Senators Ask IRS to Let Veteran Housing Get Tax-Exempt Bonds

Six senators recently sent a letter to IRS Commissioner Charles Rettig requesting that he issue a notice clarifying that affordable housing projects for veterans that comply with the LIHTC General Public Use criteria are also eligible for Private Activity Bonds (PABs). Senators John Cornyn (R-TX), Catherine Cortez Masto (D-NV), Diane Feinstein (D-CA), Kamala Harris (D-CA), Mazie Hirono (D-HI), and Jacky Rosen (D-NV) stated that their constituents told them that the IRS has reinterpreted the statute governing PABs in a way that now prevents the use of these bonds for projects that serve veterans and other populations with special needs.

The senators pointed out that, in 2008, Congress clarified in the statute governing LIHTCs that, “A project does not fail to meet the general public use requirement solely because of occupancy restrictions or preferences that favor tenants with special needs, who are members of a specified group under a Federal program or State program or policy that supports housing for such a specified group, or who are involved in artistic or literary activities [26 USC 42(g)(9)].” Given that LIHTCs and PABs are designed to be used in tandem, the senators argued, the General Public Use criteria in the LIHTC statute should apply to PABs as well.

“This change is having an immediate impact on planned housing projects for our veterans,” the senators wrote. “For example, the IRS’s new interpretation is the only impediment to breaking ground for a veteran housing project in Windsor, Calif. In addition, the future expansion and development plans of other veteran housing facilities–including in Texas, Hawaii, and Nevada – may be impaired without access to these tax-exempt bonds.”