PostElection Update for the HAND Tax Exempt Bond

Post-Election Update for the HAND Tax Exempt Bond Seminar 1 Peter Lawrence Novogradac & Company LLP @novocopolicy January 31, 2017 www. novoco. com

Agenda Tax Reform LIHTC legislation & GAO LIHTC reports HUD Budget Better Way Poverty Agenda Housing Trust Fund/Capital Magnet Fund Advocacy January 31, 2017 www. novoco. com 2

$$ Military Spending Infrastructure 3 Tax Reform PRESIDENT ELECT DONALD TRUMP January 31, 2017 www. novoco. com

Repeal & Replace 4 Comprehensive Tax Reform January 31, 2017 CHAIRMAN SPEAKER KEVIN PAUL RYAN BRADY www. novoco. com

February Report ACA Repeal reconciliation bill to budget committee Treasury to employ measures to avoid breaching the limit Mar. 15 Debt ceiling suspension expires Jan. 31 Today Pushed to Aug/Sep Debt ceiling suspension expires Apr. 15 FY 18 budget resolution “due” Tax reform reconciliation instructions? Sep. 30 Fiscal year end Apr. 28 CR expires DEC JAN 2016 2017 FEB MAR APR MAY April 30 100 th Day January 31, 2017 JUNE June 18 150 th Day www. novoco. com JULY AUG August 8 200 th Day SEP OCT 5 NOV

House GOP Tax Reform Task Force • • January 31, 2017 Calls for top 20% corporate tax rate – No deduction for net interest expense, but immediate depreciation of new investments (excluding land) Top 33% individual tax rate, with 50% exclusion for capital gains and investment income Silent on LIHTC, NMTC, HTC and tax-exempt bonds Document does say that tax reform as proposed “generally will eliminate special-interest deductions and credits in favor of providing lower tax rates. ” Tax Reform Task Force describes the blueprint as “the beginning of our conversation about how to fix our broken tax code. ” Legislative language by the first quarter of 2017 W&M Republican tax reform retreat informal “vote” on retaining LIHTC in tax reform blueprint legislation www. novoco. com 6

www. novoco. com/blog 7 January 31, 2017 www. novoco. com

COMPREHENSIVE (business & indiv. ) Infrastructu re & Internation al OBSTACLES TO TAX REFORM Business tax reform January 31, 2017 www. novoco. com 8

Obstacles to Tax Reform • Many tax preferences in the Code have substantial Congressional support and key defenders, and well organized and funded advocacy efforts • Last substantial tax reform proposals from former Chairman Camp went nowhere as Members and Congressional leadership ran away • Border adjustability provision • The process will be lengthy • Questions as to process—Budget Reconciliation or regular order January 31, 2017 www. novoco. com 9

Affordable Housing Credit Improvement Act of 2016 10 January 31, 2017 Sen. Cantwell Sen. Hatch D-Washington R-Utah www. novoco. com

Affordable Housing Improvement Act of 2016 S. 3237 Additional Resources • Increases Housing Credit authority by 50 percent Sen. Cantwell D-Washington January 31, 2017 www. novoco. com 11

Affordable Housing Improvement Act of 2016 S. 3237 Strengthening the 4 Percent Credit/ Tax Exempt Bonds • Establishes the minimum 4 percent rate • Establishes a state-determined 30 percent basis boost for bond-financed properties Sen. Cantwell D-Washington January 31, 2017 www. novoco. com 12

Affordable Housing Improvement Act of 2016 S. 3237 Sen. Cantwell D-Washington January 31, 2017 Preservation of Existing Affordable Housing • Provides flexibility around existing tenant income eligibility when Credit is used to preserve affordable housing • Replaces the right of first refusal with a purchase option • Modifies the 10 -Year rule • Allows states to include relocation expenses in Credit-eligible expenditures www. novoco. com 13

Affordable Housing Improvement Act of 2016 S. 3237 Sen. Cantwell D-Washington January 31, 2017 Facilitates Development for Hard-to-Reach Populations and in Challenging Markets • Gives states the flexibility to provide up to 50 percent basis boost for ELI households • Permits income-averaging within Housing Credit properties • Encourages development in Native American communities • Standardizes income eligibility for rural properties • Repeals the QCT population cap www. novoco. com 14

Affordable Housing Improvement Act of 2016 S. 3237 Sen. Cantwell D-Washington January 31, 2017 New Flexibility and Streamlining Program Requirements • Simplifies the Housing Credit student rule • Gives states the flexibility to determine a reasonable replacement period after a casualty loss • Specifies that states have the authority to define “concerted community revitalization plans” www. novoco. com 15

