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Great Lakes Capital Fund University of Affordable Housing Conference

Great Lakes Capital Fund University of Affordable Housing Conference. Who’s your Daddy or Mama: Advocacy and Government Relations 101. Frank A. Hoffman Krieg DeVault LLP 12800 North Meridian Street Suite 300 Carmel, Indiana 46032 Phone Number: 317-238-6240.

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Great Lakes Capital Fund University of Affordable Housing Conference

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  1. Great Lakes Capital Fund University of Affordable Housing Conference Who’s your Daddy or Mama: Advocacy and Government Relations 101 Frank A. Hoffman Krieg DeVault LLP 12800 North Meridian Street Suite 300 Carmel, Indiana 46032 Phone Number: 317-238-6240

  2. FOCUS: CURRENT FEDERAL LEGISLATION& AN EXAMPLE OF STATE LEGISLATION Federal Legislation – • Comprehensive Tax Reform – House Ways & Means Committee Chairman Dave Camp (R-MI) • Tax Extenders - Senate - Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act of 2014 (9% Floor Extension & 4% Fix) State Legislation – • Indiana 2012 Senate Bill No. 344 – Attempted to repeal the prohibition against using the value of federal income tax credits awarded under Section 42 Low-Income Housing Tax Credits for purposes of determining the assessed value of low income housing tax credit property.

  3. THE TAX REFORM ACT OF 1986THE END OF “TAX SHELTERS”THE BEGINNING OF THE SECTION 42 LOW-INCOME HOUSING TAX CREDIT Enacted October 22, 1986Almost 28 Years Ago

  4. Many view the TRA '86 as “the landmark tax reform legislation” in the last 50 years. Concerns over high tax rates and rampant tax shelter activity, united President Reagan, a majority of legislators and many in the public to enable extensive tax changes. What was the Impetus for the 1986 TRA and the Creation of the Section 42 LIHTC Program?

  5. Key to the 1986 TRA Routine After 6 pm Meetings At the end of a long day of political wrangling, President Reagan would often call Democratic Speaker of the House Tip O’Neill, and ask, “Hello, Tip, is it after six o’clock?” “Absolutely, Mr. President,” the Speaker would answer. "After six o’clock" meant work hours were over, and the two leaders of their respective parties could put away their swords and bring out their Irish whiskey and wit.

  6. Represented Michigan’s 4th congressional district since 1993. • As the head of the House Ways & Means Committee, Camp was one of the most influential policymakers in the U.S. House of Representatives. • Released a “Discussion Draft” of Comprehensive Tax Reform Bill on Feb. 26, 2014 after working on it for over 3 years. • Announced that he would not run for re-election in March, 2014. Federal Comprehensive Tax Reform – House Ways & Means Committee Chairman Dave Camp (R-MI)

  7. Michigan’s 4th District - GLCF’s backyard The 4th District includes 15 counties: Clare, Clinton, Gladwin, Gratiot, Isabella, Mecosta, Midland, Missaukee, Montcalm, Ogemaw, Osceola, Roscommon, Saginaw, Shiawassee, Wexford.

  8. Retired Senator Max Baucus - Camp’s Partner in the Comprehensive Tax Reform Over the last 3 years On February 6, 2014 he was confirmed as the U.S. Ambassador to China. As Chairman of the Senate Finance Committee, Baucus was one of the most influential members of the Senate Served as the Senator from Montana since 1978 Senator Ron Wyden (D-Ore) has replaced Baucus as Chairman of Senate Finance

  9. How would Camp’s House Comprehensive Tax Reform Discussion Draft Impact The Section 42 LIHTC? Camp’s “Discussion Draft” proposes to: • Limit the ability of state allocating agencies to best use the credit to produce affordable rental housing. • Repeal the 4% low-income housing tax credit. • Repeal the basis boost for qualified census tracts and difficult development areas. • Eliminate the national pool of unused low-income housing tax credits. • Extend the credit period to 15 years from 10 years which would: - Match the compliance period and eliminate the need for recapture rules. - Keep the floating rate for the 9% low-income housing tax credit. - Reduce annual percentage rate by 30% (the current 7.60 % rate claimed over 10 years would fall to 5.32 % a year for 15 years). - Increase total credits that a project receives by only 4% of qualified basis (total credits would rise from 76% of qualified basis to 80%).

