Low-Income Housing Tax Credit Elimination Act
- Bill Number
- H.R. 3540
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-05-21: Referred to the House Committee on Ways and Means.
- Last Updated
- 2025-06-06T20:51:16Z
AI-Generated Summary
Purpose
The legislation, titled the "Low-Income Housing Tax Credit Elimination Act," aims to end the Low-Income Housing Tax Credit (LIHTC) program under the U.S. tax code. The LIHTC is a federal incentive that provides tax credits to developers and investors who build or rehabilitate affordable rental housing for low-income households, helping to increase the supply of such housing.
Key Provisions
- Sunset Clause: Adds a new subsection (o) to Section 42 of the Internal Revenue Code of 1986, stating that no tax credits will be available for any building placed in service (i.e., ready for occupancy) in a taxable year beginning after the date of enactment.
- The change applies prospectively, meaning existing credits for projects already underway or completed before enactment remain unaffected.
Significant Changes to Existing Law
- This bill terminates the LIHTC program entirely after enactment, eliminating a key tool established in 1986 (and expanded over time) to promote affordable housing through private investment.
- Previously, the program allocated about $12-14 billion in annual tax credits nationwide, distributed by state housing agencies to qualified projects. The sunset removes this ongoing mechanism without replacing it.
Potential Impacts
- On Government Agencies: State and local housing agencies that administer LIHTC allocations will lose a major funding stream, potentially requiring them to seek alternative ways to support affordable housing initiatives. The federal government may see reduced forgone tax revenue (estimated at billions annually) but could face increased pressure for direct spending on housing programs.
- On Citizens: Low-income renters may experience reduced availability of affordable housing units, as developers lose the financial incentive to prioritize such projects. This could exacerbate housing shortages and higher rents in urban and rural areas. Higher-income taxpayers might benefit indirectly from lower overall tax expenditures.
- On International Relations: No direct impacts, as the bill focuses on domestic tax policy.
Main Stakeholders Affected
- Housing Developers and Investors: Lose access to tax credits, potentially making low-income housing projects less financially viable and shifting focus to market-rate developments.
- Low-Income Households: Primary beneficiaries of LIHTC projects; they may face barriers to affordable rentals, affecting millions who rely on subsidized housing.
- State Housing Finance Agencies: Responsible for allocating credits; they will need to adapt programs or advocate for new federal support.
- Taxpayers and the Real Estate Industry: Broader effects on tax policy and housing markets, with potential ripple effects on property values and economic development in underserved communities.
Notable Legal, Constitutional, or Political Implications
- Legal: The amendment is a straightforward change to the tax code, requiring no new regulations beyond IRS implementation. It does not retroactively revoke existing credits, avoiding potential takings claims under the Fifth Amendment (which protects against uncompensated government seizure of property).
- Constitutional: No apparent challenges, as Congress has broad authority over tax policy under Article I. However, it could invite lawsuits if seen as undermining commitments in existing affordable housing contracts.
- Political: Likely to spark debate on federal housing priorities, with supporters viewing it as reducing inefficient tax subsidies and opponents arguing it harms vulnerable populations. As an introduced bill (H.R. 3540, 119th Congress), it faces hurdles in committee (Ways and Means) and requires bipartisan support for passage, especially amid ongoing affordable housing crises.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (1)
Recent Actions
- 2025-05-21: Referred to the House Committee on Ways and Means.
- 2025-05-21: Introduced in House
- 2025-05-21: Introduced in House
Bill Versions
- Low-Income Housing Tax Credit Elimination Act — issued 2025-05-21 — PDF (2 pages)