Public Law 106-554 Aims to Change the Face of Economically Distressed Areas

WASHINGTON, DC-A bill positively affecting commercial real estate and is now law. HR 4577, now public law 106-554, is designed to encourage investments in economically distressed areas. It passed Congress on Dec. 15 and was signed into law last week. Providing $31.5 billion tax relief to the apartment industry, housing related issues in this law include a low-income housing credit, a private activity bond cap, brownfields clean-up relief, and community renewal provisions.

The low-income housing tax credit increases from the current level of $1.25 per capita to $1.50 in 2001, and to $1.75 in 2002. It also indexes it for inflation starting in 2003. The bill provides, for the first time, a minimum LIHTC allocation for small states, assuring $2 million in 2001 and 2002 and indexing that amount for inflation beginning in 2003, according to information released by the National Multi-Housing Council.

The Private Activity Bond Cap accelerates and already-scheduled increase in the state volume limits on tax-exempt private activity bonds to the greater of $62.50 per resident or $187 million in 2001, $75 per resident or $225 million in 2002. It also indexes the program for inflation starting in 2003.

The brownfields legislation extends until Jan. 1, 2004, the current law allowing the immediate expensing of brownfields clean-up costs. Brownfields are vacant, abandoned, or underutilized commercial and industrial properties where environmental contamination challenges redevelopment or utilization. The law also greatly expands the number of eligible sites by eliminating the requirement that it be located in a federal empowerment zone.

The law also provides various tax incentives for 40 renewal communities starting July 1, 2001 through Dec. 31, 2009. Among other things, designated communities will be eligible for a 15% wage credit for the first $10,000 of wages paid to employees who live and work in the renewal community, and additional $35,000 of Section 179 expensing for qualified renewal property, extension of the work opportunity tax credit for hiring youth in renewal communities, and a zero capital gains tax on sales of qualified community assets acquired after Dec. 31, 2001 and held more than five years.