Congress Passes Midwest Flood Relief
Tax-Exempt Bonds, Increases in Federal Rehab and Low-Income Housing Tax Credits Provided for Midwestern States Affected by Floods
The 110th Congress passed a triumvirate of tax relief for Midwestern states affected by recent flooding as part of tax extenders package (HR 6049) that was attached to the massive financial bailout bill, the "Emergency Economic Stabilization Act of 2008" (HR 1424, PL 110-343). The new law was enacted on October 3, 2008 and provides the following tax relief.
Tax-Exempt Bonds. Provides Iowa, Arkansas, Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri and Wisconsin the authority to issue a special class of qualified private activity bonds, called Midwestern disaster area bonds, outside of the state volume caps. The maximum aggregate bond authority with respect to any state cannot exceed $1,000 times the portion of the state population which is located in a Midwestern disaster area. Midwestern disaster area bonds can be issued by States and municipalities. Bond proceeds can be used to pay for acquisition, construction, and renovation of nonresidential real property, qualified low income residential rental housing, and public utility property (e.g., gas, water, electric and telecommunication lines) located in the Midwestern disaster area. The current low-income housing targeting rules are relaxed so that more bond proceeds can be used to rebuild housing in the Midwestern disaster area. Interest payments on the bonds are not subject to the Alternative Minimum Tax (AMT). The authority to issue Midwestern disaster area bonds expires after December 31, 2010. In the case of project involving a private business use, either the person using the property suffered a loss in a trade or business attributable to severe storms, tornadoes or flooding or is a person designated by the Governor of the State as a person carrying on a trade or business replacing a trade or business with respect to which another person suffered such loss. In the case of a project relating to public utility property, the project must involve the repair or reconstruction of public utility property damaged by sever storms, tornados or flooding. The bonds can also be used to provide financing for mortgagors who suffered damages to their principal residences attributable to severe storms, tornadoes or flooding. The total estimated revenue loss of this proposal and the proposal for mortgage revenue bonds is $1.320 billion over ten years.
Increase in Rehabilitation Credits. For buildings that were damaged or destroyed inan applicable disaster, the rehabilitation credit is raised from 10 percent to 13 percentof qualified expenditures for any qualified rehabilitated building other than a certified historic structure, and the rehabilitation credit is raised from 20 percent to 26 percent of qualified expenditures for any certified historic structure. The estimated revenueloss of this proposal is $3 million over ten years.
Low Income Housing Tax Credits. Under current law, States receive allocations of low-income housing tax credits based on population. The proposal allows States to allocate volumes of additional housing credit amounts in years 2008, 2009, 2010 of $8 per person in the Midwestern disaster area measured by population data issued before the earliest applicable disaster date for Midwestern disaster areas within the applicable state. The total estimated revenue loss of this proposal and the proposal for representations regarding income eligibility is $2.203 billion over ten years.
