In response to the ongoing COVID-19 pandemic, the IRS has issued Notice 2022-05 on January 10, 2022 to extend temporary relief from certain requirements under the Internal Revenue Code (IRC) Section 42 for qualified low-income housing projects.
For relief that was provided before this recent IRS notice, please refer to our 1/25/21 blog “IRS Notice 2021-12 Provides LIHTC Relief and Extends Deadlines.”
The IRS Notice 2022-05 is now extending previous relief for:
- 10% test for carryover allocations
- placed-in-service deadline
- 24-month minimum rehabilitation period
- reasonable period for restoration or replacement in the event of casualty loss
- agency correction periods
- period to satisfy occupancy obligations
- operational relief
10% Test for Carryover Allocations
For the IRC Sec. 42(h)(1)(E)(ii) 10% test for carryover allocations, the deadline is extended to:
- original deadline plus two years, if the original deadline was between April 1, 2020 and December 31, 2020
- December 31, 2022, if the original deadline was between January 1, 2021 and December 30, 2022
Placed-in-Service Deadline
For the IRC Sec. 42(h)(1)(E)(i) place-in-service requirement, the new deadline to place a low-income building in service is:
- December 31, 2022, if the original deadline was December 31, 2020
- December 31, 2022, if the original deadline was December 31, 2021 and the original deadline for the 10% test for carryover allocations was before April 1, 2020
- December 31, 2023, if the original deadline was December 31, 2021 and the original deadline for the 10% test for carryover allocations was between April 1, 2020 and December 31, 2020
- December 31, 2023, if the original deadline was December 31, 2022
24-Month Minimum Rehabilitation Period
For the IRC Sec. 42(e) 24-month minimum rehabilitation expenditure period, the deadline is extended to:
- The original date plus 18 months, if the original deadline was between April 1, 2020 and December 31, 2021
- June 30, 2023, if the original deadline was between January 1, 2022 and June 30, 2022
- The original date plus 12 months, if the original deadline was between July 1, 2022 and December 31, 2022
- December 31, 2023, if the original deadline was between January 1, 2023 and December 30, 2023
Reasonable Restoration/Replacement Period
For the reasonable period for property restoration or replacement in the event of a casualty loss, if the reasonable period ended on or after April 1, 2020, then the last day of the reasonable restoration or replacement period is extended by 18 months, but no later than December 31, 2022.
Housing Agency Correction Period
For noncompliance corrective action for which the correction period set by the state housing agency ends between April 1, 2020 and December 30, 2021, the end of the correction period is extended by a year, but not beyond December 31, 2022. If the correction period originally set by the agency ends during 2022, the end of the correction period is extended to December 31, 2022.
Extension to Satisfy Occupancy Obligations
For first year credit periods ending between April 1, 2020 and December 31, 2022, the qualified basis at the end of the first credit year is calculated by taking into account any increase in the number of low-income units by the close of the six-month period following the close of that first year. Please read our blog “Extension of Temporary Relief for Late-leased Units”.
Operational Relief
Following is a summary of some of the operational relief that has been extended.
State housing credit agencies are not required to conduct compliance monitoring physical inspections in the period from April 1, 2020 to June 30, 2022. Depending on the COVID-19 transmission rate, state agencies, in consultation with public health experts, may extend the waiver for physical inspections, but such extension may not go beyond December 31, 2022.
For the period from April 1, 2020 to December 31, 2022, the temporary closure of property amenities and common space facilities in response to COVID-19 pandemic will not result in a reduction of eligible basis and a loss of credits.
For the period from April 1, 2020 to December 31, 2022, LIHTC properties may be used temporarily to provide emergency housing for medical personnel and other essential workers providing services during the COVID-19 pandemic regardless of income eligibility.
If you have any questions, please contact your engagement lead member directly or email us at info@lvhj.com.
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