  10. What does a National Advocacy Group Say About Camp’s Changes to Section 42? The Affordable Housing Tax Credit Coalition • “The Affordable Housing Tax Credit Coalition (AHTCC) commends House Ways and Means Chairman Camp's tax reform discussion draft for preserving the Low-Income Housing Tax Credit (Housing Credit) as the nation's most effective tool for efficiently producing affordable rental housing, spurring economic development and creating local jobs.” • “We also appreciate the Chairman’s invitation to provide feedback on this discussion draft. While we are delighted with the Chairman’s support for the Housing Credit, the draft has proposed some key changes that will in some instances make building and preserving affordable housing more difficult or impossible to accomplish. The industry will assess the impact of these proposals, about which we have concerns, and offer constructive comments

  11. Another National Advocacy Group…… AFFORDABLE RENTAL HOUSING - A.C.T.I.O.N. Campaign A Call To Invest in Our Neighborhoods • On behalf of nearly 650 national, state and local businesses and organizations dedicated to protecting and strengthening the Low-Income Housing Tax Credit (Housing Credit), the A Call To Invest in Our Neighborhoods (ACTION) Campaign commends House Ways and Means Chairman Dave Camp for preserving the Housing Credit in his tax reform discussion draft. • We appreciate the Chairman’s invitation to provide feedback on this discussion draft. While we are very pleased with the Chairman’s support for the Housing Credit, the draft has proposed some key changes that will in some instances make building and preserving affordable housing more difficult or impossible to accomplish. • In addition, we are deeply concerned that the discussion draft would eliminate the ability of states and localities to issue tax-exempt private activity bonds to finance affordable housing. Tax-exempt Housing Bonds support the financing of 40 percent of all Housing Credit development annually and are often essential to the preservation of affordable housing.

  12. Another National Advocacy Group…… Housing Advisory Group • The great news is that the Camp discussion draft preserves the LIHTC, one of the few tax credits to survive this reform exercise. When you take the proposal as a whole, the fact that the LIHTC is included is a testament to the amazing effort our entire industry undertook to promote the program. • While we cheer our inclusion in Chairman Camp's proposal, we are reviewing the additional modifications to the LIHTC that have been suggested. We understand these changes were intended as a means to simplify and strengthen the credit, but they will need careful review and a great deal of discussion within the industry to assess their full impact.We look forward to doing so, and to following up with staff and Members on Capitol Hill.

  13. What do the National Accounting Firms Say About Camp’s Changes to Section 42? Novogradac & Company • “In general, the affordable housing industry has applauded Rep. Camp’s retention of the low-income housing tax credit program, but it has also expressed serious reservations about the effect that the changes could have on affordable housing development.” • “Stakeholders are particularly concerned about the elimination of the 4 percent credit and the elimination of private activity bonds. Enterprise [and the ACTION Campaign], for example, noted that tax-exempt bonds finance about 40 percent of LIHTC developments and that without them the ability to develop and preserve affordable housing would be severely impeded.”

