President Biden recently released his proposed fiscal year (FY) 2023 budget, which includes provisions to make the New Markets Tax Credit (NMTC) program permanent. Currently, the NMTC program is in place through 2025 with $5 billion per year in allocation. Under the President’s proposal, the NMTC program would become permanent in 2026, with annual adjustments for inflation after 2026. The estimated costs of the NMTC proposal would be $5.46 billion from 2023 to 2032.
The proposed budget does not include an explicit request to allow the NMTC to offset alternative minimum tax (AMT) liability. However, the New Markets Tax Credit Extension Act (H.R. 1321/S. 456) and the September 2021 House Ways and Means version of the Build Back Better Act would allow this offset.
Additionally, the proposed budget includes an increase of $6.2 billion for the U.S. Department of Housing and Urban Development (HUD) over FY 2022, for $71.9 billion for FY 2023. Likewise, the proposed budget includes an increase of $25 million for the Community Development Financial Institutions (CDFI) Fund to $331 million for FY 2023.
The proposed budget contains a $7.9 billion low-income housing tax credit (LIHTC) proposal. This program would allow allocating agencies to give nongeographic selective basis boosts for bond-financed affordable housing properties if required to make them financially feasible. The 4% LIHTC pairing only would be available for new construction or substantial rehabilitation that adds new net units to the property. This proposal is modeled after the state discretionary basis boost proposal in the Affordable Housing Credit Improvement Act.
Next Steps in the FY 2023 Budget Process
The typical next step in the budget process would be for Congress to consider an FY 2023 budget resolution. However, during an election year, Congress often delays budgetary proceedings so that vulnerable members do not need to vote on certain amendments to the budget. Bipartisan members of the Senate Appropriations Committee have vowed to work toward negotiating an FY 2023 discretionary budget amount to facilitate the drafting of the 12 yearly spending bills. However, whether they can reach a deal is uncertain.
As a result, it is unlikely that Congress will enact all 12 of the annual spending bills before FY 2023 starts on October 1, 2022. Instead, Congress will likely pass a continuing resolution to fund the government past September 30, 2022, into a post-election lame-duck session.
Call Savage & Associates Today
If you want to find out more information about NMTCS and similar opportunities available to you, call our offices at 215.880.9441 in Philadelphia or 202.817.3941 in Washington D.C. and schedule a time to speak with us today. You also can find Savage & Associates online 24 hours a day, seven days a week, to learn more about the extensive range of services that we can offer you. Dionne Savage is here to help you access the benefits of economic development tools such as New Markets Tax Credits, Low-Income Housing Tax Credits, C-PACE, and Historic Tax Credits. These programs can give you the resources to revitalize and build up communities across the United States. With our legal advice and your ideas, we can work to achieve the dreams that you have for your community.