Tag: Tax credit

Community Development Tax Credits: Damaged, but not Devastated

Community Development Tax Credits: Damaged, but not Devastated

President Donald Trump’s signing of the Tax Cuts and Jobs Act Dec. 22 brought the yearlong drama concerning tax reform–and its effect on community development tax credits–to a conclusion, leaving community development advocates rejoicing in the survival of the low-income housing tax credit (LIHTC), private activity bonds (PABs), new markets tax credit (NMTC), historic rehabilitation tax credit (HTC) and renewable energy investment tax credit (ITC) and production tax credit (PTC), but also wounded as they assessed the damage done to these tools.
The other credits, HTC, NMTC, ITC and PTC, shouldn’t generally see dramatic pricing changes solely as a result of the corporate tax rate reduction.
The BEAT tax rate starts at 5-6 percent in 2018, then goes to 10-11 percent in 2019-2025, and to 12.5-13.5 percent in 2026 and beyond.
Tax credit investments are generally limited in their ability to effectively reduce a corporation’s BEAT liability.
But what is even worse is the calculation of BEAT can result in corporations permanently losing up to 20 percent of the benefit of their LIHTCs, ITCs and PTCs every year through 2026 and up to 100 percent after that.
The NMTC and HTC are in a worse position, as investors could lose up to 100 percent of their value starting in 2018.
The biggest challenge to affordable housing is the fact that the lower corporate tax rate, combined with the effects of the BEAT on investor demand, will result in less affordable housing being built in the next few years.
The House bill would have repealed both iterations of the HTC—the 20 percent credit for certified historic properties and 10 percent rehabilitation credit for non-historic properties placed in service before 1936–but the Senate version of the legislation carried the day in the final bill, albeit with two significant changes.
With a tax cut bill now enacted, tax credit advocates now have two major tasks, work through the existing changes as best they can, seek guidance and suggest technical corrections as needed; and get back to work to improve and expand the credits.
The Affordable Housing Credit Improvement Act is still before Congress, as are the Historic Tax Credit Improvement Act and New Markets Tax Credit Improvement Act.

HUD Data Shows LIHTC Continues to Meet Needs of Vulnerable Populations

HUD Data Shows LIHTC Continues to Meet Needs of Vulnerable Populations

The slight increase in tenants earning over 60 percent of AMI from 2013 to 2014 can be explained by the fact that tenants are permitted to remain in LIHTC units even as their incomes increase over time and exceed the maximum qualifying limits at move-in.
As of 2014 an estimated 37.8 percent of LIHTC households received rental assistance, a 1.9 percent increase from 2013.
Some state agencies did not provide rental assistance data for some properties, 6.6 percent and 19.6 percent, for 2013 and 2014 respectively.
As noted in both HUD’s 2013 and 2014 reports, the households that did not or could not provide rental assistance data likely did not receive any rental assistance.
The number of African-Americans occupying LIHTC buildings increased by 0.4 percent from 22.7 percent in 2013 to 23.1 percent in 2014, while the number of Other Race/Multiple Race increased 0.2 percent from 2013 to 2014.
From 2013 to 2014, there was a 1.2 percent increase from 8.3 percent in 2013 to 9.5 percent in 2014.
For example, the 1997 report shows that 39 percent of households received rental assistance.
Rental assistance was slightly lower in both 2013 and 2014, 35.9 percent and 37.8 percent respectively than in 1997.
This demonstrates that the percentage of LIHTC households receiving rental assistance has not changed substantially.
The LIHTC continues to benefit extremely low-income and very low-income households as well as households that contain at least one member with a disability.

