Affordable Housing Credit Carryback Act
- Sponsor
- Rep. Carey, Mike [R-OH-15]
- Committees
- Ways and Means Committee (primary)
- Last action
- May 22, 2026
Bottom line
The bill extends a 5-year tax credit carryback period to the Low-Income Housing Tax Credit, aiming to enhance financial stability and incentivize affordable housing development.
What it actually does
This bill amends the Internal Revenue Code of 1986 to allow unused low-income housing tax credits (LIHTC) to be carried back for five years. Currently, only the marginal oil and gas well production credit has a 5-year carryback period, while most other business credits have a 1-year carryback. This change provides greater financial flexibility for developers of affordable housing projects by allowing them to apply current year unused credits to reduce tax liabilities in previous years.
Proponents argue
Supporters argue that allowing a 5-year carryback for the LIHTC will significantly improve the financial viability and attractiveness of affordable housing projects. This flexibility provides developers with greater certainty, especially during economic downturns or project delays, making it easier to secure financing and accelerate the creation of much-needed affordable housing units. It aligns the LIHTC with other credits that have extended carryback periods, recognizing its critical role in public policy.
Opponents contend
Critics might contend that while the goal of affordable housing is laudable, extending tax credit carrybacks could lead to increased federal revenue loss without a guaranteed proportional increase in new housing units. They may argue that such a change primarily benefits developers and investors by reducing their tax burden, potentially subsidizing projects that would have proceeded anyway, rather than stimulating truly additional affordable housing. There could also be concerns about the administrative complexity for the IRS in processing these carrybacks.
The bill is exceptionally short and clear, making it very accessible for any reader to understand its core purpose and provisions quickly.
Section 2(a)
5-Year Carryback for Low-Income Housing Tax Credit
This provision amends Section 39(a)(3) of the Internal Revenue Code of 1986. It adds the low-income housing tax credit (LIHTC) to the list of credits that can be carried back for five years to offset tax liabilities in prior taxable years. Previously, only the marginal oil and gas well production credit had this extended carryback period, while the LIHTC typically followed the general business credit rules allowing a 1-year carryback and 20-year carryforward.
Supporters argue
Supporters argue that this provision is a common-sense change that provides essential financial tools to the affordable housing sector. It helps developers manage cash flow and mitigate risks, which are critical for complex, long-term projects like affordable housing. By making LIHTC more robust, it directly supports the national goal of increasing affordable housing stock.
Critics contend
Opponents might argue that while the intent is good, the actual impact on increasing housing supply might be marginal compared to the cost in lost tax revenue. They may suggest that this primarily serves as a subsidy to developers and investors, and that more direct or targeted funding mechanisms might be more efficient in addressing housing shortages. Furthermore, it could add administrative burden to the IRS.
Tradeoffs
The provision balances the desire to stimulate affordable housing development through tax incentives against the potential cost to federal tax revenue. It also involves a tension between providing financial flexibility to developers and ensuring that such flexibility directly translates into tangible increases in housing units rather than simply improving project economics.