  14. Why the current push for Comprehensive tax Reform? Primary Reasons – Both claiming to be based upon Job Creation • Make the U.S. more attractive for Corporate Investment by reducing the Federal Corporate Income Tax Rate from 35% to 25%. To Learn more go to: https://www.uschamber.com/issue-brief/tax-reform • Simplify the Federal Tax Code. To learn more go to: http://www.heritage.org/research/reports/2011/11/true-tax-reform-improves-the-economy-does-not-raise-taxes

  15. What are the Current Dynamics of Tax Reform? Republicans want tax reform to be revenue neutral. Democrats want to increase tax revenues by imposing higher taxes on high income/high net worth individuals. To cut Corporate Income Tax Rates to 25% and be revenue neutral Congress has to: Dramatically reduce corporate income tax expenditures and other economic development tax expenditures which includes tax credits and tax-exempt bond interest. Cut the individual income tax rates to a level close to the same maximum tax rate as corporations to achieve a cohesive tax policy. Dramatically reduce individual tax expenditures (state tax deductions, mortgage interest deductions, retirement plan contribution deductions, health care insurance premium exclusions).

  16. How does 2014 Compare to 1986?

  17. What has been the General Reaction to Camp’s 2014 Tax Reform Proposal? Forbes March 10, 2014 If Camp's Tax Reform Bill Won't Pass, Why Is It So Important? By Martin Sullivan “The conventional wisdom is that House Ways and Means Committee Chair Dave Camp’s tax reform proposal (or anything like it) is not going anywhere soon.That conventional wisdom is correct. If anything, folks have been too optimistic. There is a 99.9 percent chance we won’t have major tax reform before 2017. There are two big reasons why.” “First, President Obama’s heart is not in it.” “Second, there is a fundamental irresolvable conflict between our two parties on how to proceed. Republicans insist that tax reform should be revenue neutral. Democrats insist that it should raise revenue.”

  18. What has been the General Reaction to Camp’s 2014 Tax Reform Proposal? MotherJones – March 17,2014 The Strange, Suicidal Odyssey of Dave Camp's Tax Reform Plan By Kevin Drum “A couple of weeks ago I wrote about Dave Camp's tax reform proposal, and I was predictably dismissive. It was a decent effort, I said, but it was DOA before Camp even officially announced it. Still, "I'll be interested in following the reaction as everyone figures out just whose ox would be gored by his various bullet points. Should be fun.” “In reality, I just forgot about it entirely. But it turns out that the biggest ox being gored by Camp's plan was Wall Street, which was very much not amused by his proposal to levy a small tax on large banks. They threatened to cancel all GOP fundraisers as long as the bank tax was on the table, and this was enough to bury Camp's proposal once and for all.

  19. What Next? Tax Extenders • On April 3, the Senate Finance Committee approved the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act of 2014, which would extend dozens of expired and expiring tax provisions. • The legislation passed by a voice vote which evidenced virtually unanimous bipartisan support. The next step for the bill is consideration by the full Senate, the timing of which is still up in the air. • Included provisions that extend the 9% floor for 9% allocations made before January 1, 2016 and establish a 4% floor for 4% bond projects placed in service after the date of enactment with respect to bond allocations made before January 1, 2016. • The inclusion of both provisions was the result of a bipartisan effortled by Senators Maria Cantwell (D-WA) and Pat Roberts (R-KS).

  20. The Continuation of a Dysfunctional Congress National Journal May 20, 2014 Tax Extenders Bill Remains Snagged Over Amendments By Michael Catani “Senate Finance Committee Chairman Ron Wyden is continuing to speak with Republicans about a list of possible amendments for the bipartisan tax-extenders package, but the prospects that Democratic leaders would bring the bill to the floor again soon look unlikely. Asked Tuesday whether lawmakers would get a package to the floor this month, Assistant Majority Leader Dick Durbin sounded pessimistic. "This month comes to a close with our departure on Thursday afternoon. So not likely," Durbin said. "It doesn't look like there's any time left for it.“ The committee's extenders package stalled on the floor last week when Republicans blocked Majority Leader Harry Reid's cloture motion to end debate. They cited Reid's repeated efforts to fill the amendment tree, thereby blocking them from offering amendments. Reid said he remains open to amendments, but rejected any measures that would touch the Affordable Care Act, like one offered last week by Republican Sen. Pat Toomey of Pennsylvania that would repeal the medical-device tax included in the law. "The Republicans can't get out of their head Obamacare," Reid said. "That's an Obamacare amendment. We're not going to do that. They can have as many amendments as practical to change the bill that's on the floor, and there's plenty of amendments that need to be offered on that. We have a lot on our side.“”

  21. Extenders in the House? House Ways and Means Committee is taking a different approach to its “Tax Extenders” in 2014 - Separate Bills Separate Votes To Permanently Extend Each Expiring Provision.

