July 7, 08

NEWS / Relief from Certain Low-Income Housing Credit Requirements Due to Severe

The Internal Revenue Service is suspending certain requirements under
§ 42 of the Internal Revenue Code for low-income housing credit projects in the
United States to provide emergency housing relief needed as a result of the
devastation caused by severe storms, tornadoes, and flooding in Wisconsin
beginning on June 5, 2008. This relief is being granted pursuant to the Service’s
authority under § 42(n) and § 1.42-13(a) of the Income Tax Regulations.
BACKGROUND
On June 14, 2008, the President declared a major disaster for the State of
Wisconsin. This declaration was made under the Robert T. Stafford Disaster
Relief and Emergency Assistance Act, 42 U.S.C. 5121-5206 (2000 and Supp. II
2002). Subsequently, the Federal Emergency Management Agency (FEMA)
designated jurisdictions for Individual Assistance. The State of Wisconsin has
requested that the Service allow owners of low-income housing credit projects to
provide temporary housing in vacant units to individuals who resided in
jurisdictions designated for Individual Assistance in Wisconsin and who have
been displaced because their residences were destroyed or damaged as a result
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of the devastation caused by the severe storms, tornadoes, and flooding. Based
upon this request and because of the widespread damage to housing caused by
the severe storms, tornadoes, and flooding, the Service has determined that the
Wisconsin Housing and Economic Development Authority (Authority) may
provide approval to project owners to provide temporary emergency housing for
displaced individuals in accordance with this notice.
I. SUSPENSION OF INCOME LIMITATIONS
The Service has determined that it is appropriate to temporarily suspend
certain income limitation requirements under § 42 for certain qualified low-income
projects. The suspension will apply to low-income housing projects approved by
the Authority, in which vacant units are rented to displaced individuals. The
Authority will determine the appropriate period of temporary housing for each
project, not to extend beyond July 31, 2009 (temporary housing period).
II. STATUS OF UNITS
A. Units in the first year of the credit period
A displaced individual temporarily occupying a unit during the first year of
the credit period under § 42(f)(1) will be deemed a qualified low-income tenant
for purposes of determining the project’s qualified basis under § 42(c)(1), and for
meeting the project’s 20-50 test or 40-60 test as elected by the project owner
under § 42(g)(1). After the end of the temporary housing period established by
the Authority (not to extend beyond July 31, 2009), a displaced individual will no
longer be deemed a qualified low-income tenant.
B. Vacant units after the first year of the credit period
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During the temporary housing period established by the Authority, the
status of a vacant unit (that is, market-rate or low-income for purposes of § 42 or
never previously occupied) after the first year of the credit period that becomes
temporarily occupied by a displaced individual remains the same as the unit’s
status before the displaced individual moves in. Displaced individuals
temporarily occupying vacant units will not be treated as low-income tenants
under § 42(i)(3)(A)(ii). However, even if it houses a displaced individual, a lowincome
or market rate unit that was vacant before the effective date of this notice
will continue to be treated as a vacant low-income or market rate unit. Similarly,
a unit that was never previously occupied before the effective date of this notice
will continue to be treated as a unit that has never been previously occupied
even if it houses a displaced individual. Thus, the fact that a vacant unit
becomes occupied by a displaced individual will not affect the building’s
applicable fraction under § 42(c)(1)(B) for purposes of determining the building’s
qualified basis, nor will it affect the 20-50 test or 40-60 test of § 42(g)(1). If the
income of occupants in low-income units exceeds 140 percent of the applicable
income limitation, the temporary occupancy of a unit by a displaced individual will
not cause application of the available unit rule under § 42(g)(2)(D)(ii). In addition,
the project owner is not required during the temporary housing period to make
attempts to rent to low-income individuals the low-income units that house
displaced individuals.
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III. SUSPENSION OF NON-TRANSIENT REQUIREMENTS
The non-transient use requirement of § 42(i)(3)(B)(i) shall not apply to any
unit providing temporary housing to a displaced individual during the temporary
housing period determined by the Authority in accordance with section I of this
notice.
