita and the total minimum from $2 million to $11.34 million. This increase might be perceived as excessive without detailed justification, raising fears of potential wasteful spending. Another significant issue involves the complexity and specificity of the language used throughout the bill, which may hinder public understanding and engagement.
The bill also proposes multiple increases in tax credits for specific building types, such as those serving extremely low-income families or proximate to public transportation. However, the lack of specific mechanisms for enforcing these credit increases could result in prioritizing projects that might not align strictly with low-income housing needs. The extension of the commitment period for low-income housing agreements from 15 to 35 years is another pivotal change that lacks clear justification, prompting concerns about transparency and the long-term viability of such commitments.
Potential Impacts on the Public
Overall, the bill could significantly impact the availability of low-income housing by creating stronger financial incentives for developers. Increasing the housing credit ceiling and providing specialized tax benefits for environmentally friendly or strategically located projects could lead to a surge in construction activity within these sectors, possibly alleviating some housing shortages.
However, the complexity of the bill's provisions might create challenges for smaller developers or nonprofits unfamiliar with intricate tax regulations, potentially restricting their ability to participate. Additionally, the focus on particular building types for enhanced credits could skew the market towards these projects, potentially neglecting other essential aspects of affordable housing development.
Specific Stakeholder Impacts
Developers and Builders: The bill would likely benefit developers with the resources to meet the heightened criteria for additional credits, encouraging investment in green and accessible housing solutions. However, smaller developers might face difficulties navigating the bill's complex requirements or meeting the financing conditions stipulated by the new tax-exempt bond rules.
Financial Institutions: Large financial organizations could see an advantage in qualifying for the specific conditions necessary to leverage tax-exempt bonds, which might lead to an uneven competitive landscape, marginalizing smaller players.
Low-Income Individuals and Families: If effectively implemented, the bill has the potential to increase housing availability for low-income individuals and families, specifically through targeted projects that align with the bill's criteria. This could lead to better living conditions and more affordable housing options in desirable locations.
Environmental and Disability Advocates: By incentivizing renewable energy use and housing that meets accessibility standards, the bill aligns with the goals of environmental sustainability and inclusivity, potentially drawing support from these advocacy groups.
In conclusion, while the bill presents ambitious goals and promises significant enhancements to support low-income housing, its complexity and financial projections warrant careful consideration and analysis to ensure equitable and efficient implementation across diverse stakeholders.
Financial Assessment
The "Affordable Housing Construction Act" primarily focuses on enhancing tax credits for low-income housing projects by amending the Internal Revenue Code of 1986. Within this legislative framework, the bill outlines several financial provisions that have significant implications.
Increase in State Housing Credit Ceiling
One of the principal changes in the bill is the significant increase in the state housing credit ceiling under Section 42(h) of the Internal Revenue Code. The dollar amounts cited in the bill are notably increased, with the baseline ceiling moving from $1.75 to $9.79 per capita, and the minimum state allocation rising from $2,000,000 to $11,340,000.
These adjustments suggest a substantial increase in the financial incentives available for developing affordable housing. However, the issues raised in association with these changes point to concerns about potential wasteful spending. The absence of a clear rationale or justification for such a marked increase could lead to inefficient use of resources if not carefully monitored and regulated.
Increased Credit Amounts for Specific Initiatives
The bill also introduces increased credit amounts for specific building projects. For example, developments that pay prevailing wages, use renewable energy, are situated near public transportation, or cater to people with disabilities or extremely low-income families can receive enhanced credits.
While these initiatives are designed to encourage desirable attributes in affordable housing projects, there is an underlying concern about the lack of clear enforcement measures. The absence of robust checks could lead to projects that prioritize maximizing credits rather than addressing the core needs of low-income housing. Additionally, these concentrated financial incentives may not align with the actual demand or geographic necessities for housing projects.
Modification of Extended Use Period
The bill proposes extending the use period for low-income housing from 15 to 35 years. This modification essentially commits these housing projects to serve low-income residents for a longer duration. However, the notable shift raises questions about transparency and the operational impact on developers who may now be subject to a prolonged commitment without sufficient justifications or transitional arrangements.
Tax-exempt Bond Financing Requirement
Changes are also proposed to the tax-exempt bond financing requirement under Section 42(h)(4). These adjustments introduce complexity into the financing landscape, potentially benefiting large financial institutions with the capacity to meet specific conditions. Such measures could inadvertently disadvantage smaller entities less equipped to handle these requirements, fostering concerns about an uneven playing field.
