DRIVE TO RAISE TAX CREDIT CAP WILL BE RENEWED Advocates of the low-income housing tax credit will renew their drive to expand the program this year, and a key legislator has already introduced a bill to raise the volume cap.

Currently, states can issue $1.25 in annual tax credits for each person, a limit that has remained unchanged since the program was created in 1986. Legislation to raise the per capita cap by 40 percent, to $1.75, and index it for inflation died in the 105th Congress. The Clinton Administration backed the one-time increase, but opposed indexation.

With the new Congress now in session, Rep. Nancy Johnson (R- Conn.), a senior member of the House Ways and Means Committee, has introduced a new bill to raise the cap, the aptly numbered H.R. 175.

Johnson's bill would raise the cap to $1.75 in calendar 2000 and index it for inflation beginning in 2001. Inflation adjustments would be based on increases in the Consumer Price Index (CPI) from 1999, rounded down to the next lower nickel. In other words, the cap wouldn't be raised until cumulative CPI increases would support a five-cent boost.

Johnson held hearings on the tax credit in the last Congress as chair of the Ways and Means Committee's Oversight Subcommittee. Though she has given up that position to head the Human Resources Subcommittee, Johnson remains an influential voice in tax credit legislation. In addition, 18 other members of the Ways and Means Committee are original co-sponsors of her bill, including Rep. Charles Rangel (D-N.Y.), the panel's ranking Democrat.

With the popular tax credits in great demand, there is strong support in Congress for raising the cap. As always, however, the fate of any particular tax proposal depends on how it fits into the framework of a larger tax bill,where various political and economic goals often come into conflict.

The Republicans, for example, have vowed to push for a major across-the-board tax cut this year, while President Clinton and the Democrats generally support more limited, targeted cuts.

Whether either plan can accommodate an increase in the credit cap remains to be seen.

IRS PROPOSES TAX CREDIT RULES ON FINANCIAL INFO In another development related to the low-income housing tax credit, the Internal Revenue Service has proposed regulations covering a number of program issues, including verification of financial information submitted to credit agencies by project developers.

Under the tax credit statute, in order to assure that the credits allocated to projects don't exceed the amount needed to assure their financial feasibility, agencies must consider the sources and uses of funds, proceeds to be generated through the syndication of the tax credits and the reasonableness of developmental and operational costs.

The proposed regulations would require developers to certify all sources and uses of funds, including any federal, state or local subsidies. Development cost information would have to include site acquisition costs, syndication and developer's fees, other fees, taxes, and auditing and accounting costs. The certification would have to be sufficiently detailed to enable an agency to analyze the total financing package.

Financial determinations would have to be made when a credit application is submitted, when the credits are allocated, when a project is placed in service and before the agency issues the credit allocation certification on Form 8609.

In order for an agency to make its final determination and issue Form 8609, the developer would have to obtain an opinion from a certified public accountant based on the developer's financial certifications, the syndication proceeds and the portion of the tax credits used for project costs other than the costs of intermediaries.

HUD DELAYS REPORTING DATE UNDER NEW RULES The U.S. Department of Housing and Urban Development (HUD) has delayed the first reporting date under its new uniform financial reporting standards rules for owners of projects with HUD financing or assistance.

The regulations require owners to submit financial information to HUD electronically. In addition, the information must be prepared in accordance with generally accepted accounting principles (GAAP). Generally, reports must be submitted within 60 days after the close of the owner's fiscal year.

HUD initially set an April 30, 1999, reporting date for owners with fiscal years ending on December 31, 1998, but because of the proximity of the federal income tax filing deadline, the department pushed the reporting date back to June 30.

The delay applies only to the December 31, 1998, fiscal year. The 60-day reporting deadline will apply to subsequent fiscal years ending on December 31.

With a national population of about 271 million, a 40 percent increase in the low-income housing tax credit cap would raise the annual credit allocation by about $135 million.