The One Big Beautiful Bill Act (OBBBA), recently passed by Congress and signed into law, includes a number of changes to federal funding programs that communities utilize to support community development investments. GOPC is providing a brief, and not exhaustive, breakdown of how the OBBBA impacts programming for local governments.
Programs Eliminated or Rescinded related to the Inflation Reduction Act (primarily focused on environmental justice)
The bill rescinds funding and statutory authority for several programs established in the Inflation Reduction Act passed in 2022. These include:
EPA Greenhouse Gas Reduction Fund (GGRF): Originally a $27 billion investment administered by the EPA to boost greenhouse gas and air-pollution-reducing projects, particularly in low-income and disadvantaged communities. Now fully repealed.
Climate Pollution Reduction Grants (EPA): A grant program that provides nearly $5 billion in federal grants to states, local governments, tribes, and territories for cutting greenhouse gas and air pollution by supporting local led initiatives. Funding rescinded if not yet obligated.
Environmental and Climate Justice Block Grants (EPA): Designed for overburdened communities by funding $3 billion and designed to empower disadvantaged communities to tackle pollution, climate resilience, and environmental justice through locally driven solutions. Funding removed.
Neighborhood Access and Equity Program (DOT): Aimed to reconnect communities divided by highways and repair infrastructure damages in disinvested communities. Funding rescinded.
Changes to Tax-Based Community Development Tools
While funding for some programs has been rescinded or removed, the OBBBA did make changes to several tax-based development incentives that benefit local governments and nonprofits, either through increasing funding or making the temporary programs permanent.
Extended or Permanent Tax Credits
New Markets Tax Credit (NMTC): The federal NMTC program was set to expire in 2025, but the OBBBA permanently extended the program. A continued $5B annual investment will continue to support private investment in low-income census tracts.
Low-Income Housing Tax Credit (LIHTC): OBBBA also made LIHTC permanent, giving stability to affordable housing development efforts. The annual 9% credit allocation to states is made permanent and elevated to 12%, beginning in 2026. For 4% LIHTC projects (typically combined with tax-exempt bonds), the required portion of the project financed with tax-exempt bonds now decreases from 50% to 25%.
Opportunity Zones (OZs): Opportunity Zones are now made permanent, with a few programmatic changes made by the OBBBA. Starting July 1, 2026, and continuing every ten years, state governors can re-designate census tracts as OZs for a ten-year period. There is a new focus on rural communities in Opportunity Zones, by enhancing the tax benefits to a 30% basis step-up for private investment in rural designated OZs (an increase from the 10% for other low-income designated census tracts).
The changes to these programs will take effect in the coming months and years. While this is not a complete list of all changes made through the OBBBA, GOPC will continue to provide updates as new information emerges that has an impact on funding opportunities that impact revitalization efforts by local communities.