Moreover, the definition of "qualified obligation" is tied to specific dates, potentially resulting in future anomalies if these dates are not consistently updated.
Conclusion
Overall, the financial allocations and credits referenced in the bill are aimed at bolstering the development of low-income housing. However, the potentially significant increases and the intricacy of the provisions could lead to challenges in effective implementation. Proper oversight and strategic planning will be necessary to ensure these financial incentives effectively translate into increased and improved low-income housing stock without leading to inefficiencies or unintended disparities.
Issues
The increase in the State housing credit ceiling from $1.75 to $9.79 and from $2,000,000 to $11,340,000 mentioned in Section 2 could be considered significant or excessive without clear justification, raising concerns about potential wasteful spending.
Section 3 offers multiple increases in credit for specific building categories, such as those powered by renewable energy, near public transportation, or serving extremely low-income families, without clear measures for enforcement or checks, which may lead to potential misuse or prioritization of projects not aligned with actual low-income housing needs.
The bill's language, especially in Sections 3 and 4, is highly technical and complex, possibly limiting stakeholder engagement and understanding by the general public due to its legal or tax background requirements.
The modification of the extended use period from 15 to 35 years in Section 5 is a significant change with no provided justification, raising transparency and operational impact concerns.
The provision allowing significant increases in credits for specific building types in Section 3 might lead to financial implications due to the aggregated effect of all increased percentages and the lack of explicit caps beyond the 250% overall limit.
The tax-exempt bond financing requirement in Section 4 is complex and may favor large financial organizations capable of meeting specific financing conditions, potentially creating an uneven playing field.
The date-specific definition of 'qualified obligation' in Section 4 is tied to dates before January 1, 2026, which could lead to future anomalies if not updated, creating potential equity issues.
The effective date specification for amendments in Section 5 refers to 'taxable years beginning after the date of the enactment', which could lead to confusion or lack of clarity for affected parties without a specific date.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of this act states that it may be referred to as the “Affordable Housing Construction Act”.
2. Increase in State housing credit ceiling Read Opens in new tab
Summary AI
The bill proposes to increase the state housing credit ceiling by amending the Internal Revenue Code, changing the per capita credit amount from $1.75 to $9.79, and the minimum state credit from $2,000,000 to $11,340,000. The amendments also set new baseline inflation adjustments to take effect for calendar years starting after December 31, 2024.
Money References
- (a) In general.—Section 42(h)(3)(C)(ii) of the Internal Revenue Code of 1986 is amended— (1) by striking “$1.75” in subclause (I) and inserting “$9.79”, and (2) by striking “$2,000,000” in subclause (II) and inserting “$11,340,000”. (b) Inflation adjustments.—Section 42(h)(3)(H) is amended— (1) by striking “In the case of a calendar year after 2002, the $2,000,000 and $1.75 amounts in subparagraph (C)” in clause (i) and inserting “In the case of a calendar year after 2025, the $16,542,968 and $9.79 amounts in subparagraph (C)”, (2) by striking “calendar year 2001” in clause (i)(II) and inserting “calendar year 2024”, (3) by striking “$2,000,000” in clause (ii)(I) and inserting “$11,340,000”, and (4) by striking “$1.75” in clause (ii)(II) and inserting “$9.79”. (c) Effective date.—The amendments made by this section shall apply to calendar years beginning after December 31, 2024. ---
3. Increased credit amounts and credit allocation set-asides for certain buildings Read Opens in new tab
Summary AI
The bill proposes amendments to the Internal Revenue Code to increase tax credits for certain types of buildings. These include buildings that pay prevailing wages, use renewable energy, are near public transportation, serve people with disabilities, or provide housing for extremely low-income families. It also sets aside a portion of state housing credits specifically for these types of projects.
4. Tax-exempt bond financing requirement Read Opens in new tab
Summary AI
The section modifies the tax law regarding how tax-exempt bonds can be used to finance buildings. It specifies that if at least 50% of a building's cost is financed with certain bonds, some tax credits do not apply. Alternatively, if at least 15% is financed by qualified bonds issued after 2023 but before 2026, different criteria apply. These changes take effect for buildings in service starting after December 31, 2023.
5. Modification of extended use period Read Opens in new tab
Summary AI
The proposed change to the Internal Revenue Code increases the period in which certain agreements must remain in effect from 15 years to 35 years, and this change will apply to agreements made in taxable years that start after the law is put into effect.