Congress may ex­tend, ex­pand low-in­come hous­ing tax break

Shows dif­fi­culty of re­form­ing na­tion’s tax code

The Washington Times Daily - - POLITICS - BY DAVID SHERFINSKI

Law­mak­ers are scour­ing the tax code to elim­i­nate cred­its and de­duc­tions as part of a broad tax re­form, but Congress ap­pears poised to pro­tect and per­haps to even ex­pand a spe­cial break for real es­tate de­vel­op­ers who build rental hous­ing for low-in­come peo­ple.

The credit has helped fi­nance some 2.4 mil­lion units as of 2014, and the cost — an es­ti­mated $34 bil­lion over the next 10 years, ac­cord­ing to con­gres­sional score­keep­ers — is rel­a­tively small in the con­text of tril­lions of dol­lars likely to shift in the bud­get un­der any tax re­form.

But at a time when the White House and Capi­tol Hill are look­ing to flat­ten the tax code by cut­ting spe­cial breaks and us­ing the sav­ings to lower rates, the real es­tate credit seems to be go­ing the wrong di­rec­tion.

“Some­body’s ox has to get gored in order to make the num­bers add up,” said Brian Riedl, a se­nior fel­low in bud­get, tax, and eco­nom­ics at the Man­hat­tan In­sti­tute for Pol­icy Re­search.

He said while the cost of this one break may be small by fed­eral bud­get stan­dards, it’s em­blem­atic of the prob­lems Congress has had over the years try­ing to con­trol the tax code.

“Repub­li­can tax-writ­ers seem in­ter­ested in pass­ing out the candy, but they don’t seem in­ter­ested in ac­tu­ally find­ing the painful trade-off,” said Mr. Riedl, a former staffer for Sen. Rob Port­man.

Sen. Or­rin Hatch, who chairs the tax-writ­ing Se­nate Fi­nance Com­mit­tee, is help­ing lead the push to ex­pand the low-in­come hous­ing credit, along with Demo­cratic Sen. Maria Cantwell of Wash­ing­ton.

Mr. Hatch re­cently de­fended the pro­gram as a way to push con­trol of the cred­its away from Wash­ing­ton, D.C., bu­reau­crats and to­ward the lo­cal hous­ing agen­cies that dole them out, while ac­knowl­edg­ing the sys­tem is worth keep­ing tabs on mov­ing for­ward.

“This im­por­tant sec­tion of the tax code has en­joyed bi­par­ti­san sup­port,” Mr. Hatch said at a hear­ing he con­vened on af­ford­able hous­ing ear­lier this month.

The credit in ques­tion is given over a 10-year pe­riod to busi­nesses or groups that build rental hous­ing, with the amount of the award depend­ing on the num­ber of low-in­come peo­ple who ul­ti­mately live in the prop­erty.

Sen. Sher­rod Brown, Ohio Demo­crat, called the pro­gram a “crit­i­cal tool.”

“[It] cer­tainly should be pro­tected and ex­panded re­gard­less of whether tax re­form de­vel­ops into a real bi­par­ti­san process or re­mains the par­ti­san fan­tasy … as peo­ple here talk about,” he said.

It’s been widely praised for fi­nanc­ing mil­lions of low-in­come hous­ing units, but has also come un­der fire from fed­eral in­ves­ti­ga­tors in re­cent months for over­sight is­sues.

“IRS over­sight over this pro­gram has been min­i­mal,” said Daniel Gar­cia-Diaz with the Gov­ern­ment Ac­count­abil­ity Of­fice.

He said over the past 30 years, agen­cies that dole out the cred­its have been au­dited only a hand­ful of times, and even when they were ex­am­ined the re­sult­ing data of­ten in­cluded er­rors and con­flicts.

The IRS, mean­while, says the agency did not count reg­u­lar re­views as part of its statu­tory du­ties, and that lo­cal agen­cies should bear that re­spon­si­bil­ity.

But those in the in­dus­try say there are in­ter­nal safe­guards fed­eral in­ves­ti­ga­tors might not see, and that the pro­gram is in­valu­able amid ris­ing rental costs and fed­eral re­sources dwin­dling else­where.

“We take it very, very se­ri­ously,” said Granger MacDon­ald, chair­man of the Na­tional As­so­ci­a­tion of Home Builders. “I re­al­ize that’s hard to track from a GAO stand­point, but on a lo­cal ba­sis, there is a lot of over­sight to make sure the com­pli­ance of this pro­gram is be­ing care­fully, care­fully mon­i­tored.”

Ef­fi­cacy ques­tions aside, though, bud­get an­a­lysts said they’re look­ing for signs that Congress knows the bind it’s in. If Repub­li­cans don’t find enough off­sets and pur­sue a plan that adds to the fed­eral deficit in the long run, they’ll face sig­nif­i­cantly more re­stric­tions on what they can do leg­isla­tively — as frus­trated con­ser­va­tives grum­bled about dur­ing the failed Oba­macare re­peal ef­forts.


Sen. Or­rin Hatch, Utah Repub­li­can, sup­ported the low-in­come tax credit. “This im­por­tant sec­tion of the tax code has en­joyed bi­par­ti­san sup­port,” he said.

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