IRS, Treasury Urged to Take Emergency LIHTC Program Measures

The National Council of State Housing Agencies (NCSHA) recently sent a letter to the IRS and the Treasury Department asking them to take immediate action to provide deadline extensions and other necessary accommodations for the LIHTC program due to the severe disruptions the COVID-19 pandemic is having on construction activities and the ongoing operations of existing LIHTC sites.

The following are the specific accommodations requested:

• Provide a 12-month extension of the 10 percent test deadline for carryover allocations as required by IRC Section 42(h)(1)(E)(ii) and IRS regulation 1.42-6. Currently, at least 10 percent of the anticipated basis of a development must be expended within one year of the LIHTC allocation.
• Provide a 12-month extension of the 24-month minimum rehabilitation expenditure deadline as required by IRC Section 42(e)(3) and IRC Section 42(e)(4). These are currently required to be placed in service within 24 months.
• Provide a 12-month extension of the placed-in-service deadline as required in IRC Section 42(h)(1)(E)(i). Buildings must currently be placed in service by the end of the second year after the calendar year of the LIHTC allocation.
• Provide at minimum a 12-month extension of the 25-month rehabilitation period currently allowed under IRS Revenue Procedures 2014-49 and 2014-50 to properties that suffered a casualty loss due to a presidentially declared major disaster in the 25-month period prior to the onset of COVID-19. State Housing Credit agencies should be allowed to set restrictions within this period.
• Provide a 12-month extension of the year-end deadline for property restoration for any property that suffers a casualty loss not associated with a major disaster during 2020 (until Dec. 31, 2021). State Housing Credit agencies should be allowed to set restrictions within this period.
• Provide a 12-month moratorium on both physical inspections and tenant file reviews as required by IRS regulation 1.42-5. State Housing Credit agencies should continue to monitor emergency work orders during this time, and should be allowed to continue or resume inspections depending on their assessment of the situation in their state and their ability to do so, but there should be no penalty for states or owners if inspections are not completed during this time.
• Provide a 12-month moratorium on tenant income recertification requirements. State Housing Credit agencies should be allowed to continue or resume requiring property managers to conduct recertifications depending on their assessment of the situation in their state and their ability to do so.
• Provide a 12-month extension for all open noncompliance corrective action periods. State Housing Credit agencies should be allowed to reinstate deadlines depending on their assessment of the situation in their state and their ability to do so.
• Suspend the yet-to-be implemented IRS Regulation 1.42-5 that will increase the number of required compliance monitoring physical inspections even further than required under current regulations and exacerbate the inspection backlog.
• Provide guidance clarifying that the temporary closure of property amenities and common space facilities during the duration of the crisis (with the exception of laundry facilities) will not negatively impact a property’s eligible basis and result in loss of credits.