IRS Provides Short-Term, Limited Housing Credit Relief

Regulation | April 18, 2020 | by Linda Couch

The IRS has issued short-term relief for certain deadlines within the Low Income Housing Tax Credit program. LeadingAge has requested longer, 12-month extensions for a lengthier list of deadlines and will continue to push the IRS to do more for Housing Credit communities in the face of COVID-19. The relief provided in Notice 2020-23 is welcomed but insufficient.

The IRS’s April 10 issuance of Notice 2020-23 provided a new July 15, 2020, deadline for various deadlines that were to be on or after April 1 and before July 15. Notice 2020-23Notice 2020-23 provides the new July 15, 2020, deadline for all time-sensitive actions included in the IRS’s Revenue Procedure 2018-58.

Under Notice 2020-23, several Housing Credit and Housing Bond deadlines are extended until July 15, 2020, including the 10% test, the 24-month period for minimum rehabilitation expenses, the annual tenant income certification requirement, and the annual owner certification of compliance.

In an April 3 letter to the IRS, LeadingAge urged a 12-month extension of eight key Housing Credit deadlines, guidance on operating Housing Credit communities during COVID-19, and support for LeadingAge’s Congressional request of financial resources for Housing Credit providers and residents through the pandemic.

LeadingAge’s deadline extension requests reflect those of the ACTION Campaign, of which LeadingAge serves on the Steering Committee. Approximately 26.2% of the nation’s 3.2 million Low Income Housing Tax Credit homes include someone who is 62 or older; the Housing Credit is a critical source of financing for affordable senior housing and its importance has only grown with the expansion of HUD’s Rental Assistance Demonstration for Section 202s with Project Rental Assistance Contracts.

Housing credit disaster guidance issued in 2014 provides other relief, which, for example, gives state allocating agencies the ability to offer deadline relief on a project-by-project basis or a statewide basis under Revenue Procedure 2014-49.

As complied by the National Council of State Housing Agencies, the national association for the state housing finance agencies that allocate Housing Credits and other programs, the full list of April 1 – July 15 deadlines extended by Notice 2020-23 to July 15, 2020, is:

Housing Credit Deadlines:

  1. The 10 percent test requirement as referenced in Section 42(h)(1)(E) and (F).
  2. The 24-month period in which the requisite amount of rehabilitation expenditures has to be incurred as required in Section 42(e)(3)(A)(ii).
  3. The annual owner certification of compliance as required in regulation 1.42-5(c)(1).
  4. The annual tenant income certification requirement in regulation 1.42-5(c)(1)(iii).
  5. The requirement to notarize a binding agreement by the fifth day following the end of the month in which the binding agreement was made as referenced in regulation 1.42-8(a)(3)(v).
  6. The requirement to notarize a binding agreement by the fifth day following the end of the month in which the tax-exempt bonds are issued as referenced in regulation 1.42-8(b) (1)(vii).
  7. The 10-year rule for claiming credits on an existing building as required in Section 42(d)(2)(D)(i)(IV).
  8. The minimum set-aside requirement as referenced in Section 42(g)(3)(A).
  9. The requirement that a low-income housing commitment must be in effect as of the beginning of the year for a building to receive credit as referenced in Section 42(h)(6)(J).

Housing Bond and Mortgage Credit Certificate Deadlines:

  1. The requirement that the issuer file an election not to issue an amount of qualified mortgage bonds if they are to instead distribute MCCs in Section 1.25-4T(c).
  2. The requirement that an issuer provide notice to the Commissioner of the establishment of a defeasance escrow within 90 days of the date such defeasance escrow is established.
  3. The annual certification to the Secretary by operators of multifamily Housing Bond projects that they continue to meet the requirements of section 142(d).
  4. The election to carry forward bond authority after the year in which the state received such authority.
  5. Requirements for making tax-exempt bond yield reduction payments and rebate payments.
  6. The requirement that an issuer of a tax-exempt bond must submit to the Secretary a statement providing certain information regarding the bond not later than the 15th day of the second calendar month after the close of the calendar quarter in which the bond is issued.

LeadingAge also understands that some state housing finance agencies are urging Housing Credit owners and managers to consider the individual circumstances of tenants when deciding, based on recently issued new HUD income limits, if and when to raise rents where allowed. Owners and managers are working with tenants on payment plans and other measures to mitigate the hardship many tenants are currently facing. Of course, Housing Credit tenants are covered by the March 27 CARES Act’s moratorium on evictions for nonpayment of rent and any associated late fees or penalties. But, for Housing Credit tenants without secondary rental assistance like a Housing Choice Voucher, a 120-eviction moratorium for nonpayment of rent does not mean all the rent arrears will not be due at the end of the 120-day period.

Some state housing finance agencies are also adopting HUD Multifamily flexibilities under COVID-19, such as allowing use of electronic signatures for applications, Tenant Income Certification Forms, leases, and other forms. As with HUD-assisted properties, wet signatures will still have to be collected at a later date. Housing finance agencies are also allowing tenants to electronically provide background documentation for income and assets, where the hard copies, again, must be completed at a later date.