NOTICE: IRS Provides Additional COVID-19 Deadline Relief from LIHTC and PAB Deadlines

On January 11, 2022, the IRS issued Notice 2022-05 extending COVID-19 relief from certain requirements under § 42 of the Internal Revenue Code for qualified low-income housing projects and under §§ 142(d) and 147(d) of the Code for qualified residential rental projects.

The relief in Notice 2022-05 is an extension of certain relief that the IRS published in Notice 2020-23 (April 27, 2020), Notice 2020-53 (July 20, 2020), Notice 2021-12 (February 8, 2021), and Notice 2021-17 (April 5, 2021).

The relief is generally in the form of extending certain deadlines, and waiving certain monitoring requirements. Specifically, Notice 2022-05 provides the following relief:

Extension of Certain Low-Income Housing Project Deadlines
1. The 10-Percent Test for Carryover Allocations
If the original deadline for an Owner of a building with a carryover allocation to meet the 10-percent test is:
  • on or after April 1, 2020, and on or before December 31, 2020, the deadline is extended to the original deadline plus two years.
  • on or after January 1, 2021, and before December 31, 2022, the deadline is extended to December 31, 2022.
2. 24-Month Minimum Rehabilitation Expenditure Period
If the original deadline for the 24-month minimum rehabilitation expenditure period for a building originally is:
  • on or after April 1, 2020, and on or before December 31, 2021, then that deadline is extended to the original date plus 18 months.
  • on or after January 1, 2022, and on or before June 30, 2022, then that deadline is extended to June 30, 2023.
  • on or after July 1, 2022, and on or before December 31, 2022, then that deadline is extended to the original date plus 12 months.
  • on or after January 1, 2023, and on or before December 30, 2023, then that deadline is extended to December 31, 2023.
3. Placed in Service Deadline

For purposes of taxpayers who receive a carryover allocation pursuant to the 10% test, if the original placed-in-service deadline for a low-income building is:

