No change this year in housing tax break law


A tax credit opposed by Mississippi’s county officials because they say it gives certain housing developers too big of a break will remain on the books for at least another year.

Legislation to rework the 2005 tax break died this session after developers and county supervisors and assessors couldn’t reach an agreement.

The law applies to so-called Section 42 developers who use federal tax credits to build rental complexes for people who qualify for affordable housing.

Under the law, the developers are assessed by the income generated from the rental units rather than the cost of the real property. Officials have said the apartment owners are paying about one-third of what they could be paying in taxes without the law.

That formula causes counties to assess other taxpayers at higher rates to make up the difference, said Derrick Surrette, executive director of the Mississippi Association of Supervisors.

The bill that died this week in the Senate Finance Committee would have taxed the developments like all other rental property, but also provide a 35 percent tax break, Surrette said.

Marty Milstead, executive vice president of the Homebuilders Association of Mississippi, said the proposal was excessive.

“It would have doubled the taxes on some family homes. In some cases tripled,” Milstead said.

Surrette didn’t dispute that fact.

“Right now, they’re paying very little to no taxes. If you’re coming from nothing, to get there you’ve got to triple,” Surrette said.

Surrette and Milstead said the two sides will continue to work on an agreement with hopes of introducing another proposal next session.

Under Section 42 of the federal code, the developers who build or rehabilitate housing for low-income residents can get part of the construction costs supplemented by the sale of tax credits. Many of those type developments sprang up on the Gulf Coast after Hurricane Katrina wiped out much of the housing stock, but such housing communities exist across the state.

“These guys are building homes that look just like my three-bedroom, two bath. I pay thousands of dollars a year for taxes. They’re paying taxes at a lot lower rate,” Surrette said. “Now, we’re faced with another year of the developers paying very little taxes and all the other residents having to pick up their taxes for them.”

Milstead said the tax break was approved in 2005 because there was an inequity on the way the properties were being taxed. There’s a limit on how much can be charged for the rent.

“The assessment was not equitable. The law was passed so that all the counties across the state would recognize these are tax credit properties and needed to be taxed differently,” Milstead said.

Senate Finance Committee Chairman Dean Kirby, R-Pearl, said he didn’t bring the bill up for a committee vote this week because Surrette had informed him the counties and developers couldn’t reach an agreement.

The bill is House Bill 301.
By SHELIA BYRD – Associated Press Writer

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