HB3540, titled the Low-Income Housing Tax Credit Elimination Act, would amend the Internal Revenue Code to end the federal low-income housing tax credit for future projects. Specifically, the bill adds a sunset provision to Section 42 of the tax code so that no credit may be claimed for buildings placed in service in taxable years beginning after enactment. In practical terms, the measure would stop the creation of new LIHTC-supported developments after the bill becomes law, while not expressly changing credits already determined under prior law.
The bill’s effect would be to alter federal tax policy governing affordable housing finance by removing one of the primary incentives used to support construction and rehabilitation of low-income rental housing. Because the low-income housing tax credit is widely used by developers, investors, state housing agencies, and local governments to finance affordable units, the bill would likely reduce future availability of this financing tool and could affect state-administered housing credit allocation programs that rely on the federal credit structure.
Impact
HB3540 would amend Section 42 of the Internal Revenue Code of 1986 to prohibit new low-income housing tax credits for buildings placed in service after the enactment date, effectively terminating the LIHTC program for future projects. This would directly affect developers, investors, state housing finance agencies, and affordable housing providers that use the credit to finance construction and rehabilitation of rental housing. The bill would not appear to retroactively revoke credits already earned or allocated under existing law, but it would prevent new projects from qualifying going forward.
Sentiment
The available record shows no committee transcript and no recorded votes, so there is no formal evidence of broader legislative sentiment from debate or roll call. Based on the bill text and its title, the measure appears to be a targeted effort to eliminate a long-standing federal affordable housing subsidy, which would likely draw strong opposition from housing advocates and supportive interest groups, while appealing to lawmakers seeking to reduce or repeal tax expenditures. The referral to the House Committee on Ways and Means indicates the bill was at an early stage and had not yet advanced to substantive consideration.
Contention
The central point of contention is whether the federal government should continue using the low-income housing tax credit to encourage affordable housing development. Supporters of the credit would likely argue that it is a key financing mechanism for producing and preserving affordable rental units, while opponents may view it as an inefficient tax subsidy or a federal intervention that should be ended. The bill does not include any replacement policy, so another likely concern is that eliminating the credit without an alternative could reduce affordable housing production and strain state and local housing programs that depend on LIHTC financing.
An act to amend Section 50205 of the Health and Safety Code, and to amend Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.