Abortion Adds Obstacle as Republicans Plan to Unveil Health Bill

Abortion Adds Obstacle as Republicans Plan to Unveil Health Bill

WASHINGTON — Abortion flared up Wednesday as the latest hot-button issue to complicate passage of a bill to repeal and replace the Affordable Care Act, which Senate Republican leaders hope to unveil on Thursday and pass next week.
The repeal bill approved last month by the House would bar the use of federal tax credits to help purchase insurance plans that include coverage of abortion.
But senators said that provision might have to be jettisoned from their version because of complicated Senate rules that Republicans are using to expedite passage of the bill and avoid a filibuster.
If that provision is dropped, a bill that has already elicited deep misgivings among moderate Republicans — and stiff resistance from Democrats, health care providers and patient advocacy groups — could also generate concern among abortion opponents, as well as conservative lawmakers.
The changes being considered in Congress could “amount to a 25 percent shortfall in covering the actual cost of providing care to our nation’s neediest citizens,” the top executives of 10 insurance companies wrote.
The federal government is expected to spend more than $30 billion this year on tax credits to help lower- and middle-income people pay premiums.
The Senate bill would also repeal most of the taxes imposed by the Affordable Care Act.
Senators Thom Tillis of North Carolina and Susan Collins of Maine, both Republicans, said they understood that the House restrictions on the use of tax credits for insurance covering abortion had encountered parliamentary problems.
The leaders of 10 insurance companies told Mr. McConnell that proposed caps on federal Medicaid spending would cause “an enormous cost shift to the states,” forcing them to raise taxes, reduce benefits, cut payments to health care providers or eliminate coverage for some beneficiaries.
“In my state,” Mr. Kennedy said, “we are now spending 47 percent of our budget on Medicaid.

Treasury’s CDFI Fund Announces Availability of New Markets Tax Credits for 2017

Treasury’s CDFI Fund Announces Availability of New Markets Tax Credits for 2017

Treasury’s CDFI Fund Announces Availability of New Markets Tax Credits for 2017.
WASHINGTON, May 2, 2017 /PRNewswire-USNewswire/ — The NMTC Coalition was pleased to see the U.S. Department of the Treasury release the Notice of Allocation Availability (NOAA) today for the New Markets Tax Credit (NMTC) competition for calendar year (CY) 2017.
The CDFI Fund, which manages the NMTC program at Treasury, will provide $3.5 billion in NMTC allocations to be deployed in low-income rural and urban communities. “To date, the CDFI Fund has made 1,032 awards, totaling $50.5 billion in tax credit allocation authority, to promote public-private partnerships and spur investment to some of our nation’s hardest hit and persistently poor communities,” said Bob Rapoza, spokesperson for the NMTC Coalition.
In FY 2016 alone, the CDFI Fund, which operates the program at Treasury, reported that the NMTC delivered $3.16 billion in financing to 530 businesses, community facilities, and economic revitalization projects.
Communities put the capital to work, creating nearly 11,000 permanent jobs and almost 27,000 construction jobs in areas with high unemployment and poverty.
Legislation was introduced in the House and Senate in February to secure the future of the NMTC.
In the Senate, the bill was introduced by Senators Blunt (R-MO) and Cardin (D-MD) and has 5 Republicans and 6 Democrats signed on.
The bills, both titled The New Markets Tax Credit Extension Act of 2017, respectively H.R.
1098 and S. 384, would ensure that rural communities and urban neighborhoods left outside the economic mainstream have access to financing to grow their economies, build up businesses and create jobs.

