LeadingAge submits concerns, recommendations for Housing Credit Average Income Test

Regulation | December 30, 2020 | by Juliana Bilowich

LeadingAge submits concerns, recommendations on proposed rule by the IRS to administer the new Average Income minimum set-aside for Housing Credit communities. 

For housing providers and residents participating in the Low-Income Housing Tax Credit (LIHTC) program, the new Average Income minimum set-aside has offered many opportunities, but also challenges and the need for more clarity. The Average Income Test (AIT) was created as a third minimum set-aside option for Housing Credit communities; it requires that at least 40 percent of the units in the project to be rent-restricted and designated low-income units, and the average unit designation to be no more than 60 percent of Area Median Income (AMI). 

LeadingAge housing provider members were strong advocates of the new minimum set-aside, enacted in 2018, as a mechanism for reaching more older adults with low and extremely low incomes. Since enactment, more clarity has been needed on administering the new test as an effective set-aside for tax credit properties.

In October 2020, the IRS issued some proposed clarity, but included a number of concerning restrictions for implementation of the Average Income Test (AIT). In response to the Notice of Proposed Rulemaking filed by the IRS, LeadingAge submitted comments expressing concerns and offering recommendations for improvements in the final rule.

LeadingAge recommendations on the proposed rule included allowing for modified or floating unit designations under the Average Income set-aside; more consistent and reasonable compliance measures for units and properties utilizing the set-aside; and fallback opportunities for properties to choose a different set-aside or grandfather in residents, should the proposed rule take effect as written.