LIHTC Provisions Advance as House Approves One Big Beautiful Bill
Good morning.
Early this morning the House of Representatives passed the One Big Beautiful Bill by a 215-214 vote. Despite all the back and forth from factions within the Republican conference, the President and Speaker Mike Johnson were able to push the bill over the goal line and secure the victory.
The final House bill includes our LIHTC provisions, specifically:
12.5% increase in the 9% LIHTC for 2026 – 2029
Reduces the 50% test to 25% for obligations made from 2026 - 2029
Creates a 30% basis boost for rural and Tribal communities for buildings placed in service between December 31, 2025, and January 1, 2030.
This represents the single largest increase in the LIHTC, $14.1 billion, since the Housing and Economic Recovery Act in 2008. It could result in the production of over 500,000 additional LIHTC units, according to estimates by Novogradac & Associates.
There were additional changes to the final legislation in the rules committee, some based on negotiations between the Speaker, supporters of increasing the state and local tax cap (SALT), and budget hawks concerned about increased spending and the deficit. Below is a summary from the Republican Conference of those changes:
Title IV – Energy and Commerce Committee:
Amends Sec. 44108 to move the implementation date for biannual redeterminations of coverage for adults covered by Medicaid expansion to December 31, 2026.
Amends Sec. 44122 to move the implementation date for limiting retroactive coverage in Medicaid to December 31, 2026.
Amends Sec. 44141 to move the implementation date for Medicaid work requirements to December 31, 2026, with guidance for states to adopt work requirements as soon as December 31, 2025.
Amends Sec. 44141 to eliminate the discretion of future administrations to waive work requirements for various populations.
Amends Sec. 44125 to ensure federal Medicaid does not fund gender transition therapies or procedures for minors or adults.
Amends Sec. 44133 to adjust the limits on new state-directed payments (SDPs), providing non-Medicaid expansion states with a cap of 110% of the Medicare rate for a given health care service, grandfathering in any existing SDPs above that rate in such states. The cap of 100% of the Medicare rate for new SDPs in Medicaid expansion states, and the grandfathering of any existing SDPs above that rate in such states, remain unchanged.
Inserts a new section (Sec. 44202) to appropriate cost-sharing reduction payments (CSRs) for low-income beneficiaries in the individual market.
Title VI – Homeland Security Committee:
Inserts a new section (Sec. 60004) providing $12 billion to reimburse states for actions taken to deter, mitigate, or prevent unlawful or illicit activities related to border security.
Title VII – Judiciary Committee:
Amends Sec. 70200 to modify the provision requiring Congressional approval of major rules that increase revenue prior to them coming into effect (REINS Act) to maintain privilege in the Senate.
Title VIII – Natural Resources Committee:
Strikes Secs. 80315, 80316, and 80317, which would have allowed for the sale of public lands in Nevada and Utah.
Title IX – Oversight Committee:
Strikes Sec. 90002, which would have based a retiree’s annuity payment on their average highest five earning years instead of the highest three.
Title XI – Ways and Means Committee:
Amends Sec. 112008, Sec. 112009, and Sec. 112012 to revise the treatment of nuclear energy. These provisions:
Change the implementation standard from “property placed in service” to “commence construction” to determine nuclear project eligibility for the Production Tax Credit (45Y), Investment Tax Credit (45E), and Nuclear Production Tax Credit (45U).
Allow transferability for nuclear energy only.
Move the expiration date of the Nuclear Production Tax Credit (45U) to December 31, 2031.
Amends Sec. 112008 and Sec. 112009 to modify the Production Tax Credit (45Y) and the Investment Tax Credit (45E):
Move the implementation date of tightened Foreign Entity of Concern rules to December 31, 2025.
Eliminate the phase-out of both credits from 2029 to 2031, closing eligibility for both credits on December 31, 2028, maintaining the “property placed in service” implementation standard to determine credit eligibility.
Create a new “commenced construction” deadline of December 31, 2025, to determine credit eligibility.
Prohibit leasing arrangements for residential and farm solar credit eligibility.
Amends Sec. 112018 to cap the state and local tax deduction at $40,000 per household up to an income of $500,000, then phases down. Both the cap and income level would increase by 1% annually over the 10-year window.
Amends Sec. 112029 to strike the registration requirement for firearm silencers and take the manufacturer tax on silencers to $0
Additional Materials:
Legislative Text as ordered and reported by the Budget Committee.
Comparative Print (Showing the differences between H.R. 1 (as reported by the Budget Committee) and Rules Committee Print 119-3).
The bill now moves to the Senate for consideration, and it is widely expected that there will be changes, especially to the energy provisions and cuts to Medicaid. We do not expect any changes to the LIHTC provisions, but in a conversation with Senator Cantwell yesterday, she made it clear to us she would like to make some, if not all, of the LIHTC changes permanent. She continues to emphasize the housing crisis taking place in the country and hopes to convince her Republican colleagues that it is worth the relatively small commitment in context to this big bill, to achieve more housing security.
We expect the Senate to begin consideration of the One Big Beautiful Bill upon their return from the Memorial Day recess and, if Speaker Johnson’s prediction is correct, possible passage of the bill by July 4th.
Have a wonderful Holiday Weekend, and congratulations on this big step forward for affordable housing.