The Internal Revenue Service has released guidance that will extend temporary relief for low-income housing tax credit and private activity bond-financed properties as a result of the ongoing complication related to COVID-19.
This is the third time the IRS has issued extensions on its Housing Credit Program in relation to the COVID-19 pandemic and this time the notice extends the previous relief for the 10% test for carryover allocations, extended to Dec. 31, 2022; the 24-month rehabilitation period, which is extended at least 12 months depending on the deadline for the minimum rehabilitation expenditure period; placed-in-service deadline, extended to Dec. 31, 2022; the reasonable period for restoration or replacement in the event of casualty loss, extended to Dec. 31, 2022 if the reasonable restoration period ends on or after April 1, 2020. It also extends the agency correction periods, which are extended to Dec. 31, 2022.
An extension to satisfy occupancy obligations in also in the provisions.
It also provides extensions for the requirement for a 30-day notice for state agency reviews of tenant files through the end of 2022 and allows state agencies to defer physical inspections through June 30, 2022, with the option to extend further following the consultation of a local public health expert.
“We are very pleased with the notice that came out,” said Jennifer Schwartz, director of tax and housing advocacy at the National Council of State Housing Agencies. “It's very consistent with what NCSHA had been asking the IRS to do on the Housing Credit Program.”
“It's been harder to get projects back in service in the normal time constraints we would expect because of the supply chain issues and workforce problems that have occurred,” she said. “Extending the deadlines for all of those things is really important.”
All of the provisions in the notice impact both categories in the Low-Income Housing Tax Credit Program, the 9% credit which provides for the allocation of tax credits to projects under the federally designated formula based on a state’s population, among other factors, in addition to the 4% program which allows qualified rental housing projects financed with private activity bonds to receive LIHTC that don’t count against the 9% LIHTC annual credit availability.
The notice also extends the pool of eligible properties, a step further than what was outlined in previous extensions.
“IRS also expanded the universe of properties that were eligible for those deadline extensions and that's also really critical,” Schwartz said. “They had been in the previous guidance, they only applied those extensions to certain properties and as the pandemic has continued, additional properties have needed that.”
“We had hoped that they would have been able to get this out last year, before the end of 2021, but we're just very pleased that we have it now,” she said.
"We are very glad that the IRS has issued these overdue Housing Credit deadline extensions and other flexibilities in light of the continued disruptions to the development construction and ongoing operations of Housing Credit properties as a result of the COVID-19 pandemic," said Emily Cadik, executive director of the Affordable Housing Tax Credit Coalition.