  • the close of calendar year 2020, the new deadline is the close of calendar year 2022 (that is, December 31, 2022).
  • the close of calendar year 2021 and the original deadline for the 10-percent test in § 42(h)(1)(E)(ii) was before April 1, 2020, the new placed-in-service deadline is the close of calendar year 2022 (that is, December 31, 2022).
  • the close of calendar year 2021 and the original deadline for the 10-percent test in § 42(h)(1)(E)(ii) was on or after April 1, 2020, and on or before December 31, 2020, then the new placed-in-service deadline is the close of calendar year 2023 (that is, December 31, 2023).
  • the close of calendar year 2022 (and thus the original deadline for the 10-percent test was in 2021), then the new placed-in-service deadline is the close of calendar year 2023 (that is, December 31, 2023).
4. Reasonable Period for Restoration or Replacement in the Event of Casualty Loss
  • For purposes of § 42(j)(4)(E), both in the case of a casualty loss not due to a pre-COVID-19-pandemic Major Disaster and in situations governed by Section 8.02 of Rev. Proc. 2014-49 in the case of a casualty loss due to a pre-COVID-19-pandemic Major Disaster, if a low-income building’s qualified basis is reduced by reason of the casualty loss and the reasonable period to restore the loss by reconstruction or replacement that was originally set by the HCA (original Reasonable Restoration Period) ends on or after April 1, 2020, then the last day of the Reasonable Restoration Period is postponed by eighteen months but not beyond December 31, 2022. Notwithstanding the preceding sentence, the Agency may require a shorter extension, or no extension at all.
  • For purposes of determining the credit amount allowable under § 42(a) in the case of a credit year that ends on or after April 1, 2020, and not later than the end of the Reasonable Restoration Period (taking into account any extension under the preceding paragraph), if the Owner restores the building by the end of that extended Reasonable Restoration Period, then for taxable years ending after the first day of the casualty and before the completion of the restoration, the Owner must use the building’s qualified basis at the end of the taxable year immediately preceding the first day of the casualty as the building’s qualified basis for that credit year.
5. Extension to Satisfy Occupancy Obligations
  • If the close of the first year of the credit period with respect to a building is on or after April 1, 2020, and on or before December 31, 2022, then, for purposes of § 42(f)(3)(A)(ii), the qualified basis for the building for the first year of the credit period is calculated by taking into account any increase in the number of low-income units by the close of the 6-month period following the close of that first year.
6. Correction Period
  • For purposes of § 1.42-5, if a correction period that was set by the Agency ends on or after April 1, 2020, and before December 31, 2021, then the end of the correction period (including as already extended, if applicable) 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 period is extended to December 31, 2022. Notwithstanding the preceding sentences, the Agency may require a shorter extension, or no extension at all.
Operational Waivers for Low-Income Housing Projects
1. Compliance-Monitoring – Review of Tenant Files
  • An Agency is not required to review tenant files in the period beginning on April 1, 2020, and ending on December 31, 2021. The Agency must have resumed tenant-file review as due under § 1.42-5 as of January 1, 2022.
  • Between April 1, 2020, and the end of 2022, when the Agency gives an Owner reasonable notice that it will review low-income certifications of not-yet-identified low-income units, it may treat reasonable notice as being up to 30 days. Beginning on January 1, 2023, for this purpose reasonable notice again is generally no more than 15 days.
2. Compliance-Monitoring – Physical Inspections
  • An Agency is not required to conduct compliance-monitoring physical inspections in the period beginning on April 1, 2020, and ending on June 30, 2022. Because of high State-to-State and Intra-State variability of COVID-19 transmission, an Agency, in consultation with public health experts, may extend the waiver in the preceding sentence if the level of transmission makes such an extension appropriate. Depending on varying rates of transmission, the extension may be Statewide, may be limited to specific locales, or may be on a project-by-project basis. No such extension may go beyond December 31, 2022. The Agency must resume compliance-monitoring reviews once the waiver expires.
  • Between April 1, 2020, and the end of 2022 only, when the Agency gives an Owner reasonable notice that it will physically inspect not-yet-identified low-income units, it may treat reasonable notice as being up to 30 days. Beginning on January 1, 2023, for this purpose reasonable notice again is generally no more than 15 days.
3. Common Areas and Amenities
  • A temporary full or partial unavailability or closure of an amenity or common area in a low-income building or project does not result in a reduction of eligible basis of the affected building if the unavailability or closure is during some or all of the period from April 1, 2020, to December 31, 2022, and is in response to the COVID-19 pandemic and not because of other noncompliance with § 42. During the above period, an Agency may deny any application of the above waiver or, based on public health criteria, may limit the waiver to partial closure, or to limited or conditional access of an amenity or common area. (For example, the Agency may apply the waiver to access an amenity or common area that is limited to persons wearing masks or to persons fully vaccinated against COVID-19.).
4. Permission for Agencies to Conduct Hearings in the Same Manner and under the Same Procedures as Private-Activity-Bond Hearings
  • Beginning on April 1, 2020, for the purposes of QAP approval under § 42(m)(1)(A), if a public hearing is conducted in a manner and under procedures such that § 1.147(f)-1(d) would be satisfied, taking into account the date on which the hearing is held, then the manner and procedures of the hearing are acceptable for QAP approval under § 42(m)(1)(A). Continued application of the preceding sentence is not dependent on the continuation of the COVID-19 pandemic.
5. Emergency Housing for Medical Personnel and Other Essential Workers
  • If individuals are medical personnel or other essential workers (as defined by State or local governments) who provide services during the COVID-19 pandemic, then, for purposes of providing emergency housing from April 1, 2020 to December 31, 2022, under Rev. Proc. 2014-49 or under Rev. Proc. 2014-50, Agencies, Issuers, Owners, and Operators of low-income housing projects may treat these individuals as if they were Displaced Individuals (defined under Section 5.02 of Rev. Proc. 2014-49 or Section 4.04 of Rev. Proc. 2014-50, as applicable). That is, Agencies, Issuers, Owners, and Operators may provide emergency housing for these individuals pursuant to the provisions of the applicable revenue procedure.
Grant of Relief for Deadlines Associated with Qualified Residential Rental Projects Funded with Bonds
1. The 12-Month Transition Period to Meet Set-Asides for Qualified Residential Rental Projects
  • For purposes of meeting the set-aside requirements on the acquisition of an existing residential rental project pursuant to Section 5.02 of Rev. Proc. 2004-39, if the last day of a 12-month transition period for a qualified residential rental project originally was on or after April 1, 2020, and before December 31, 2022, then that last day is postponed to December 31, 2022.
2. The § 147(d) 2-Year Rehabilitation Expenditure Period for Bonds Used to Provide Qualified Residential Rental Projects
  • If a bond is used to provide a qualified residential rental project, and if the last day of the § 147(d) 2-year rehabilitation expenditure period for the bond originally was on or after April 1, 2020, and before December 31, 2023, then that last day is postponed to the earlier of eighteen months from the original due date or December 31, 2023.
Please contact your DOZ professional if you have any questions.