Affordable Housing Bond Enhancement Act
- Sponsor
- Rep. Yakym, Rudy [R-IN-2]
- Committees
- Ways and Means Committee (primary)
- Last action
- Feb 9, 2026
Bottom line
This bill aims to make it easier and more attractive for state and local authorities to issue tax-exempt bonds and provide tax credits to support affordable housing and home improvement, primarily by reducing administrative burdens and expanding eligibility.
What it actually does
H.R. 7414, the "Affordable Housing Bond Enhancement Act," amends the Internal Revenue Code of 1986 to expand the use and flexibility of mortgage revenue bonds (MRBs) and mortgage credit certificates (MCCs) for affordable housing. It introduces new reporting requirements for bond usage, allows greater flexibility in using carryforward bond authority, eliminates refinancing limitations for certain mortgagors, increases the financing limit for qualified home improvement loans with inflation adjustments, revises the recapture tax period for MRBs, modifies MCC credit calculations, extends the period MCCs are in effect, extends the period to revoke MCC elections, adjusts public notice requirements, and eliminates a lender reporting requirement.
Proponents argue
Proponents would argue that the bill will significantly boost affordable housing initiatives by making mortgage revenue bonds and mortgage credit certificates more accessible and efficient for state and local governments. They would highlight the reduced administrative burden, increased flexibility for bond usage, and expanded eligibility for home improvement loans as key measures to address housing shortages and improve housing stock, ultimately benefiting low and middle-income families.
Opponents contend
Critics might argue that while the intent is good, expanding tax-exempt bond authority and tax credits could lead to increased federal revenue loss without sufficient targeting to the most in-need populations. They might also raise concerns about the potential for abuse or inefficiency in the expanded programs, or that the changes might not be substantial enough to address the root causes of housing affordability issues, instead primarily benefiting developers or higher-income individuals who can access these programs.
The bill is relatively short and clearly structured, making it accessible for an informed reader to evaluate its provisions.
Sec. 2, amending IRC Sec. 146, 149(e), 6103(f)
Enhanced Reporting for Private Activity Bonds
This section requires the Secretary of the Treasury to submit an annual report to Congress detailing how states use their private activity bond volume cap, including carryforwards and bonds issued for various purposes. It also mandates electronic submission for issuer statements and allows the Secretary to disclose this information to relevant congressional committees.
Supporters argue
Supporters would argue this provision increases transparency and accountability in the use of private activity bonds, allowing Congress and the public to better understand how these tax-exempt financing tools are utilized for housing and other purposes.
Critics contend
Some might argue that additional reporting requirements could add administrative burden to state and local authorities, potentially deterring smaller entities from participating in these programs, without a clear benefit outweighing the cost.
Tradeoffs
Balances the desire for greater transparency and oversight with potential administrative burdens on state and local governments.
Sec. 3, amending IRC Sec. 146(f)
Increased Flexibility for Carryforward Bond Authority
This section significantly increases the flexibility for state and local issuing authorities to use carryforward private activity bond authority. It allows carryforwards to be transferred to other issuing authorities within the same state for qualified mortgage bonds or exempt facility bonds for qualified residential rental projects, and permits redesignation of carryforwards for these housing purposes. States can, by law, direct or limit these transfers/redesignations.
Sec. 4, amending IRC Sec. 143(i)(1)
Refinancing Exception for Mortgage Revenue Bonds
This section creates an exception to the general rule that mortgage revenue bonds cannot be used to refinance existing mortgages. It allows refinancing for mortgagors who meet the principal residence and income requirements at the time of refinancing. For these refinancings, the "new mortgage" requirement does not apply, and the acquisition cost is replaced with the market value of the residence for certain calculations.
Sec. 5, amending IRC Sec. 143(k)(4)
Increased Limit for Home Improvement Loans
This section significantly increases the maximum amount for qualified home improvement loans financed with mortgage revenue bonds from $15,000 to $75,000. It also introduces an annual inflation adjustment for this new $75,000 limit, starting after 2026, rounded to the nearest $100.
