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House Budget Chairman Jodey Arrington (R-Texas) introduced the LIHTC Security Act, H.R. 10856, on October 22, 2026, joined by Representatives Beth Van Duyne (R-Texas) and Greg Steube (R-Florida). The bill was referred to the House Committee on Ways and Means, which has jurisdiction over the tax credit program. It proposes the first federal linkage between Low-Income Housing Tax Credit eligibility and the immigration status of individual tenants, a significant departure from how the program has operated since its creation in 1986.
The legislation amends Section 42(c) of the Internal Revenue Code to add a new occupancy requirement. Under the proposal, no housing credit could be claimed for a qualified low-income building for any taxable year unless all "relevant low-income units" in that building - meaning every unit counted toward the building's applicable fraction - meet a defined occupancy standard. A unit passes only if no occupant is an alien individual who falls outside the eligibility categories listed in Section 214(a) of the Housing and Community Development Act of 1980, the same statute that governs immigration-based eligibility for HUD rental assistance programs.
The test is applied unit by unit as of the beginning of any lease term that starts within the calendar year. In practical terms, that design places the compliance moment at move-in and at each new lease, rather than requiring continuous re-verification of sitting tenants mid-lease. But because the standard attaches to the credit itself, a single noncompliant unit in the applicable fraction could put the entire building's credit at risk for that taxable year, an exposure far beyond the noncompliance consequences owners manage today.
The bill does not simply impose the requirement nationwide. Instead, it gives each state housing credit agency a choice with a price attached. Under a new Section 42(h)(3)(J), a state may elect to apply the occupancy requirement to buildings in its jurisdiction. If a state does not have that election in effect for a calendar year, its housing credit dollar amounts - both the per-capita allocation and the small-state minimum - are multiplied by 0.95, a 5 percent reduction, after any inflation or other adjustments.
The election, once made, carries forward to subsequent years unless revoked with the Treasury Secretary's consent. That structure effectively pushes state housing finance agencies into the enforcement role: adopt and administer the tenant eligibility standard, or accept a smaller annual allocation ceiling for every deal in the state. For developers competing for allocations in states that decline the election, the practical consequence would be roughly 5 percent less credit authority available statewide each year.
Recognizing that hundreds of thousands of existing credit units were leased under rules that never asked about immigration status, the bill includes a transition rule. For "transition-eligible buildings" - those whose allocations counted against a state's credit ceiling before calendar year 2027, or whose eligible basis was financed with tax-exempt bonds issued before January 1, 2027 - the standard is applied to 75 percent of units rather than all units. That relief applies to taxable years beginning before January 1, 2031, giving existing portfolios roughly three years of graduated compliance before the full standard would attach.
Today, no federal law requires LIHTC tenants to be U.S. citizens or to hold particular immigration statuses. Immigration-based restrictions apply to HUD-assisted programs - public housing, Housing Choice Vouchers, and project-based assistance - through Section 214 of the Housing and Community Development Act of 1980, but the tax credit program is administered through the Internal Revenue Code and has never carried a parallel requirement. Properties that layer LIHTC with HUD assistance already apply Section 214 screening to the assisted units; purely tax-credit units do not.
Arrington framed the bill as closing what he called a loophole. "Every year, Washington provides nearly $15 billion through the Low-Income Housing Tax Credit to support the development of affordable rental housing, with no requirement to verify tenants' citizenship or legal status," he said in the October 27 announcement. The National Taxpayers Union and the American Principles Project issued supporting statements in the same release. Housing industry and civil rights organizations have historically opposed linking rental assistance to immigration status, arguing such rules impose administrative costs and deter eligible mixed-status households; formal responses to this bill were still emerging at press time.
First, the timeline. Both the occupancy requirement and the state election mechanism apply to taxable years beginning after December 31, 2027. Nothing changes for the 2026 or 2027 compliance years, and an introduced bill must clear Ways and Means, the full House, the Senate, and a presidential signature before any of this becomes law. Similar proposals in prior Congresses have not advanced.
Second, the compliance design. If enacted, the burden would fall on lease transactions: owners would need a lawful, consistent method for determining each occupant's status at the start of each lease term for credit-counted units. How that verification would work - what documents, what systems, what fair housing guardrails - is not specified in the bill text and would likely be defined by Treasury regulation and state agency rules. Fair housing counsel will note that any status-screening process must still comply with the Fair Housing Act's prohibitions on national origin discrimination in application.