IV. OTHER REQUIREMENTS
All other rules and requirements of § 42 will continue to apply during the
temporary housing period established by the Authority. After the end of the
temporary housing period, the applicable income limitations contained in
§ 42(g)(1), the available unit rule under § 42(g)(2)(D)(ii), the nontransient
requirement of § 42(i)(3)(B)(i), and the requirement to make reasonable attempts
to rent vacant units to low-income individuals shall resume. If a project owner
offers to rent a unit to a displaced individual after the end of the temporary
housing period, the displaced individual must be certified under the requirements
of § 42(i)(3)(A)(ii) and § 1.42-5(b) and (c) to be a qualified low-income tenant. To
qualify for the relief in this notice, the project owner must additionally meet all of
the following requirements:
(1) Major Disaster Area
The displaced individual must have resided in a Wisconsin jurisdiction
designated for Individual Assistance by FEMA as a result of the severe storms,
tornadoes, and flooding in Wisconsin beginning on June 5, 2008.
(2) Approval of the Wisconsin Housing and Economic Development
Authority
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The project owner must obtain approval from the Authority for the relief
described in this notice. The Authority will determine the appropriate period of
temporary housing for each project, not to extend beyond July 31, 2009.
(3) Certifications and Recordkeeping
To comply with the requirements of § 1.42-5, project owners are required
to maintain and certify certain information concerning each displaced individual
temporarily housed in the project, specifically: name, address of damaged
residence, social security number, and a statement signed under penalties of
perjury by the displaced individual that, because of damage to the individual’s
residence in an Wisconsin jurisdiction designated for Individual Assistance by
FEMA as a result of the severe storms, tornadoes, and flooding beginning on
June 5, 2008, the individual requires temporary housing. The owner must notify
the Authority that vacant units are available for rent to displaced individuals.
The owner must also certify the date the displaced individual began
temporary occupancy and the date the project will discontinue providing
temporary housing as established by the Authority. The certifications and
recordkeeping for displaced individuals must be maintained as part of the annual
compliance monitoring process with the Authority.
(4) Rent Restrictions
Rents for the low-income units that house displaced individuals must not
exceed the existing rent-restricted rates for the low-income units established
under § 42(g)(2).
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(5) Protection of Existing Tenants
Existing tenants in occupied low-income units cannot be evicted or have
their tenancy terminated as a result of efforts to provide temporary housing for
displaced individuals.
EFFECTIVE DATE
This notice is effective June 14, 2008 (the date of the President’s major
disaster declarations as a result of the severe storms, tornadoes, and flooding in
Wisconsin beginning on June 5, 2008).
PAPERWORK REDUCTION ACT
The collection of information contained in this notice has been reviewed
and approved by the Office of Management and Budget in accordance with the
Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-2107.
An Agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless the collection of information
displays a valid OMB control number.
The collection of information in this notice is in the section titled “OTHER
REQUIREMENTS” under “(3) Certifications and Recordkeeping.” This
information is required to enable the Service to verify whether individuals are
displaced as a result of the devastation caused by severe storms, tornadoes, and
flooding in Wisconsin beginning on June 5, 2008, and thus warrant temporary
housing in vacant low-income housing credit units. The collection of information
is required to obtain a benefit. The likely respondents are individuals and
businesses.
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The estimated total annual recordkeeping burden is 125 hours.
The estimated annual burden per recordkeeper is approximately 15
minutes. The estimated number of recordkeepers is 500.
Books or records relating to a collection of information must be retained as
long as their contents may become material to the administration of the internal
revenue law. Generally, tax returns and tax return information are confidential,
as required by 26 U.S.C. 6103.
DRAFTING INFORMATION
The principal author of this notice is David Selig of the Office of the
Associate Chief Counsel (Passthroughs and Special Industries). For further
information regarding this notice, contact Mr. Selig at (202) 622-3040 (not a toll
free call).