ATR today released a letter in opposition to Section 303 of S. 1703/H.R.3077, the “Affordable Housing Credit Improvement Act”, legislation introduced by Senator Maria Cantwell (D-Wash) and Congresswoman Susan DelBene (D-Wash).

If implemented, Section 303 would upend the low-income housing tax credit (LIHTC) by retroactively substituting a general partner’s defensive right of first refusal (ROFR) to purchase property from a limited partner who wishes to sell the property with an affirmative option to force the limited partner to sell the property at a below market price. 

Section 303 violates the longstanding principle that tax legislation should be imposed prospectively, not retroactively. Taxpayers routinely make decisions based on their reasonable interpretation of the law as it exists at the time, with the expectation that the law will be applied consistently and in a way that promotes certainty.

This change would undermine the certainty understood at the time of the LIHTC investment, particularly because a below market option flies in the face of longstanding tax principles relating to property ownership.

This provision also raises alarming constitutional questions. An analysis by the Federalist Society review concluded that the retroactive nature Section 303 would directly impact vested rights and contractual obligations, a blatant violation of the Due Process Clause. The below market option created by Section 303 could also violate the Takings Clause, exposing taxpayers and government to liability for monetary damages.

Moving forward, lawmakers should reject this proposal – regardless of whether it is considered as stand-alone legislation, within the Affordable Housing Credit Improvement Act, or as part of a broader package of legislation. 

You can view the full letter here.