Committee advances bill to exclude low-income housing tax credits from property valuations after contentious debate

Representative Chairman Hazen introduced House Bill 0753 on April 15, telling the State and Local Government Committee that Tennessee has “over 900 active low-income housing projects and approximately 54,000 housing units” and saying developers concentrate projects in the state’s four largest cities. The bill and its amendment (drafting code 18145) would prevent valuing the federal low-income housing tax credit (LIHTC) portion of a project as taxable property, a change sponsors said will encourage developers to build in smaller and rural communities.

The debate centered on where projects would locate and whether the change would concentrate poverty. Representative Dixie said she feared the bill would “concentrate poverty in an area” and create “pockets of poverty,” and said enforcement of property standards has sometimes been weak in her district. Representative Rudd and others said the measure is designed to incentivize work-class housing in regions that currently see little LIHTC activity. Representative Butler and Rep. Brickin pressed on fiscal details and how the credits appear on developers’ balance sheets; Brickin noted a fiscal estimate that approximately $100,000 in property taxes statewide could be affected.

Members sparred over whether the proposal is necessary statewide or should be targeted to rural areas. Vice Chairman Rock and others moved to end debate (a motion for the previous question); an initial effort to cut off debate drew objections and one tally showed the motion failed, after which the committee sought legal clarification on whether a two-thirds vote was required to cut debate. The committee reopened discussion and heard additional exchanges before taking the final committee vote to advance the bill to Government Operations.

Representative Faison defended the bill’s intent, saying lawmakers should not “tax the incentive” because doing so discourages development in less-attractive markets. Representative Dixie reiterated concerns about siting and enforcement of standards in disadvantaged neighborhoods.

The committee vote to advance House Bill 0753 was 18 ayes and 4 nos; the measure now moves to the Government Operations committee for further consideration.

The record contains questions about the bill’s statewide fiscal impact and how implementation would be enforced at the local level. The committee did not adopt language in this session that restricts the change to rural counties only, and the sponsor said the LIHTC program’s 20-year affordability requirements and the 60% of area median income limit would remain in force under federal rules.

Next steps: House Bill 0753 will be scheduled for Government Operations committee consideration; no floor date was announced in the hearing.