Fiscal cliff negotiations went down to the wire, but the final deal brokered between Democrats and Republicans included extensions to several transit and housing tax programs.
Late on January 1, Congress agreed on a tax package, the American Taxpayer Relief Act, which includes a few provisions critical to helping communities implement smart growth solutions.
First, the American Taxpayer Relief Act re-establishes parity between the parking and transit benefits at $240/month through 2013. Before passage of the legislation employers could offer their workers a pretax deduction for transit of up to $125/month. The benefit had been $230/month until the beginning of last year when a provision in the law expire and reset it to a lower level. Prior to passage of the American Taxpayer Relief Act, the benefit for parking costs had been more than for transit. The passage of the American Taxpayer Relief Act restores parity and allows commuters to deduct $240 for transit. Smart Growth America thanks Senator Schumer and Congressman McGovern for championing the effort to increase the transit benefit.
Additionally, the legislation includes an extension of the 9 percent Housing Credit floor for projects allocated by the end of 2013. This creates a fixed floor for new construction and substantial rehabilitation Housing Credits at no less than 9 percent. The American Taxpayer Relief Act extends this provision until the end of the year, removing the financial uncertainty and risk associated with underwriting Housing Credit-financed properties using a “floating rate” system. Smart Growth America thanks Senator Cantwell for her work to include the 9 percent floor in the Senate version of the bill.
Finally, the legislation extends the New Markets Tax Credit (NMTC) program, which has been successful in leveraging billions of dollars in private investment, creating thousands of jobs and reinvesting in the most distressed communities at a low cost to taxpayers. Through the use of the NMTC, many communities attract smart growth development, which in turns gives residents quick access to these commercial centers and lowers the infrastructure cost municipalities face when supporting new businesses. The legislation included two additional years of NMTC allocations at $3.5 billion annually.