  22. Tax Extender Bills Approved by House Ways and Means Committee (April 29, 2014) HR 4429 - “To amend the Internal Revenue Code of 1986 to permanently extend the subpart F exemption for active financing income.” HR 4438 - “To amend the Internal Revenue Code of 1986 to simplify and make permanent the research credit.” HR 4453 - “To amend the Internal Revenue Code of 1986 to make permanent the reduced recognition period for built-in gains of S corporations.” HR 4454 - “To amend the Internal Revenue Code of 1986 to make permanent certain rules regarding basis adjustments to stock of S corporations making charitable contributions of property.” HR 4457 - “To amend the Internal Revenue Code of 1986 to permanently extend increased expensing limitations, and for other purposes.” HR4464 - “To amend the Internal Revenue Code of 1986 to make permanent the look-through treatment of payments between related controlled foreign corporations.”

  23. The Continuation of a Dysfunctional Congress • On May 9, 2014 the House of Representatives approved a bill making the research-and-development tax credit permanent in the face of a White House veto threat. • The White House earlier in the week said it supports extending the credit but that President Barack Obama would veto the Republican bill since it would add $156 billion to the deficit over 10 years. • The White House argued it should be paid for by eliminating other tax breaks. The Senate isn't expected to take up the permanent credit, since lawmakers in that chamber are pursuing a two-year renewal of expired tax breaks. The House vote was 274 to 131.

  24. Tax Extenders in the Lame Duck? With Tax Extenders being used by both parties as a “2014 Campaign Issue” unlikely to see progress on Tax Extenders until after November 2014. R’s Anti-Jobs Theme – “Democrats won’t permanently extend the R&D Tax Credit that creates thousand of new jobs every year.” D’s No Help for Those in Need Theme– “Republicans don’t demand offsets to pay for “corporate welfare” like the permanent extension of the R&D Tax Credit; but they do demand offsets to pay for the temporary extension of unemployment benefits.”

  25. Where should your Federal focus be? The House Ways and Means Committee – Subcommittee on Select Revenue Measures The jurisdiction of the Subcommittee on Select Revenue Measures shall consist of those revenue measures that, from time to time, shall be referred to it specifically by the Chairman of the full Committee. Source: "Manual of Rules of the Committee on Ways and Means for the One Hundred and Twelfth Congress"

  26. Who should we get to know on the Subcommittee? Subcommittee on Select Revenue Measures Rep. Pat Tiberi, OH, Chairman Rep. Erik Paulsen, MN Rep. Kenny Marchant, TX Rep. Jim Gerlach, PA Rep. Aaron Schock, IL Rep. Tom Reed, NY Rep. Todd Young, IN Rep. Richard E. Neal, MA, Ranking Member Rep. John Larson, CT Rep. Allyson Schwartz, PA Rep. Linda Sánchez, CA

  27. Should Could Replace House Ways & Means Chairman Camp? • It is anticipated that Paul Ryan • (R, WI 1st District) will replace Camp as House Ways & Means Chairman in 2015. • Wisconsin’s 1st District Congressional District covers southeastern Wisconsin, and includes Kenosha County, Racine County and most of Walworth County, as well as portions of Rock County, Waukesha County and Milwaukee County. • Another key tax reform player in GLCF’s backyard.