Sec. 6, amending IRC Sec. 143(m)(4)(C) and 143(m)(2)(B), (7)(B)(ii)
Reduced Recapture Period for Mortgage Revenue Bonds
This section shortens the period during which a recapture tax may apply to homeowners who sell their homes financed with mortgage revenue bonds. It reduces the maximum recapture period from 9 years to 5 years, with a revised holding period percentage table (20% per year up to 100% in year 5). It also specifies that if the subsidized indebtedness is fully repaid within the first 4 years, the recapture percentage for succeeding years becomes zero.
Sec. 7, amending IRC Sec. 25(a) and 25(d)
Flexible Mortgage Credit Certificate Rates
This section modifies how the mortgage credit certificate (MCC) tax credit is calculated. It removes the restriction that limited the credit calculation to 20% of the certified indebtedness amount if the certificate credit rate exceeded 20 percent. It also allows issuing authorities to specify a different annual certificate credit rate for each year of the mortgage term, within a new range of 1 percent to 5 percent.
Sec. 8, amending IRC Sec. 25(e)(3)(B)
Extended MCC Effectiveness Period
This section extends the period during which a mortgage credit certificate (MCC) can be in effect from the "second" calendar year to the "fourth" calendar year after the calendar year for which the nonissued bond amount is determined.
Sec. 9, amending IRC Sec. 25(c)(2)
Extended Period for MCC Election Revocation
This section allows an issuing authority to revoke an election to issue mortgage credit certificates (MCCs) and reduce the nonissued bond amount for a calendar year, provided the revocation is made by the end of the succeeding calendar year. This gives authorities more time to adjust their MCC allocations. However, it clarifies that this does not permit issuing bonds under carryforward rules after the prescribed period.
Sec. 10, amending IRC Sec. 25(e)(5)
Reduced Public Notice Period for MCCs
This section shortens the public notice requirement for mortgage credit certificates (MCCs) from 90 days to 30 days.
Sec. 11, amending IRC Sec. 25(g) and 6709(c)
Streamlined MCC Reporting
This section amends the reporting requirements for mortgage credit certificates (MCCs) by shifting the primary reporting responsibility from "each person who makes a loan which is a certified indebtedness amount" (i.e., the lender) to "each person who issues a mortgage credit certificate" (i.e., the issuing authority). It also strikes the second sentence of Section 25(g), which specifically detailed the lender's reporting duties.
This amendment explicitly includes "redesignates a carryforward under paragraph (4)(B)(ii) for any carryforward purpose" as a trigger for the 3-calendar-year period during which private activity bonds issued for that purpose are not taken into account under the volume cap.
Sec. 3(a)(1), amending IRC Sec. 146(f)(3)(A)
Why it matters:This is standard legislative practice for amending existing tax code sections, ensuring consistency and proper referencing.
Case for: Supporters would argue this ensures the new flexibility for redesignating carryforwards (as introduced in Sec. 3(b)) is properly integrated into the existing rules for how carryforwards are counted against the volume cap, preventing unintended consequences or loopholes.
Case against: No specific opposition is typically raised against technical conforming amendments that ensure the proper functioning of a new policy.
Estimated impact: Ensures the proper accounting and utilization of potentially billions of dollars in bond authority over time, by clarifying the rules for carryforward redesignation.
For the new refinancing exception, this clause specifies that subsection (d) (the "new mortgage" requirement) shall not apply, and subsection (e) (the "purchase price" requirement) shall be applied using the market value of the residence at the time of refinancing instead of the acquisition cost.
Sec. 4(a), amending IRC Sec. 143(i)(1)(D)(ii)
Why it matters:This is standard legislative practice for ensuring that a new exception correctly interacts with existing complex tax code provisions, preventing unintended side effects.
Case for: Supporters would argue these specific adjustments are crucial to make the refinancing exception workable and fair, ensuring that eligible homeowners can truly benefit from MRB refinancing without being constrained by rules designed for initial purchases.
Case against: No specific opposition is typically raised against technical adjustments that enable a new policy to function as intended.
Estimated impact: Enables the effective implementation of the refinancing exception, potentially impacting thousands of homeowners seeking to refinance.