This bill amends the Internal Revenue Code to require that payments of disability compensation or pension under chapter 11 or 15 of title 38, United States Code, be disregarded when determining income under section 142(d)(2)(B). In practice, that means VA disability compensation and certain VA pensions would not count toward a household’s income test for the purposes of (1) the low-income housing tax credit (LIHTC) program’s qualified residential rental project rules and (2) the income tests used for tax-exempt qualified residential rental bonds.
That change narrows the taxable-code income definition used for project-level eligibility and compliance. For housing providers, state housing agencies, bond issuers and investors, the bill creates a one-line statutory exclusion that will require updating income verification, underwriting and compliance procedures; for disabled veterans and their families, it can increase access to income-restricted units financed with LIHTC or tax-exempt bonds.
At a Glance
What It Does
The bill inserts a new clause into IRC section 142(d)(2)(B) directing that payments of disability compensation or pension under chapters 11 or 15 of title 38 U.S.C. be ignored when calculating income for the subsection’s purposes. The change applies to income determinations made after the date of enactment.
Who It Affects
State housing finance agencies that administer LIHTC and tax-exempt bond programs, owners and managers of LIHTC and bond-financed rental properties, bond counsel and investors, and veterans receiving VA disability compensation or VA pensions calculated under chapter 11 or 15 of title 38.
Why It Matters
The bill alters the baseline income calculation used to qualify tenants for income-restricted housing and to satisfy bond-financing eligibility tests. That can increase the pool of qualifying disabled veterans, change underwriting and compliance practices, and shift who receives federally incentivized affordable housing without changing program funding levels.
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What This Bill Actually Does
The bill makes a focused, technical change to how income is calculated for two related federal housing-subsidy rules. Under current law, section 142(d)(2)(B) supplies an income test used to determine whether occupants of projects financed with certain tax-exempt bonds meet required low-income thresholds; that same statutory language ties into LIHTC compliance because owners use similar income definitions when certifying tenants for tax credit eligibility.
This measure adds a single new sentence: it tells administrators to ignore VA disability compensation and certain VA pensions when computing a household’s income for those purposes.
Operationally, the change does not create a new benefit program or redirect funds; it simply removes a category of VA payments from the income side of eligibility calculations. State agencies and project owners will need to update tenant income certification, recertification and underwriting checklists to exclude the specified VA payments.
Bond counsel and investors will also adjust their compliance protocols because bond qualification often depends on meeting percentage tests tied to tenant incomes.Implementation will hinge on verification: housing administrators must identify which VA payments fall within chapter 11 or 15, change income worksheets and train staff. The effective-date language limits the change to determinations made after enactment, so housing providers and agencies will need to decide how to handle ongoing certifications and recertifications.
While the bill targets disabled veterans explicitly, the operational effects extend across the LIHTC and tax-exempt bond ecosystems where income measurement governs both subsidy and tax compliance.
The Five Things You Need to Know
The bill amends Internal Revenue Code section 142(d)(2)(B) by adding a new clause (v) that requires ignoring specified VA payments when determining income for that subparagraph.
It directs that payments of disability compensation or pension under chapter 11 or chapter 15 of title 38, U.S.C.
be disregarded for income tests tied to qualified residential rental project bonds and related LIHTC income determinations.
The change is narrow in scope: it operates only ‘for purposes of determining income under this subparagraph’ rather than amending broader LIHTC (section 42) language or VA statutes.
The amendment applies to income determinations made after the date of enactment—there is no retroactive reclassification of past determinations in the text.
The bill does not appropriate funds or alter the tax status of VA payments; it only changes how those payments are counted (or not counted) in certain federal housing income tests.
Section-by-Section Breakdown
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Short title
Provides the Act’s caption, the "Fair Housing for Disabeled Veterans Act." This is a formal naming provision with no substantive effect on program operations or timing.
Add exclusion for VA disability and pension payments
This is the operative change. The bill inserts a new clause (v) into section 142(d)(2)(B) directing that payments of disability compensation or pension under chapter 11 or 15 of title 38 be disregarded when determining income under that subparagraph. Practically, income calculations used to test whether a residential rental project meets the low-income occupant tests for tax-exempt qualified residential rental bonds (and the closely connected LIHTC compliance processes) must omit those VA payments. The statutory insertion is narrowly phrased, so its legal effect is limited to the subsection’s income tests rather than revising the broader definitions used by other programs unless those programs reference the same code provision.
Applies to determinations after enactment
The amendment takes effect for income determinations made after the date of enactment. That timing avoids retroactive reclassification of prior certifications but creates a transition challenge: projects mid-certification or mid-credit period will need internal policies to reconcile prior income certifications with the new rule at recertification points.
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Explore Housing in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Disabled veterans and veteran households receiving VA disability compensation or VA pensions under chapter 11 or 15 — their VA payments will be excluded from income tests, which can make them eligible for income-restricted units financed with LIHTC or qualified residential rental bonds.
- Veteran-serving nonprofits and supportive-housing developers — broader eligibility can simplify placement of veterans into existing subsidized units without needing separate vouchers or carve-outs.
- Owners and developers of LIHTC and bond-financed projects targeted at low-income tenants — excluding VA disability/pension from income calculations can increase the number of households that qualify as low-income, making it easier to meet set-aside thresholds in some projects.
- State housing finance agencies — may gain flexibility in meeting program occupancy targets, particularly in markets with veteran populations where VA payments would otherwise push households over income caps.
Who Bears the Cost
- State housing finance agencies and local allocators — must update income-certification forms, staff training, and compliance manuals to implement the statutory exclusion, incurring administrative and implementation costs.
- Property owners, managers and compliance officers — will need to change tenant intake, underwriting and annual recertification procedures and may face increased audit scrutiny during the transition.
- Bond counsel, syndicators and investors — underwriting models and compliance testing may require revision to reflect the changed income base; investors could reassess credit risk, lease-up projections and reserve assumptions.
- Non-veteran low-income applicants in high-demand markets — while the bill does not reallocate funding directly, practical effects on unit availability could increase competition for some units unless owners expand supply or local policies adjust priority rules.
Key Issues
The Core Tension
The bill balances two legitimate goals that pull in different directions: improving access to subsidized, income-restricted housing for disabled veterans by excluding VA disability and pension payments from income tests, versus preserving the targeting integrity of scarce LIHTC and tax-exempt bond benefits for the lowest-income households. Achieving one objective (greater veteran access) makes the other (precise income targeting) harder to enforce without additional administrative steps and local policy adjustments.
The bill is legally narrow but operationally consequential. By carving out VA disability compensation and certain VA pensions from a specific income test, it sidesteps broader changes to LIHTC statute and HUD-derived rules; however, many HUD and state programs reference related federal income definitions or follow similar verification standards, so coordination will be necessary.
The text’s reliance on chapter citations (chapter 11 and chapter 15 of title 38) is precise legally but invites implementation questions about which specific VA payment streams fall within those chapters and how administrators verify amounts without creating new privacy or documentation burdens for veterans.
Another tension is administrative timing. The effective-date language limits the change to determinations made after enactment, which avoids retroactivity but forces agencies and owners to decide whether to apply the exclusion at the next annual recertification or to offer immediate re-certifications.
That choice affects occupancy, tax credit compliance, investor expectations and audit risk. Finally, because the bill does not alter funding levels or allocation formulas, its primary effect is re-targeting eligibility; that re-targeting benefits a protected population but could indirectly affect other low-income applicants and requires careful local policy responses to manage distributional consequences.
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