LIHTC and the Trump tax agenda

Based on the most helpful WSO content, here are some insights regarding the impact of the Trump tax agenda on LIHTC (Low-Income Housing Tax Credit) and related areas:

1. Corporate Tax Rate Reduction:

   • The Trump tax plan proposes lowering the corporate tax rate from 35% to 15%.
   • This reduction in corporate tax rates can significantly impact after-tax income and valuations of companies. Lower corporate taxes mean higher after-tax cash flows, which can increase company valuations.

2. Impact on LIHTC Yields:

   • Lowering the corporate tax rate could potentially affect the yields on LIHTC investments. Since LIHTC yields are tied to the value of tax credits, a reduction in corporate tax rates might reduce the demand for these credits, potentially lowering their value and yields.

3. Repatriation of Overseas Money:

   • With a 15% corporate tax rate, some companies might repatriate money held overseas, which could influence the overall investment landscape, including LIHTC.

4. Pass-Through Entities:

   • The Trump tax plan also aims to extend the 15% corporate rate to pass-through entities such as LLCs and S Corps. This could have implications for how businesses structure themselves and their tax liabilities.

5. General Economic Stimulus:

   • The tax cuts, both corporate and individual, are expected to stimulate the economy by increasing disposable income and investment. This broader economic growth could indirectly benefit sectors like affordable housing and community-based lending.

6. Political Feasibility:

   • There is some skepticism about the political feasibility of these tax cuts, especially with potential opposition from Democrats. The final impact will depend on the actual implementation of these policies.

For those in LIHTC or tax credit equity, it's crucial to monitor these developments closely, as changes in tax policy can have significant implications for investment strategies and yields.

Sources: TRUMP TAX PLAN, TRUMP TAX PLAN, How will the results of the election affect Wall Street and the overall economy?, , The insanity of the US tax code: Bad Laws and Predictable Consequences