HR 893119th CongressIn Committee

Working Families Housing Tax Credit Act

Introduced: Jan 31, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Working Families Housing Tax Credit Act creates a new federal tax credit, labeled the Working Families Housing Credit (Sec. 42A), to spur the development of rental housing targeted at “working families.” The credit would run for 15 years and be equal to the applicable percentage for a project times the qualified basis of each qualified working families building. The program builds on the existing 42 LIHTC framework but shifts focus to households with higher incomes than typical LIHTC targets, while preserving rent-restricted units and income-based occupancy tests. Key design features include: (a) a defined set of occupancy and income rules for projects to qualify as “qualified working families housing projects,” (b) a calculation method that uses a schedule of “applicable percentages” intended to deliver a target present-value credit, with minimum credit rates and special treatment for high-cost areas and rehabilitation, (c) special rules for accessing rehabilitation expenditures as separate buildings, and (d) a sense-of-Congress statement urging pro-housing reforms. The act also requires housing policy agencies to consider the credit as a critical tool for expanding quality housing for teachers, first responders, veterans, and other workers.

Key Points

1Creation of the Working Families Housing Credit (Sec. 42A): A new 15-year federal tax credit equal to the applicable percentage times the qualified basis of each qualified working families building within a qualified project. This operates within the existing LIHTC framework (Section 38) but targets working families units defined by income and rent restrictions.
2Qualified Working Families Housing Projects and Units:
3- Low-income requirement: 20% or more of units must be rent-restricted and occupied by individuals whose income is 60% or less of area median gross income (AMGI).
4- Working families requirement: 40% or more of units must be rent-restricted and occupied by individuals whose income does not exceed an imputed income limitation designated by the taxpayer (with rules around averaging, designation, and allowed percentages ranging around 70–180% of AMGI). The average imputed limitation for a project must not exceed 100% of AMGI.
5- Rent restrictions and income testing are central to determining eligibility.
6Applicable Percentages and Credit Calculation:
7- The credit equals the applicable percentage times the qualified basis of each qualified working families building.
8- The applicable percentage is set to yield a present value of credits over 15 years that equals:
9- 50% of the qualified basis for a new building; and
10- 60% of the qualified basis for a building not described as a new building (e.g., certain rehabilitations or existing buildings).
11- There are minimum credit rates:
12- At least 5% for buildings that are not federally subsidized.
13- At least 2% for federally subsidized buildings, with an exception where a zero-percent rate can apply unless the building is part of a 42 credit and financed with tax-exempt bonds as described in 42(h)(4).
14Rehabilitation Expenditures Treated as Separate New Buildings:
15- Costs incurred for rehabilitation can be treated as a separate building for the purposes of the credit, with specific rules about what counts as rehabilitation expenditures, minimum expenditure thresholds, timing of placement in service, and interaction with the regular credit.
16Increases in Qualified Basis in High-Cost Areas:
17- Buildings in designated difficult development areas may have increased eligible basis (130% of base) for new buildings, and rehabilitation expenditures may also be increased by 130% in those areas.
18- There are safeguards and area-designation rules (including geographic and demographic limits) and special rules for Indian areas.
19Credit Period and Special Rules:
20- The credit period lasts 15 years from the place-in-service date (with an optional year shift at the taxpayer’s election).
21- Provisions govern partial year calculations, increases in qualified basis, dispositions, and treatment of multi-building projects (with the project needing to be identified and treated as a single project unless otherwise designated).
22- There are special rules for acquisition timing, prior credit periods, and the treatment of projects with multiple buildings.
23Project Qualification and Designation:
24- A project must be identified and approved in a manner to be treated as a single project unless explicitly designated otherwise.
25- The act allows for certain elections on whether a building remains part of a qualified working families housing project after the credit period.
26SENSE OF CONGRESS:
27- The bill includes a non-binding statement that the Working Families Housing Credit is a critically important tool and that Congress should pursue pro-housing legislation to improve and enhance this credit.

Impact Areas

Primary group/area affected- Developers and owners of qualified residential rental projects, state and local housing credit agencies, and builders involved in low- to moderate-income housing development. The program targets working families units and imposes specific occupancy and rent/income restrictions, which will influence project design, financing, and eligibility.Secondary group/area affected- Tenants: working families and households with incomes up to the designated imputed limits, including a subset of low-income residents who must meet the 20%/60% AMGI threshold for the low-income portion.- Local governments and communities in need of affordable rental housing, particularly in high-cost areas designated as difficult development areas.Additional impacts- Fiscal/treasury considerations: The new credit would have cost to the federal government, with design details (present-value rules, minimum rates, and high-cost area boosts) aimed at targeting federal subsidies efficiently.- Tax policy and compliance: The mechanism for calculating credits (applicable percentage, qualified basis, rehabilitation treatment, and imputed income limits) adds complexity for developers, housing agencies, and tax professionals, potentially increasing compliance and monitoring efforts.- Interaction with existing LIHTC: The act modifies and supplements the LIHTC framework, requiring coordination with current 42 rules, bond financing, and agency oversight. It may affect planning decisions for multi-building projects and rehabilitation strategies.- Market and construction effects: By expanding eligibility and offering enhanced credits in high-cost areas, the bill could influence the supply of new and rehabilitated housing dedicated to working families and affect rents and availability in targeted markets.Sponsor: Mr. Ryan; Status: Introduced in the 119th Congress (as of the provided text).The text describes a comprehensive set of provisions that would require regulatory guidance and agency implementation, including the Secretary’s role in setting percentages and administering designations, and housing credit agencies’ authority to limit eligible percentages and qualified basis for individual buildings.

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