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Regional Impacts of
Tax Reform Act Analyzed
President Trump signed the Tax Cuts and Jobs Act (HR 1) into law on December 22 - less than two months after the House Ways and Means Committee released its initial tax reform proposal. The Northeast-Midwest Institute has been monitoring the progress of this legislation, in particular tax-code related provisions that northeast-midwest states and communities leverage as part of larger community and economic development strategies. The Northeast-Midwest
Institute
also held two briefings related to critical new markets and historic rehabilitation tax incentives on November 7.
Individual taxpayers in the region could be hurt by new provisions that limit deductibility of state and local tax (SALT) deductions, which will be capped at a $10,000 aggregate for property and income or sales taxes. This will make it potentially more difficult for northeast-midwest states (which don't have the option of energy severance and similar types of revenues) and their communities to raise revenues to meet infrastructure, education, and other basic needs. In addition, the mortgage interest deduction would be capped at $750,000. This limit could potentially undermine home sales markets in high cost-of-living communities like those in New York, New Jersey, Maryland, Connecticut, and other states.
In general, economic development incentives commonly used by northeast-midwest states and communities, threatened during the bill drafting process, emerged relatively unscathed:
- Private activity bond interest exemption retained - continued availability of tax-exempt bonds will allow the region to continue to support manufacturing, infrastructure, and other economic development investment.
- Historic rehabilitation 20% tax credits retained, but with reduced bottom-line value - credits will now have to be claimed over 5 years, rather than all in the year the restored property is put back into service. Nearly every state in the NE-MW region has its own historic tax credit program, many synchronized with the federal tax code. The impact of this change in state credit time frames has yet to be determined.
- Non-historic rehabilitation tax credits (10%, for pre-1936 buildings) repealed - eliminating a lesser used tool which has been used to help finance numerous revitalization projects in older cities and towns, often for small economic development projects.
- New Markets Tax Credits (previously authorized in 2018 and 2019 rounds) retained - which will channel $10.5 billion in private investment dollars to low-income, economically distressed areas nationally, usually for job generating real estate and business development projects.
- Investing in Opportunity Zones newly authorized - new incentive to invest capital gains in new or existing businesses in state-designated "opportunity zones" in low-income communities.
- Low-income housing tax credits retained - with no changes, critical to affordable housing development in the region (although the lower corporate tax rate will make these credits less attractive to investors).
- Renewable energy investment tax credits, production tax credits retained - with existing phase downs (after 2019 for ITC, after 2016 for PTC) retained.
For more information, please contact
Charlie Bartsch, Visiting
Senior Fellow at the Northeast Midwest
Institute
.
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Great Lakes Lawmakers Support Formation of Canadian "GLRI" Type Program
A bipartisan and bicameral letter, led by Canada-United States Inter-Parliamentary Group Co-Chairs Senator Amy Klobuchar (MN) and Representative Bill Huizenga (MI), was sent last week to Canadian Environment Minister Catherine McKenna in support of the process to create a similar Great Lakes Restoration Initiative (GLRI) in Canada. A copy of the letter can be viewed
here.
The letter urges consideration of the current efforts of the
Great Lakes Collaborative
asking the Canadian government to endorse and finance an 18-month consultative process to develop a plan to preserve Canada's freshwater. The proposed process is very similar to how the GLRI was developed starting with the creation of the Great Lakes Regional Collaboration (GLRC) in 2004. The Collaborative held Parliament Hill Days over the week of Thanksgiving where they met with Canadian Environment Minister Catherine McKenna.
For more information, please contact
Matthew McKenna
, Director of the Great Lakes Washington Program at the Northeast-Midwest Institute.
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This Week on Capitol Hill
The House returns to session today.
With eleven days left before current stop-gap funding expires on January 19, House and Senate leadership are negotiating a long-term spending bill. Other issues, such as the President's proposed border wall, DACA, spending caps, and disaster relief, have been folded into the negotiations. However, if they are unable to reach a deal it is expected that they will pass another short-term continuing resolution.
As negotiations continue, the Senate will be considering nominations on the floor, most of them judicial.
The House will consider reauthorizing the Foreign Intelligence Surveillance Act (FISA), which also expires on January 19.
House Budget Committee Chairman Representative Pat Tiberi (R-OH) and House Ways and Means Committee Chairwoman Representative Diane Black (R-TN) will be vacating their committee leadership positions this year. A House Republican Steering Committee will meet Tuesday to decide on their successors.
A full list of key Congressional committee activity that impacts the region can be viewed below:
Wednesday, January 10
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NEMWI: Strengthening the Region that Sustains the Nation
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