Tax Legislation Enacted: Important Tax Benefits Preserved

Legislation | December 13, 2017 | by Barbara Gay

Although LeadingAge remains concerned about the impact H.R. 1 will have on aging services resources in the coming years, your advocacy succeeded in preserving important tax provisions for older people and aging services providers. 

On December 20, the House voted to pass H.R. 1. The measure is on its way to the White House for the President's signature.

The nonpartisan Joint Committee on Taxation projects a $1.4 trillion increase in the federal budget deficit resulting from H.R. 1 over the next decade. Even more generous estimates using so-called “dynamic scoring” still predict a ten-year budget deficit increase of over $1 trillion resulting from the legislation.

We already have heard members of the congressional leadership calling for deep cuts in aging services programs – Social Security, Medicare, Medicaid, senior housing, nutrition assistance - which these legislators see as unaffordable in view of the budget deficit projections resulting from the tax legislation.

Nevertheless, the final version of H.R. 1 ameliorated some of the worst provisions of the original House legislation. These are provisions on which we, our members, residents and clients advocated heavily over the last two months, and the preservation of these tax provisions is a huge achievement for all of us:

  • Medical expense deduction - The final version of the tax bill not only preserves the deduction but also keeps the threshold for it at 7.5% of adjusted gross income for 2017 and 2018 before letting it rise to 10% in 2019.
  • Private activity bonds - The final version of the tax legislation continues the present tax exemption for interest income on these bonds. This is a major correction in the legislation for our members, who rely on private activity bonds extensively to finance new projects and improvements to existing properties. In addition, the 4% low-income housing tax credit can only be used on properties financed with private activity bonds; the loss of the tax exemption would have made this tax credit unavailable.

Other provisions:

  • Advance refunding bonds - Under the final version of H.R. 1, interest on advance refunding bonds will no longer be tax-exempt. The loss of the tax-exemption will apply to any bonds issued after December 31, 2017. Not-for-profits have used these bonds to lower their interest costs, which has resulted in savings for residents.
  • Low-income housing tax credit – While both the 4% and the 9% credits are preserved, the reduction in the corporate tax rate to 21% will make these tax credits less attractive as an incentive for the development of affordable housing.
  • Charitable contributions deduction – H.R. 1 preserves this deduction and enhances it by allowing a deduction for contributions of up to 60% of adjusted gross income, rather than the present limit of 50%. However, the doubling of the standard deduction, to $12,000 for individuals and $24,000 for married couples, will sharply reduce the number of taxpayers using the deduction for charitable contributions.
  • State and local taxes – in a major concession to legislators from high-tax states, the final version of H.R. 1 allows for the deduction of up to $10,000 in state and local property taxes and income or sales taxes.

We greatly appreciate all of our members' work on this legislation. As Congress turns to budget and spending bills for the coming years, we are committed to redoubling our efforts to ensure that our members have the necessary resources to provide services to those who need them.