The Internal Revenue Service (IRS) recently issued Notice 2022-52 which extends previously issued temporary relief for qualified low-income housing developments from certain requirements under Section 42 of the Internal Revenue Code. This new guidance extends relief that was included in Notice 2022-05 and is in response to ongoing labor and supply-chain issues.
Placed-in-service deadline extensions include:
- If the original placed-in-service deadline was December 31, 2020, the new deadline is December 31, 2022.
- If the original placed-in-service deadline was December 31, 2021, and the original 10% Test deadline was before April 1, 2020, the new placed-in-service deadline is December 31, 2023.
- If the original placed-in-service deadline is December 31, 2021, and the original 10% Test deadline was on or after April 1, 2020, and on or before December 31, 2020, the new placed-in-service date is December 31, 2023.
- If the original placed-in-service date is December 31, 2022, and the original 10% Test deadline was in 2021, the new placed-in-service deadline is December 31, 2024.
- If the original placed-in-service deadline is December 31, 2023, and the original 10% Test deadline is/was in 2022, the new placed-in-service deadline is December 31, 2024.
Notice 2022-52 also offers an extension of the reasonable period for restoration or replacement due to a casualty loss in certain cases. This deadline may be extended by 24 months, but not beyond December 31, 2023.
The extension of a correction period which originally ended between April 1, 2020, and December 31, 2022, may be extended by a year, but not beyond December 31, 2023, according to Notice 2022-52.
Finally, housing finance agencies may extend waivers for compliance monitoring physical inspections. Housing finance agencies were not required to perform these inspections between April 1, 2020, and June 30, 2022. Notice 2022-52 allows housing finance agencies to extend waivers for these inspections were made appropriate by the level of COVID-19 transmission.
The IRS also recently released guidance on the Average Income Set-Aside Test which is expected to go into effect on October 12, 2022. This guidance clarifies the requirements that must be satisfied in order for a development to meet the average income set aside as well as provides more flexibility for developments to meet the set-aside. The newly released regulations remove the “cliff test”. Previously, if a unit did not maintain its low-income status and caused the remaining units to rise above 60 percent of the area median income, it could have caused the entire development to fail the average income test and no longer meet its set aside which would mean it would no longer be considered a low-income housing tax credit development. The new regulations no longer include this test but have replaced it by stating that the development may satisfy the average income test if at least 40% of the units are eligible low-income units and have been designated in a way that in total averages 60% or less of the area median income. The new guidance also provides several instances where a change in unit designation is allowed, as well as other provisions.
McKonly & Asbury is a leader in accounting for affordable housing partnerships. Our team has the specialized knowledge to help you ensure you comply with IRS and tax credit allocating agency reporting requirements. For more information on these services and more be sure to visit our Affordable Housing page, and don’t hesitate to contact us.