Income Certifications: Personal Retirement Accounts from Top to Bottom

Income Certifications: Personal Retirement Accounts from Top to Bottom

Tenant B has a personal retirement account with a cash value of $15,000 and receives $2,400 once a year from this account.
Tenant B would then have an asset of $15,000, because once a year is not frequent enough to be considered regular and periodic (as demonstrated in the example under Exhibit 5-2(5) in the HUD Handbook 4350.3) and no amounts should be listed under the gross annual income portion of the Tenant Income Certification.
Household has $5,000 or Less in Assets If the household’s total assets are $5,000 or less, then no third-party verification is required and include the cash value of the retirement account (definition of cash value discussed later) on the Under $5,000 Asset Certification on the appropriate line, list the expected income from the account in the current year, and add that asset and income to the income from assets section on the first page of the Tenant Income Certification.
Whether or not the household’s total assets are more or less than $5,000, on the first page of the Tenant Income Certification, the personal retirement account should be listed at its cash value.
If the tenant does not have access to any part of the personal retirement account until retirement or until some vestment period is over, then the account and any related income does not need to be listed on the Income Certification.
Next, determine the anticipated income from the personal retirement account for the next 12 months, either by inquiring of the tenant for instances where the household’s assets are less than $5,000, or by calculation performed based on the asset verification, estimating future earnings or annualizing past earnings if future earnings are not available.
The income you include as income from this asset is the total amount of income the asset is expected to generate, even on portions that are not available for withdrawal and not included in the cash value in the asset.
On the Tenant Income Certification, the Income from Assets section would include a $15,000 personal retirement account asset and $2,500 ($25,000 x 10 percent) in income from this asset.
On the Tenant Income Certification, the Income from Assets section would include a $15,000 personal retirement account asset and $9 ($15,000 x .06 percent) in income from this asset.
On the Tenant Income Certification, the Income from Assets section would include a $2,000 personal retirement account asset and $650 ($6,500 x 10 percent) in income from this asset.

HUD 2017 Income Limits Notice Indicates Robust Income Growth

HUD 2017 Income Limits Notice Indicates Robust Income Growth

Overall 2017 was a very robust year for income limits; more than 80 percent of areas (88 percent of the population) saw an increase in the 50 percent very low-income (VLI) limit used for Section 8 rental assistance and multifamily tax subsidy projects (MTSP) when compared to the 2016 VLI income limits.
Income and rent limits for low-income housing tax credit (LIHTC) properties are not allowed to decrease from year to year; this is referred to as the hold harmless policy.
Generally speaking, the hold harmless period is determined for each property based on when it was placed in service.
Therefore even though the income limit may have increased from 2016 to 2017, properties that are being held harmless may not see an increase in their income and rent limits if their hold harmless limit is greater than the 2017 limit.
The following chart illustrates this concept–even though 2017 is greater than 2016, the income limit has not risen above its high-water mark of 2015 and therefore properties in service in 2015 or earlier would not have an increase in their limits.
Because this calculation is based on when a project is placed in service this analysis have assumed a placed- in-service date of Jan. 1, 2009, or earlier and compared the highest income limit for that county since 2009 vs the 2017 income limit: Even though income growth is increasing for many communities, income limits will still be flat for a vast majority of the LIHTC properties in the country.
According to HUD, 209 areas (11 percent of all areas) were capped at a 7 percent increase.
Eighty-nine areas had their decreases floored at 5 percent (3.4 percent of all areas).
Because in all cases the weighted average is greater than the average, it appears that income limits generally had larger increases in the more populous areas of the country.
Please click here to see a table of the income limit changes in the 15 largest Fair Market Rent Metropolitan areas.

4 Tax Filing Tips For People 65 And Older
Social Security Disability

4 Tax Filing Tips For People 65 And Older

4 Tax Filing Tips For People 65 And Older.
By Alissa Sauer, Next Avenue Contributor Tax filing time is quickly approaching (April 18, this year), so it’s a good time to offer a reminder about tax filing rules, tax deductions and tax credits specifically for people 65 and older.
1. Who Needs to File Every unmarried person over 65 who had a gross income of at least $11,900 in 2016 is required to file an income tax return.
Social Security benefits are not included in that gross income figure unless: you were either married filing separately and lived with your spouse at any time during 2016 or half of your net Social Security benefits plus other gross income and any tax-exempt interest exceeded $25,000 ($32,000 if you were married and filing jointly).
If you met either of those two exceptions, the taxable portion of your Social Security benefits is included in your gross income for determining whether you need to file a return.
If you lived only on Social Security in 2016, you won’t need to file a federal income tax return.
The Elderly or Disabled Tax Credit Some taxpayers over age 65 qualify for the Tax Credit for the Elderly or Disabled, which ranges between $3,750 and $7,500.
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If you were married and only one of you was 65 or older in 2016, you can still use the 7.5% rule.
Required Minimum Distributions from IRAs If you are 70 ½ or older and have a traditional IRA, you must take Required Minimum Distributions (RMD) and report them on your tax return.