Subcommittee advances bill to exclude federal housing tax credits from property valuations

A county subcommittee voted 4-2 Wednesday to advance House Bill 753, which would direct local property assessors not to include the value of federal low-income housing tax credits when determining a development's taxable value.

Chairman Faizon, the bill's sponsor, told the committee the change is intended to preserve incentives for developers to build and hold affordable housing units. "I'm just saying, you ought not tax the incentive that you've given somebody," Faizon said, arguing that federal credits are a necessary tool to induce developers to rent units at 60% of area median income for 20 years. Faizon added the bill is a correction to how some localities currently treat those federal credits and said he expects broader development and a larger tax base over time.

Representative Butler questioned the mechanics and potential consequences for banking and assessments, noting that tax credits are treated as assets and asking how excluding credit value from taxable valuation would affect market and lending perceptions. The question of whether the proposal would create a new local tax credit or simply exclude federal credits from valuation was clarified: the sponsor said the bill would not create an additional local credit but would remove the federal credit amount from the valuation basis.

Representative Dixie and others expressed concern about timing and whether upfront financial benefits could produce windfalls for developers over decades. Faizon said the bill includes a 20-year requirement to hold units and rent them at restricted levels and that the intent is to ensure long-term affordable housing stock rather than short-term developer profit.

Will Denami, testifying on behalf of assessors of property, opposed the bill during a permitted public comment. Denami noted a Court of Appeals decision in 2002 that, in his reading, treats such tax credits as part of real property for valuation and said assessors already have tools such as pilot authorizations. "There is a provision that allows for pilots," Denami said, adding that courts and existing valuation practice treat the credits as part of value.

After deliberation and a brief, previously filed amendment that moved a date from January 25 to July 26, the committee voted on the bill as amended. The clerk reported 4 ayes and 2 noes and the bill "moves next available calendar of state and local government." No further implementation steps or fiscal offsets were specified in the hearing record.

The committee adjourned to the call of the chair after advancing the bill. The measure will appear on the next available state and local government calendar for further consideration by the full body.