One Big Beautiful Bill - The Senate Version
Right on the heels of our Affordable Housing Forum in Washington, the Senate Finance Committee has released its version of the One Big Beautiful Bill’s tax section. We indicated at the Forum that we had every hope and indication that we would be included in the Senate Version (page 230 for the LIHTC section), and we got it right.
There are some significant changes from the House version of the OBBB.
9% LIHTC allocation: a permanent 12% increase in the allocation (versus a temporary 12.5% increase for 2026-2029 in the House bill).
Bond Test: A permanent reduction of the 50% test to 25% (versus a temporary reduction in the House bill for 2026-2029)
Basis Boosts: The Senate bill does not include any basis boosts.
Despite the lack of any basis boost in the Senate version of the OBBB, by making the allocation increase and bond test reduction permanent, it is estimated that the Senate investment in the LIHTC could be upwards of $15.7 billion, or $1.6 billion more than the House version.
In addition, considering previous estimates by our friends at Novogradac, a 10-year effect of reducing the 50% test to 25% could result in as many as 1.1 million units. We have to wait on their estimates for a permanent 12% increase in the 9% program, but it will likely be over an additional 130,000 units.
What is equally significant, if we assume the Senate language is adopted in the final bill, which is an assumption, as we work on the next tax bill, we will have addressed a significant need of the program with the reduction of the 50% test. We will also have a higher baseline for the 9% program with the 12% increase.
Finance Chairman Mike Crapo (R-ID) has indicated for some time that he wants to make as much of the tax portion of the OBBB permanent as possible, thereby ending the routine of tax extenders and bills renewing tax policy. It is thus very telling that Section 70422 of the bill is titled PERMANENT ENHANCEMENT OF LOW-INCOME HOUSING TAX CREDIT.
Now that the Senate has released the tax section of the bill, which differs significantly from the House's version in many ways, the difficult negotiations between the two chambers may begin. While President Trump, Speaker Johnson, and Leader Thune have done an outstanding job of keeping their conferences focused and on schedule, the next negotiation will be the most challenging by far. We remain skeptical that they will make the July 4th deadline, and with the House out of session this week, reaction to the Senate bill may take some time to materialize. That said, it is going to be a rollercoaster.
Stay tuned, and thank you as always for your advocacy.