STAND. COM. REP. NO. 3628

Honolulu, Hawaii

RE: H.B. No. 2527

H.D. 1

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2020

State of Hawaii

Sir:

Your Committee on Housing, to which was referred H.B. No. 2527, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE LOW-INCOME HOUSING TAX CREDIT,"

begs leave to report as follows:

The purpose and intent of this measure is to amend the State Low-Income Housing Tax Credit to increase the amount of equity generated by the sale of the Low-Income Housing Tax Credit for affordable rental housing developments.

Your Committee received testimony in support of this measure from the Hawaii Housing Finance and Development Corporation; Faith Action; Hunt Companies, Inc.; and Hawai‘i Appleseed Center for Law & Economic Justice. Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

Your Committee finds that under existing law, the relatively small pool of investors lowers the demand for the State Low-Income Housing Tax Credits, and, in turn limits the equity that can be generated for affordable rental housing projects through the sale of the State Low-Income Housing Tax Credits. By making the at-risk and passive activity loss limitation rules inapplicable to State Low-Income Housing Tax Credits investors, this measure would expand the pool of Hawaii taxpayers that can invest in State Low-Income Housing Tax Credits and increase its pricing, thereby generating more equity toward affordable rental housing projects. Your Committee further finds that provisions in the original version of this measure that were intended to prevent abuse and unintended revenue losses for the State were deleted in this House Draft. Your Committee further finds that buildings placed in service this year could still sell State Low-Income Housing Tax Credits because the credit is taken over a five year period. Finally, your Committee notes that the Low-Income Housing Tax Credits should not expire on December 31, 2021, as contemplated by Act 129, Session Laws, 2016.

Accordingly, your Committee has amended this measure by:

(1) Inserting a provision that removes the credit for investments in a building if that building ceases to be a qualified low-income building;

(2) Making the new rules applicable to buildings placed in service after December 31, 2019;

(3) Extending the Low-Income Housing Tax Credits for six years;

(4) Making it effective upon its approval; and

(5) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

As affirmed by the record of votes of the members of your Committee on Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2527, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2527, H.D. 1, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Housing,

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STANLEY CHANG, Chair