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The House Ways & Means Committee May 19 held a broad-ranging hearing on "Leveraging the Tax Code for Infrastructure Investment" during which members discussed tax credits for housing and renewable energy and bonds for infrastructure projects. Reflecting a dynamic present in other congressional hearings, some Democrats defended tax increases proposed to pay for infrastructure and educational investment, while Republicans like Rep. David Schweikert (R-AZ) suggested it is ironic that Democrats propose to increase taxes on the wealthy but provide tax credits for EVs and solar panels that benefit people with higher incomes. There is a broad debate in Congress and with the White House over what constitutes infrastructure — Republicans generally don't support green energy investment as infrastructure — and how to pay for it.

Chairman Richard Neal (D-MA) applauded President Biden "for his initiative and leadership in putting forward the American Jobs Plan" but didn't directly address tax increase proposals. He has long been a supporter of Build America Bonds and called for their permanent revival, along with reinstatement of advance refundings, and a "holistic expansion" of private activity bonds. Ranking Member Kevin Brady (R-TX) criticized the Biden infrastructure package for provisions calling for "wasteful spending, the radical Green New Deal, or lavish green subsidies to millionaire owners of windfarms" and buyers of EVs, plus "crippling tax increases."

There was some tension over demands by some high-tax state Democrats to include relief from the TCJA $10,000 SALT deduction cap in an infrastructure bill, which Rep. Jason Smith (R-MO) criticized and Tom Suozzi (D-NY) defended, saying he can't support any changes in the tax code without SALT cap repeal.

Witnesses:

• Khalil Shahyd, Senior Policy Advisor, National Resource Defense Council
• Michael J. Novogradac, Managing Partner, Novogradac
• Rachel Eubanks, Treasurer, State of Michigan
• The Honorable Stephen R. Lewis, Governor, Gila River Indian Community
• Dr. Adrian Moore, Vice President of Policy, Reason Foundation

Testimony in brief:

• Shahyd called for additional incentives for clean energy projects that benefit communities who live in places with high levels of pollution or long-term poverty or who face high levels of unemployment due to the loss of energy production jobs.
• Novogradac urged the extension and advancement of the low-income housing tax credit (LIHTC), New Markets Tax Credit (NMTC), and renewable energy tax credits.
• Eubanks said both funding and financing solutions are needed and warned against bonds that could be subject to sequestration.
• Lewis called for a tribal set-aside for NMTCs.
• Moore called for changes in public-private partnerships (P3s), including raising the private activity bond cap to $30 billion.

Relevant legislation:

• Reps. Brian Higgins (D-NY) and Mike Kelly (R-PA), Neighborhood Homes Investment Act (NHIA) - tax credit allocated through states to cover the gap between the cost of construction and the sales price of a home, modeled on the LIHTC.
• Reps. Terri Sewell (D-AL) and J. Smith, Rural Jobs Act — incentivize greater NMTC investment in rural areas.
• Sewell, Local Infrastructure Financing Tools (LIFT) Act — expand bond financing opportunities for local governments and nonprofits.
• Reps. Earl Blumenauer (D-OR) and Kelly, REHAB Act — reinstate and improve REHAB tax credit for buildings that are more than 50 years old and within one-half of a mile of a public transportation center.
• Rep. Suzan DelBene (D-WA), Affordable Housing Improvement Act — expand and strengthen the Affordable Housing Tax Credit, also known as the LIHTC.
• Rep. Mike Thompson (D-CA), GREEN Act — extend and expand renewable energy incentives.

Additional information is available in the attached Tax Alert.

Testimony is available here.

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Ways & Means infrastructure hearing