IRS offers relief on low-income housing tax credits in response to coronavirus

The Internal Revenue Service is extending timelines for performing some of the actions associated with the low-income housing tax credit and bonds for qualified residential rental projects to give businesses more time during the COVID-19 pandemic.

The IRS issued Notice 2020-53 Wednesday to offer regulatory and tax relief to issuers, operators, owners, and tenants of qualified low-income housing projects or qualified residential rental projects financed with exempt facility bonds, and state agencies that have jurisdiction over such projects.

For some of the time-sensitive actions that are scheduled to be performed and requirements to be met on or after April 1, 2020 and before Dec. 31, 2020, owners and operators now have until Dec. 31, 2020 to perform the actions and satisfy the requirements.

In addition, between April 1, 2020 and Dec. 31, 2020, owners of qualified low-income housing projects aren’t required to perform some of the income recertifications or decrease the eligible basis in a building because of the temporary closure of an amenity or common area due to the novel coronavirus pandemic, and state agencies that have jurisdiction over the projects aren’t required to do compliance-monitoring.

On top of that, between April 1, 2020 and Dec. 31, 2020, owners and operators of such projects, issuers, and state agencies can treat medical personnel and other essential workers offering services during the COVID-19 pandemic as if they were “displaced individuals,” as defined in Rev. Procs. 2014-49 and 2014-50, and thus can provide emergency housing for them as described in revenue procedures.

More details about tax relief for those affected by the COVID-19 pandemic can be found on IRS.gov. In connection with the relief, the IRS is also issuing proposed regulations (PDF) pertaining to the compliance-monitoring duties of state agencies for purposes of the low-income housing credit. The proposed rules relax the minimum compliance-monitoring sampling requirement for purposes of physical inspections and low-income certification review, offering more flexibility and less of a burden than the requirements in final regulations published in Feb. 2019.

An industry group, the Affordable Housing Tax Credit Coalition, welcomed the regulatory relief and predicted it would help keep low-income housing development on track during the pandemic. The group said the measures would address some of the obstacles to building and preserving affordable housing during the COVID-19 crisis, at a time when affordable housing is needed more than ever. The new IRS guidance will provide needed deadline extensions, compliance and review moratoriums, and added flexibility to address some of the challenges that have emerged, such as social distancing policies.

“Prior to the COVID-19 crisis, nearly 11 million renter households were spending more than half of their income on rent, and now millions more are facing economic hardship, compounding the need for affordable housing,” said AHTCC executive director Emily Cadik in a statement Thursday. “These flexibilities will allow us to keep developments moving forward more efficiently so the Housing Credit can continue to provide homes to those in need.”

The group pointed out that the IRS guidance includes many of the regulatory accommodations requested by the National Council of State Housing Agencies and supported by AHTCC and its partners. In a letter to the Treasury Department in April, the AHTCC joined over 220 other organizations urging IRS changes in response to COVID-19.

“We thank the IRS for recognizing the immediate need for greater flexibility on behalf of providers of affordable housing and the low-income families we serve,” said Michael Gaber, president of the AHTCC board of directors and executive vice president of WNC, Inc., in a statement Thursday. “These are common-sense measures that will have a significant impact as we work to provide homes across the country.”

The AHTCC is asking for further relief in a set of legislative proposals and national affordable housing priorities to address other ugent affordable housing development challenges created by the COVID-19 pandemic, including a minimum 4 percent Housing Credit rate, and provisions that would bolster the country’s long-term economic recovery by expanding and strengthening the low-income housing tax credit.

David 'Dee' Delgado/Bloomberg