[Congressional Record Volume 146, Number 154 (Thursday, December 14, 2000)]
[Senate]
[Page S11776]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   THE LOW INCOME HOUSING TAX CREDIT

  Mr. KENNEDY. Mr. President, one of the most significant bipartisan 
achievements by Congress and the Clinton Administration is the increase 
in the Low Income Housing Tax Credit that we should enact this week. 
However, I am concerned that the Internal Revenue Service is taking a 
position in audits that may undermine the goal of the credit.
  Last month, the IRS issued a series of five technical advice 
memoranda, TAM, on the credit, in response to questions about an audit 
of a low-income housing developer earlier this year. The memoranda 
described what may be included in the basis of a property to calculate 
the amount of the credit that a state can allocate for a development.
  The memoranda were requested and issued because no regulations 
currently exist to clearly define the eligible basis for determining 
the credit. In the absence of regulations, this highly technical advice 
is all that taxpayers have available, but these specific instructions 
for a single taxpayer should not necessarily be the final word on the 
wide variety of developments across the nation. Regulations would be 
much clearer and would be fully developed by the Treasury Department.
  A further issue is that the memoranda are inconsistent with current 
industry practice. The positions taken in the memoranda could lower the 
eligible basis by over 15 percent, reducing available credits for a 
project. I am concerned that such a sharp reduction in the credit would 
mean that many planned developments for affordable housing will no 
longer be economically feasible, and will force developers to decide 
against building affordable units. It is also possible that this 
reduction in available credits for projects could be applied 
retroactively--nullifying credits that have already been allocated and 
destroying confidence in this important program that Congress worked so 
hard to establish.
  Since States are allocated a fixed number of credits based on 
population, the memoranda do not save the Treasury any revenues. They 
simply limit the amount of credits available per project, making 
individual projects less attractive to developers. The result is fewer 
affordable housing units at a time when housing prices have soared in 
many communities across the country.
  I am also concerned about the lack of opportunity for public comment 
on this issue. Preparing regulations requires comment, but issuing such 
memoranda does not. Many constituents--tenants as well as developers--
have strong concerns about the credit, and they should have the 
opportunity to express those concerns adequately. Developers and 
housing advocates can provide valuable information on the application 
of these credits, and their views should be taken into consideration.
  With the growing regional and national economy, housing prices are 
increasing faster in Massachusetts than any other state. Many studies 
have shown that we must increase production in new affordable housing 
units throughout the state to meet the overwhelming demand for 
affordable housing. We must do all we can to see that the low income 
housing tax credit is used effectively to meet this pressing need.
  I urge the Treasury Department to begin the process of developing 
appropriate regulations on this important issue, including 
opportunities for detailed public comments.

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