16C — February 19 - March 12, 2021 — Property Management — Owners, Developers & Managers — M id A tlantic Real Estate Journal
By Michael Pintabone, CPA, Withum Congress and Department of Treasury Grant Relief to LIHTC Communities
ongress recently passed the Consolidated Ap- propriations Act, 2021,
The provisions of this text establish aminimum tax credit percentage and are as follows: • Subsection (b) of IRC Sec - tion 42 is amended to provide an applicable credit percentage for federally subsidized build- ings of not less than 4% • The 30% present value credit now joins its big brother, the 70% present value credit, to establish a credit floor • The 4% tax credit percent - age floor provision is effective for federally-subsidized build- ings as follows: o If financed with tax-exempt bonds:
▪ Placed in service by the taxpayer after December 31, 2020, and ▪ Received a tax credit al - location after December 31, 2020, and ▪ Tax-exempt bonds are is - sued after December 31, 2020 o If not financed with tax- exempt bonds: ▪ Placed in service by the taxpayer after December 31, 2020, and ▪ Received a tax credit alloca - tion after December 31, 2020 With the 30% present value tax credit percentage hitting all-time lows during 2020,
this floor provision can only sweeten the pot for tax credit investors, provide more capital to finance additional afford - able housing units, and help shorten the housing gap. Meanwhile, the IRS recently issued Notice 2021-12, which grants additional relief in three primary areas related to the Low Income Housing Tax Credit (LIHTC): 1. Deadlines related to the credit 2. Operational provisions 3. Deadlines associated with qualified residential rental projects
Some notable provisions from IRS Notice 2021-12 include the following: Relief for deadlines related to the credit 1) 10-percent test for car- ryover allocation If the last day for an Owner of a building with a carryover allocation to meet the 10-per- cent test falls on or after April 1, 2020 and before September 30, 2021, the last day for the Owner to meet the 10-percent test is postponed to the earlier of one year from the original due date or September 30, 2021. Meeting the 10-percent test is critical to preserving a LIHTC allocation from the relevant Agency. 2) 24-month minimum rehabilitation expenditure period If the 24-month minimum rehabilitation expenditure period for a building origi- nally ends on or after April 1, 2020 and before September 30, 2021, the last day for the Owner to incur the minimum rehabilitation expenditures with respect to the building is postponed to the earlier of one year from the original end date or September 30, 2021. An extension of this expenditure period may provide additional Qualified Basis within your LIHTC project. 3) Placed in service dead- line If the deadline for a low- income building to be placed in service is the close of calendar year 2020, the last day for the Owner of the building to place the building in service is postponed to December 31, 2021. This extension will help preserve the Owner’s LIHTC allocation. 4) Extension to satisfy oc- cupancy 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 June 30, 2021, then 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. This provision will help Owners meet quali- fied occupancy projections and avoid deferring 1st year credits and / or claiming a portion of their LIHTC over the 15 year compliance. continued on page 18B
which com- prises 2,100+ p a g e s o f t e x t , wi t h a d i v i s i on d e d i c a t e d to Taxpayer C e r t a i n t y and Disaster Tax Relief .
Included within that division is one small section that is ex- pected to have an enormously positive impact on LIHTC developments.
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