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Hello. It’s Tax Credit Tuesday and I’m Michael Novogradac. This is the Novogradac Report on Tax Credits, a podcast presented each week by Novogradac & Company LLP. Novogradac & Company is a national accounting, consulting and valuation firm that offers a full range of services as well as expertise in the fields of renewable
energy, community development and affordable housing.
Today is Tuesday July 22nd, 2008. This week we will discuss the latest legislative wrangling surrounding the tax extenders legislation.
But first, let’s start our discussion with an update on the housing stimulus bill.
On Wednesday, July 16th, House leaders announced that they would delay consideration of the Senate-passed housing stimulus bill, to give lawmakers more time to consider the Administration's
proposal to shore up investor confidence in GSEs Fannie Mae and Freddie Mac. The recommendations released on Tuesday July 15th would give Treasury authority to make unlimited debt and equity investments in the GSEs. The proposal would also direct the new GSE regulator to develop capital standards and other regulations in consultation with the Federal Reserve Board. The new authority and consulting role would expire at the end of 2009.
The House and the Senate have both agreed to incorporate the Administration's recommendations into the housing stimulus bill. Last week, House Majority Leader Steny Hoyer of Maryland said that Senate Banking Committee Chairman Christopher Dodd of
Connecticut and House Financial Services Committee Chairman Barney Frank of Massachusetts were working with the Administration to produce legislation that would be added to the housing bill. It is now expected that the House will resume work on the housing stimulus package this week.
In related news, Congressman Frank announced last week that he and House leaders will not attempt to eliminate the Senate
provision to provide $4 billion in grants to states and localities to help them turn around foreclosed properties. However, Congressman Frank did say the House will attempt to pay for the provision with a revenue-raising offset.
After the House has finished its work on the housing stimulus package, the bill will go back to Senate for its consideration. The Senate is expected to quickly approve the House-passed bill, which will then go to the President for his signature.
When the housing stimulus bill becomes law it will have immediate and widespread implications for the affordable housing community. I encourage you to join Novogradac & Company LLP in San Francisco in September for the 15th Annual San Francisco Affordable Housing Tax Credit Conference to discuss what changes are in store for existing LIHTC properties, as well as for transactions that are currently being negotiated and the future of the LIHTC
market. You can learn more about the conference and register online at www.novoco.com slash events.
Now let’s turn to a discussion of how the proposed
extensions of the new markets tax credit and renewable energy tax credits may fare in light of legislative wrangling that has slowed their progress.
Even though the new market tax credit enjoys strong bipartisan support, legislative proposals that have sought to extend the program have stalled repeatedly. In a recent statement on the floor of the Senate, Senator Gordon Smith of Oregon expressed his support for the new markets tax credit and urged his colleagues to join him in supporting an extension of the NMTC program. On July 8th, Senator Smith praised the NMTC’s potential to bring communities and
businesses into the mainstream financial market — and he pledged to do all that he could to see that the program is extended and expanded.
Extension of the NMTC program has been proposed in a
handful of different pieces of legislation. The program’s extension has been proposed as part of a larger package tax extenders. The New Markets Tax Credit Coalition reports that Senator John Kerry of
Massachusetts and Congressman Phil English of Pennsylvania were expected to make floor statements that echoed Senator Smith’s remarks. Their comments were anticipated in advance of a
procedural vote in the Senate that was scheduled for last week to determine whether to consider the tax extender bill. Although
Democrats and Republicans agree that a tax extender package should move forward, they disagree on whether the extensions should be paid for with revenue offsets.
The extension of renewable energy tax incentives has also been delayed by the debate over offsetting the cost of the extender bill. Although both political parties have outlined energy policies and proposed legislation to extend renewable energy tax credits, neither has yet been able to achieve the bipartisan consensus necessary to gain final approval.
The Senate has passed a bill that would extend temporary tax provisions for two years and includes renewable energy incentives. The House approved a measure to extend the provisions for one year. The Senate twice has failed to proceed to consideration of the revenue-neutral $54 billion House-passed bill. That measure includes a package of energy tax incentives, including a long-term extension and modification of the renewable energy production tax credit, and an extension and modification of the tax credit for solar energy and fuel cell investment.
Earlier this month, Senate Minority Leader Mitch McConnell of Kentucky proposed that Republicans would agree to offsets for the tax extenders bill if Democrats agreed to lower their proposed 2009 domestic spending to make up for the lost revenue. Democratic leadership has not indicated whether they would accept the deal but reports in recent weeks suggest that the Senate could bring a
bipartisan AMT/tax extenders package to the floor for a vote before the August recess. However, even if Congress were able to reach an
agreement, the bill’s final approval is not guaranteed because the Administration has opposed offsetting extensions of existing tax laws.
While lawmakers continued to debate the cost issue last month, the National Governors Association moved to put pressure on
Congress to act immediately to postpone the expiration of tax credits for investment in wind and solar power. On July 14th, the national body of governors agreed to call on Congress to act immediately to postpone the December 2008 expiration date of renewable energy tax credits. At a four-day summer meeting in Philadelphia, the
governors group agreed to seek the signatures of all 50 governors on a letter that would request extension and funding of the tax credits for five years. The association says it plans to send the letter as soon as possible, in the hope Congress will act prior to its summer recess.
Meanwhile, members of Congress in turn called for action from the White House. An initiative led by Senator Olympia Snowe of Maine recently called on President Bush to convene a bipartisan National Energy Summit to develop a proposal to address the current national energy crisis. In a statement on July 15th, Senator John
Sununu of New Hampshire said quote, “Instead of saying ‘we can’t, we can’t, we can’t,’ legislators should be working together today to find the best way to take positive action in each of these areas.” close quote
The coalition sent a letter to the President urging him to call a national summit with Congressional and national leaders to develop a comprehensive energy proposal. The letter says, quote, “This energy stalemate must be broken – and we believe it can be broken, if there
is a demonstrable, good-faith commitment from both ends of Pennsylvania Avenue.” end quote
It should be noted that if the current version of tax extender legislation stalls again, there are other ways that the new market tax credit and renewable energy tax incentives could be extended. For example, last week reports surfaced again that Congress is
considering a second economic stimulus bill. Seizing the opportunity, Congressman Harry Mitchell of Arizona appealed to House Speaker Nancy Pelosi of California to include a renewal of alternative energy tax credits in the new economic stimulus package. Congressman Mitchell says that the tax credits, which are set to expire at the end of the year, are necessary for large scale renewable energy projects to proceed and he argues that these projects could spark significant economic development.
We will continue to follow these developments closely and keep you updated in future podcasts.
Well that brings us to the end of this week’s report.
Please join us again next Tuesday when we will bring you the latest updates on the housing stimulus and tax extender legislation. We will also discuss the highlights of a report issued last week about the use of tax incentives in the GO Zone as well as recent
developments in the IRS’s investigation of Colorado's conservation easement tax credit program.
This is Michael Novogradac and I’ll be back next Tuesday. Thanks for listening.
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Editorial material in this transcript is for informational purposes only and should not be construed otherwise. Advice and
interpretation regarding tax credits or any other material covered in this transcript can only be obtained from your tax advisor.
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