IRS Revises 2018 Inflation Adjustments for LIHTCs, Bonds

Revenue Procedure 2017-58, released in October 2017, provided the annual inflation adjustments for more than 50 tax provisions, including the tax rate schedules and other tax amounts for 2018, as adjusted for inflation for 2018. But a few months later, Congress passed the new tax law with the Tax Cuts and Jobs Act. The new tax law not only amends the income tax rates for individual taxpayers, but it also includes many other changes that affect individual taxpayers and business taxpayers. Because Revenue Procedure 2018-18 amended certain but not all measures under Revenue Procedure 2017-58, these two revenue procedures were to be read together.

Now, the IRS has recently published Revenue Procedure 2018-22, which reflects an increase in the state LIHTC ceiling enacted through the recently passed omnibus spending bill, the Consolidated Appropriations Act of 2018. The law provides a 12.5 percent increase in LIHTC allocations, every year for the next four years from 2018 to 2021. This year, the amended state LIHTC ceiling is the greater of $2.70 multiplied by the state population or $3.105 million. The modifications are in effect for taxable years beginning in 2018. For 2019 to 2021, the annual inflation adjustments will be applied to the new 2018 allocation amounts. Without a legislative extension for 2022, the LIHTC annual allocation will revert to current law, adjusted for inflation.