Making LIHTC Work with Lower Tax Rates under Tax Reform

Making LIHTC Work with Lower Tax Rates under Tax Reform

As of Spring of 2017, pricing in the Low‐Income Housing Tax Credit (LIHTC) market remains unsettled due to the prospect of cuts in corporate tax rates reducing the returns to corporate LIHTC investors. President Trump and the Chairman of House Ways and Means, Kevin Brady, have both recently indicated that a major reform of the United States tax code will be forthcoming, suggesting that corporate income tax rates may decline from the current 35% rate to as low as 15%.

While that may be great news for most industries, for the LIHTC industry, which raises equity from investors that acquire tax benefits, the potential tax rate reduction has created great uncertainty, and consequently, has slowed investment activity significantly. This article explores the question “How might the LIHTC
industry continue to operate efficiently in a low tax rate environment?”

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