LIHTC Reform/Expansion Proposed; Opportunity for REITs

In his recently released fiscal 2013 budget, President Obama proposed to reform and expand the low-income housing tax credit (LIHTC).  Under the plan, LIHTC projects would be allowed to elect an average-income criterion and permit a 30% basis increase for projects:

  •  involving preservation, recapitalization and rehabilitation of existing housing; 
  • demonstrating a serious backlog of capital needs or deferred maintenance; 
  • involving housing that was previously financed with federal funds or benefitted from LIHTC; and 
  •  due to federal support, subject to a long-term use agreement limiting occupancy to low-income households. 

Further, the budget makes LIHTC attractive to REITS by allowing a REIT that receives LIHTCs to designate some of the dividends it distributes as tax-exempt.   If this component of the budget is enacted, we envision LIHTC-based projects becoming more attractive to REITs and, accordingly, these REITs becoming more attractive to investors in tandem.   



Aninda Dhar is a Senior Tax Manager with extensive experience in federal and international tax matters. Aninda provides tax consulting services to entities in numerous industries and serves a diverse roster of clients.

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