Bass, Berry & Sims attorneys Michael Bradshaw and Justin Starling authored an article for Urban Land Institute (ULI) discussing how the One Big Beautiful Bill Act has impacted three existing federal tax incentive programs that support the development of affordable housing and investment in a wide variety of economic development projects in low-income communities.
The Low-Income Housing Tax Credits (LIHTC) program was revised by the One Big Beautiful Bill Act in two ways. It increased the allocated amount of 9% LIHTCs by 12%, and it reduced the amount of a project that must be financed with tax-exempt multifamily housing bonds to generate 4% LIHTCs from 50% to 25%.
The One Big Beautiful Bill Act has also made it so that developers, community development entities, and tax credit investors no longer have to rely on Congress to provide additional new markets tax credits (NMTC) allocation every year, which reduces uncertainty with the program. The One Big Beautiful Bill Act provides for ongoing and annual new markets tax credits allocation of $5 billion beginning in 2026.
The One Big Beautiful Bill Act also extended the Opportunity Zone program by removing the December 31, 2026 date for deferral of capital gains tax for Opportunity Zone investments made after December 31, 2026. For such investments, capital gains tax can be deferred for five years or the date the investment is sold, whichever is earlier. Investors can also still receive a permanent reduction of 10% of the amount of such capital gains if the Opportunity Zone investment is held for five years.
Michael and Justin emphasized, “All three of these federal tax incentives have aided in the development of countless economic development projects.”
The full article, “Enhancement of Economic Development Tools in the One Big Beautiful Bill Act,” was published by ULI on December 16 and is available online.