Low Income Housing Tax Credit Program Extensions

AAFCPAs would like to make clients aware that on January 11, 2022 the IRS issued Notice 2022-05 which further extends the temporary relief from certain requirements for low-income housing tax credit (LIHTC) projects, originally extended earlier in 2020 & 2021 due to the COVID-19 pandemic.

For your convenience we have outlined some of the key highlights of the notice:

Grant Relief for Deadlines

10% test for carryover allocations

• If the original deadline was after April 1, 2020 but before Dec 31, 2020, it is extended to the original deadline plus 2 years.
• For those due after Jan 1, 2021 but before Dec 31, 2022, the deadline is Dec 31, 2022.

24-month minimum rehabilitation expenditure period

• If the original deadline was after April 1, 2020 but before Dec 31, 2021, it is extended to the original deadline plus 18 months.
• For those due after Jan 1, 2022 but before June 30, 2022, the deadline is June 30, 2023.
• For those due after July 1, 2022 but before December 31, 2022, the deadline is the original date plus 12 months.
• For those due after Jan 1, 2023 but before December 30, 2023, the deadline is December 31, 2023.

Placed in service deadline

• If the original deadline was the close of calendar year 2020, the new deadline is Dec 31, 2022.
• If the original deadline was the close of calendar year 2021, the new deadline is Dec 31, 2023.

Reasonable period for restoration or replacement in event of casualty loss

• If the original Reasonable Restoration Period ends on or after April 1, 2020, then it is postponed by 18 months but not beyond Dec 31, 2022.
• If the original credit year ends on or after April 1, 2020 and not later than the end of the Reasonable Restoration Period, if the Owner restores the building by the end of that extended Reasonable Restoration Period, then for taxable years ending after the first day of the casualty and before the completion of the restoration, the Owner must use the building’s qualified basis at the end of the taxable year immediately preceding the first day of the casualty as the building’s qualified basis for that credit year.

Occupancy obligations for 1st year credit considerations

• If the close of the first year of the credit period is on or after April 1, 2020 and on or before December 31, 2022, then the qualified basis for the building for the first year of the credit period is calculated by taking into account any increase in the number of low-income units by the close of the 6-month period following the close of that first year.

Correction period

• If a correction period ends on or after April 1, 2020 and before December 31, 2021, then the end of the correction period (including as already extended, if applicable) is extended by a year, but not beyond December 31, 2022.
• If the correction period ends during 2022, the end of the period is extended to December 31, 2022.

12-month transition period for set aside testing purposes

• If the last day of a 12-month transition period for a qualified residential rental project originally was on or after April 1, 2020, and before December 31, 2022, then that last day is postponed to December 31, 2022.

24-month rehabilitation period for bond projects

• If a bond is used to provide a qualified residential rental project and if the last day of the 2-year rehabilitation expenditure period for the bond originally was on or after April 1, 2020, and before December 31, 2023, then that last day is postponed to the earlier of eighteen months from the original due date or December 31, 2023.

Compliance Monitoring

Tenant file review

• Agency is not required to perform reviews between April 1, 2020 – December 31, 2021
• The Agency must have resumed tenant-file review as of Jan 1, 2022.

Physical Inspections

• Agency is not required to conduct compliance monitoring physical inspections in the period beginning on April 1, 2020, and ending on June 30, 2022, with the ability to extend but not beyond Dec 31, 2022.
• Between April 1, 2020 and Dec 31, 2022 reasonable notice shall be up to 30 days.
• Beginning Jan 1, 2023 reasonable notice will generally be no more than 15 days.

Common Areas and Amenities (April 1, 2020 – December 31, 2022)

Common areas or amenities that are temporarily unavailable or closed in response to COVID-19 (and not due to other non-compliance) will not result in reduction in eligible basis if the closure is between April 1, 2020 to December 31, 2022.

Guidance Permitting Agencies to Conduct Telephone Hearings

For purposes of an Agency’s QAP meeting, if the hearing is on or after April 1, 2020, and it is conducted by teleconference that is accessible to residents, then the hearing does not fail to satisfy the requirements solely that it was not held in person.

Emergency Housing for Medical Personnel and Other Essential Workers (April 1, 2020 – December 31, 2022)

Services provided by medical personnel and other essential workers during COVID-19 may treat these individuals as if they were displaced individuals.

If you have any questions about how these provisions affect your organization, please contact Matthew McGinnis, CPA at mmcginnis@nullaafcpa.com, 774.512.4080; or your AAFCPAs Partner.