Third, the state dimension. Because the 5 percent allocation cut falls on states that do not elect the requirement, state housing finance agencies would face pressure from development partners in both directions. Owners with multi-state portfolios could see different compliance regimes depending on each state's election, and allocation competition dynamics would shift in states that absorb the cut.
H.R. 10856 is an introduced bill, not law, and its earliest effect would be the 2028 tax year. But it is the first serious legislative attempt to import Section 214-style immigration eligibility into the tax credit program, backed by the House Budget chairman, and it arrives while the administration pursues parallel verification efforts in HUD programs. Owners, syndicators, and state agencies should read the actual bill text, understand the election mechanics and transition rule, and monitor committee action before making any operational changes.
The LIHTC Security Act lands in a Congress already debating several housing production bills. The same week, Representative Norma Torres (D-Calif.) introduced the Streamlining Affordable Housing Act, which would provide $90 million annually from fiscal years 2027 through 2029 to help states restructure housing agencies and build universal funding applications, and Representatives Mike Lawler (R-N.Y.) and Josh Gottheimer (D-N.J.) introduced the bipartisan American Home Mobility Act. Arrington's bill moves in the opposite regulatory direction - adding a federal eligibility overlay rather than reducing administrative burden - and its path runs through a tax-writing committee rather than the housing committees that typically handle program legislation.
The proposal also parallels the administration's executive-branch efforts. HUD ordered public housing authorities earlier this year to re-verify citizenship and immigration status for tenants in HUD-funded programs, and the department's pending mixed-status families rule would restrict prorated assistance for households with ineligible members. H.R. 10856 would extend that policy direction into the tax code, reaching the roughly 90 percent of new affordable rental production that the credit supports without any HUD subsidy layer.
Because the standard attaches to the credit itself, investors and syndicators would bear the financial consequence of tenant-level noncompliance. A building that fails the occupancy test for a taxable year would generate no credit for that year, an outcome no current compliance failure produces on a whole-building basis without a recapture event. Underwriting for new deals would need to price that risk: lease-up timelines in gateway markets, documentation practices at move-in, and the reliability of whatever verification process Treasury ultimately prescribes would all become credit-risk factors alongside the usual rent and operating assumptions.
For properties in the transition window, the 75 percent standard is not a safe harbor so much as a smaller target. Compliance teams would still need unit-level tracking systems that can demonstrate, for each new lease, which units counted toward the test and how each was satisfied. State allocating agencies, which already audit income and rent compliance through the existing monitoring regime, would presumably absorb the new verification layer - one reason the state election and its 5 percent penalty matter so much to how the burden would actually be distributed.
The text does not specify what documentation or verification system owners would use, whether existing tenants who decline to respond to status inquiries would be treated as failing the test, or how the requirement interacts with state and local laws that restrict immigration-status inquiries in housing. It also does not address households whose members hold mixed statuses - the bill tests whether any occupant falls outside the Section 214(a) categories, which would disqualify the unit rather than prorate, a notably harder line than HUD's proration model for assisted housing. Each of these questions would shape whether the requirement functions as a screening rule at move-in or a continuing eviction pressure, and each would likely be contested in the regulatory process if the bill advances.
Sources: H.R. 10856 bill text (GovInfo); Rep. Jodey Arrington press release, Oct. 27, 2026; National Housing Conference Member Brief, Nov. 1, 2026.
House Budget Chairman Jodey Arrington (R-Texas) has introduced the LIHTC Security Act, H.R. 10856, a bill that would tie Low-Income Housing Tax Credit eligibility to the immigration status of tenants for the first time.
The bill would deny credits for any qualified low-income building unless every credit-counted unit is leased without any occupant who falls outside the immigration categories in Section 214(a) of the Housing and Community Development Act of 1980.
States that do not elect to apply the requirement would see their annual per-capita and small-state-minimum housing credit dollar amounts cut by 5 percent, putting housing finance agencies in charge of a high-stakes choice.
A transition rule softens the first years for existing deals: buildings allocated credits before 2027, or financed with bonds issued before 2027, would apply the test to 75 percent of units rather than all of them, through taxable years beginning before January 1, 2031.
The changes would take effect for taxable years beginning after December 31, 2027, giving owners, managers, and state agencies a defined window to understand what compliance would require if the bill advances.
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