Affordable Housing Improvement Act of 2016 S. 3237 Sen. Cantwell Other Policy Changes • Addresses Fair Housing concerns • Renames the program • Conserves affordable housing resources (Section 8 overhang) • Promotes energy efficiency D-Washington January 31, 2017 www. novoco. com 16

Government Accountability Office (GAO) Housing Credit Reports #1 January 31, 2017 #2 #3 #4 Late Feb. /Early March First Quarter 2018? Investors & Syndicators Cost www. novoco. com 17

HUD Budget Note: amounts in Millions President’s Senate FY House FY FY 2017 THUD Proposed Bill $19, 628 $20, 854 $20, 431 $20, 189 FY 2015 FY 2016 Enacted Housing Choice Voucher $19, 304 Project Based Section 8 $9, 730 $10, 620 $10, 816 $10, 901 Public Housing Operating Fund $4, 440 $4, 500 $4, 569 $4, 675 $4, 500 Public Housing Capital Fund $1, 875 $1, 900 $1, 865 $1, 925 $1, 900 Section 202 $420 $433 $505 Section 811 $134 $150 $154 HOPWA $330 $335 CDBG $3, 000 $2, 800 $3, 000 HOME $900 $950 Homeless Assistance $2, 135 $2, 250 $2, 664 $2, 330 $2, 487 Choice Neighborhood Initiative $80 $125 $200 $80 $100 $45, 372 $46, 978 $48, 911 $48, 434 $47, 955 Overall January 31, 2017 www. novoco. com 18

Outlook of Federal Funding for HUD FY 2018 • • Trump expected to release budget in May Bipartisan Budget Act of 2015 set to expire this year – sequestration returns HUD’s project-based & tenant-based rental assistance program – 3 -4% increase per year Parity as a policy – Set to change – caps to be lifted for spending on defense programs – Cutting non-defense spending by additional 1% each year over the next 10 years • • We need to educate Members of Congress about the potentially devastating impacts of cutting domestic programs & urge them to raise the spending caps & maintain parity between defense & non-defense programs We need to urge Congress not to short-fund PBRA, and to oppose cuts to vouchers, HOME & CDBG January 31, 2017 www. novoco. com 19

Potential Impact of the Ryan Poverty Plan on Housing • Calls for aligning federal housing programs with Temporary Assistance for Needy Families (TANF) – Additionally, time limits and work requirements • Our immediate concerns: – 56% of residents are elderly or disabled – Only 25% of eligible Americans are currently being served – risks for further cuts in assistance January 31, 2017 www. novoco. com 20

Housing Trust Fund 2016 State Housing Trust Fund Allocations Top 10 State HTF Allocations Housing Trust Fund Capital Magnet Fund $174 M $93 M HUD/Treasury Reported Amounts California New York Texas Florida Illinois Pennsylvania Ohio New Jersey Michigan Massachusetts 2016 January 31, 2017 www. novoco. com $10, 128, 143 $7, 013, 963 $4, 778, 364 $4, 598, 821 $4, 302, 012 $3, 862, 285 $3, 740, 578 $3, 733, 566 $3, 522, 622 $3, 419, 569 21

With Diversion Housing Trust Fund Preliminary 2017 estimate using 1 st, 2 nd and 3 rd quarter of 2016 10 -Q filings from Fannie/Freddie Housing Trust Fund Capital Magnet Fund $183 M $98 M Preliminary Estimate Top 10 State HTF Allocation Estimates California New York Texas Florida Illinois Pennsylvania Ohio New Jersey Michigan Massachusetts 2017 January 31, 2017 www. novoco. com $11, 166, 661 $7, 939, 376 $5, 264, 187 $5, 060, 640 $4, 779, 210 $4, 282, 574 $4, 163, 824 $4, 067, 448 $3, 877, 193 $3, 789, 231 22

Housing Trust Fund Mel Watt Federal Housing Finance Agency Director • Watt announced his intention to remain FHFA Director until end of his term (Jan. 2019) • Unless, of course, Congress reforms FHFA to be a commission structure rather than single director • If Watt leaves, status of HTC and CMF would be uncertain • New appointee could decide to suspend GSE contributions 2018 January 31, 2017 www. novoco. com 23

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Post-Election Update for the HAND Tax Exempt Bond Seminar 30 Peter Lawrence Novogradac & Company LLP @novocopolicy January 31, 2017 www. novoco. com