States would choose housing tax credit cuts or tenant restrictions

States could avoid the 5% reduction by choosing the tenant restrictions. The reduction would apply to both dollar amounts used to calculate a state's annual low-income housing tax credit limit. A state's choice would continue each year unless the U.S. Treasury secretary agrees to let the state revoke it. The state-choice and credit-limit rules would apply to calendar years beginning after December 31, 2027.

Buildings would receive no tax credit for a year unless their covered units meet the tenant rule. Covered units count toward a building's low-income share. They could not house noncitizens outside the categories allowed by the federal housing law the bill cites. The requirement would apply only in states choosing it. Buildings with credit allocations counted against an agency's limit before 2027, or qualifying financing from bonds issued before January 1, 2027, could use the 75% threshold. The requirement would apply to tax years beginning after December 31, 2027. Compliance would be measured at the start of each lease beginning in the preceding calendar year. The 75% threshold would apply to eligible buildings for tax years beginning before January 1, 2031.