Sponsors (2)
The bill makes it substantially easier to preserve affordable housing by widening eligibility for tax-exempt preservation bonds and protecting LIHTC claims, but it risks crowding out other PAB-financed projects, shifting tax benefits, and locking issuing authorities into irrevocable choices.
Low-income households and state/local governments can more easily preserve and refinance existing low-income and federally/state-assisted housing because certain preservation bonds are exempted from the private activity bond (PAB) volume cap.
Developers and preservation projects are more likely to keep tax-exempt financing status because the bill reduces the unrelated private business use threshold (section 147(d)) from 50% to 15%, making more preservation deals qualify for tax-exempt bonds.
Projects using these exempted bonds are treated as meeting the Low-Income Housing Tax Credit (LIHTC) limitation requirement, helping developers continue to claim LIHTCs and supporting the economics of preservation transactions that keep affordable units in service.
Other PAB-financed projects (including new construction or different private activity uses) within an issuing authority may have less cap available, so small businesses and other local projects could be crowded out of tax-exempt financing.
Lowering the private business use test to 15% and exempting these bonds could expand tax-exempt financing for projects with greater private involvement, potentially reducing federal tax revenue or shifting tax benefits toward developers rather than broader taxpayers.
Issuing authorities must make an irrevocable election to use the exemption, which reduces their flexibility to respond to changing housing priorities or market conditions once the choice is made.
Based on analysis of 2 sections of legislative text.
Allows issuing authorities to irrevocably exempt certain bonds financing preservation/rehab of LIHTC, federally assisted, or State‑assisted housing from the private activity cap and lowers the rehab threshold from 50% to 15%.
Official title: To amend the Internal Revenue Code of 1986 to provide an elective exception from the volume cap on tax-exempt bonds for certain exempt facility bonds for qualified residential rental projects, and for other purposes.
Introduced July 23, 2026 by Daniel Goldman · Last progress July 23, 2026
Allows state and local issuing authorities to elect to exempt certain tax-exempt exempt-facility bonds used to preserve, improve, or replace long‑standing low‑income, federally assisted, or State‑assisted housing from that authority's private activity volume cap. The bill lowers the rehabilitation test applied to those bonds from a 50% threshold to 15% and makes the election irrevocable, and it adjusts Low-Income Housing Tax Credit (LIHTC) rules so affected projects still meet certain LIHTC limits. The change applies to bonds issued after enactment and is intended to make it easier and cheaper to finance preservation and moderate rehabilitation of affordable and assisted housing projects whose LIHTC compliance periods have ended but extended-use requirements remain in place, or that receive federal or State assistance.