  28. Example of State Legislation Impacting Section 42 LIHTC In the 2012 Indiana Legislative Senate Bill (SB) 344 as originally proposed would significantly raise the property taxes for affordable housing developments using the Section 42 low-income housing tax credit (LIHTC). Bill (SB) 344 passed out of the Senate over to House containing language that expressly required local assessors to include the value of Section 42 LIHTC in determining the assessed value of Section 42 developments. This language repealed existing state law that prohibits inclusion of the value Section 42 LIHTCfor the purpose of determining assessed value. Repealing this provision would have dramatically increased the cost of providing affordable housing in Indiana and put low-income families at risk. The Affordable Housing Industry in Indiana was successful in removing the language from SB 344 and ultimately stopping this provision from becoming law. As a final hour compromise, HB1072 required the state tax and financing policy commission to study the “topic of whether the value of tax credits under Section 42 of the Internal Revenue Code should be considered in determining the assessed value of low-income housing tax credit property.”

  29. Indiana Commission on State Tax and Financing Policy Meeting –October 4, 2012 The Affordable Housing Industry in Indiana rallied to win the day! After months of grass roots advocacy and preparation, 16 members of the Affordable Housing Industry gave testimony in support of Section 42 LIHTC developments and convinced commission members to not repeal existing Indiana Law. To read the minutes from the Commission meeting go to: http://www.in.gov/legislative/interim/committee/minutes/STFPFA4.pdf

  30. Who represents the Affordable Housing Industry in Indiana?

  31. Key Players at the Legislature • Governor • Governor’s Chief of Staff • Governor’s Lobbying Team • Director of Management & Budget • Speaker of the House • House Ways and Means Chairman • Senate President Pro Tem • Senate Finance Committee Chairman • Senate Appropriations Committee Chairman • Most Respected In-Power State Representatives & Senators (Find out who are the top 5 on each side)

  32. Krieg DeVault - Frank Hoffman Frank A. Hoffman is a partner in the law firm of Krieg DeVault LLP with offices in Merrillville, Mishawaka, Noblesville, Carmel, Indianapolis, Minneapolis, Atlanta and Chicago (www.kriegdevault.com).   Frank Hoffman concentrates his practice in creative and complex federal, state, and local incentive-based financing transactions.   Mr. Hoffman has closed over $235 million in new market tax credit transactions in the last 12 months and anticipates closing over $60 million in the next 3 months. To learn more to go:  (http://www.kriegdevault.com/our_professionals/frank-hoffman). • Tax Incentive Financing Experience •  Created the New Markets Tax Credit Program for the Indiana Bankers Association and its 180 member banks - 2004 $50 million Allocation •  Assisted in the creation of the New Markets Tax Credit Program for the city of Fort Wayne – 2008 $15 million Allocation •  Assisted in the creation of the New Markets Tax Credit Program for the town of French Lick and seventeen (17) participating southern Indiana counties – 2009 $50 million Allocation •  Assisting in the creation of the New Markets Tax Credit Program for the City of Indianapolis – 2010 - $32 million Allocation •  Combined Indiana CRED Credit, Local TIF Bond and NMTC to fund $5.5 million start-up manufacturing plant (Marion, Indiana) • Combined local TIF Bond and NMTC to fund $25 million hotel/indoor waterpark facility (French Lick, Indiana) •  Closed over $250 million in NMTC financing (2004 to present) •  Created the Wind Energy Manufacturers Associations, Inc. to attract capital investment under ARRA to Indiana in 2009 •  Obtained over $28 million in ARRA economic development incentives and $53 million in permanent financing for Indiana start-up wind turbine component part manufactures since February 2009 Education    DePauw University                                         B.A., (Economics), June, 1979   Indiana University School of Law                 J.D., (Taxation); December, 1982 Admitted to Indiana Bar                               1983, Indiana Birth Place:  Evansville, Indiana, September 1, 1957 High School:  Andrean Catholic High School, Merrillville, Indiana; 1975  KD #6298133

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