Preserve Private Activity Bonds (PAB)

call to action to protect PAB in tax reform bill

On November 2, the Tax Cuts and Jobs Act of 2017, H.R.1, was released. As introduced, H.R.1 proposes to eliminate tax-exempt private activity bonds (PABs), including multifamily, single family, manufacturing, and 501c3 bonds, for bonds issued after 2017. The bill contradicts all previous reports, from sources both in Congress and within the Administration, that suggested the bill would maintain tax-exempt PABs. The bill also repeals the related Mortgage Credit Certificate (MCC) program. Additionally, the elimination of PAB effectively kills the 4 percent Low Income Housing Tax Credit program, as IRS code requires that developments supported with 4 percent LIHTC also use Private Activity Bonds for at least 50 percent of the development’s debt financing.

As partners working to strengthen affordable housing in Colorado we encourage you to immediately contact the Colorado Congressional delegation and ask them to communicate to House and Senate leadership the need to restore tax-exempt private activity Housing Bonds in the tax reform bill, H.R. 1 and in the Senate version of the tax reform bill.

​delegation list
​Senator Michael Bennet (D-CO)

Senator Cory Gardner (R-CO)

Rep. Diana DeGette (D-1)

Rep. Jared Polis (D-2)

Rep. Scott Tipton (R-3)

Rep. Ken Buck (R-4)

Rep. Doug Lamborn (R-5)

Rep. Mike Coffman (R-6)

Rep. Ed Perlmutter (D-7)

It is important that Colorado’s delegation hears from many concerned stakeholders about potential impacts to their districts. Please act now and contact your delegation members and ask them to support preservation of Private Activity Bonds.

PABs impact in Colorado

Private Activity Bonds (PAB) are a special class of tax-exempt municipal bonds that are used as a means to raise investor capital to support specific and privately developed projects.

CHFA is one of several PAB issuers in Colorado. Cities, counties, and other authorities across the state also issue PAB to support affordable housing, infrastructure investment, and economic development.

How CHFA Uses PAB for Housing and Community Investment

Since 2000, CHFA has issued more than $931.7 million in PAB to support

  • Affordable homeownershp for first time homebuyers and qualified veterans;
  • The development and preservation of affordable rental housing; and
  • Real estate and equipment purchases by manufacturers and nonprofit organizations.

expanding and preserving affordable rental housing

Since 2012, the largest use of PAB at CHFA has been to support the development and preservation of affordable rental housing. Most often, PAB is paired with 4 percent Low Income Housing Tax Credits to leverage private sector investment into our state’s housing needs. Over half (55%) of the affordable rental housing supported with Low Income Housing Tax Credits in Colorado are also supported with PAB. During the past five years, nearly 10,000 rental housing units were built across the state using both PAB and 4 percent LIHTC. The resulting economic impact of this investment is $3 billion.

Without PAB and the 4 percent LIHTC program, the amount of affordable rental housing that CHFA could likely support annually, would drop from 3,000+ units to 700-800 units. This would simply be inadequate to meet to state’s vast and varied affordable housing challenges.

supporting homeownership

CHFA issues single family PAB and uses the proceeds to help our participating lender network make 30-year fixed rate home mortgages to income-eligible first-time homebuyers and qualified veterans mortgage. In 2017, CHFA issued $52.6 million in single family PAB which we estimate will help 200 Colorado households achieve their dreams of homeownership.

In addition, CHFA uses PAB cap to issue Mortgage Credit Certificates (MCCs). MCCs allow eligible first time homebuyers and qualified veterans to take 20 percent of the mortgage interest paid annually as a federal income tax credit. The remaining 80 percent, is still available to be used as a standard Mortgage Interest Deduction. The savings from the Mortgage Credit Certificate helps make homeownership more affordable and therefore more attainable. Since 2012, CHFA has helped over 6,200 Colorado households benefit from the Mortgage Credit Certificate program.

Catalyzing job growth and investment through manufacturing and nonprofits

PAB can also support manufacturers across Colorado. This is notable given the significant multiplier effect manufacturing has on the economy. Estimates indicate that every $1 spent on manufacturing leverages an additional $1.81 in economic investment.

Eligible uses of PAB for manufacturing include the acquisition, rehabilitation, or new construction of real estate or equipment purchases. Similarly, PAB can be used to finance real estate and equipment purchases by nonprofits. Since 2012, CHFA has issued $108 million in PAB to support manufacturers and nonprofits, supporting over 3,500 jobs and resulting in nearly $195 million in economic impact.

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