IRS Extends Deadlines for Several LIHTC Requirements Due to COVID-19

The IRS has issued Notice 2020-23 extending the deadline to July 15, 2020 for any tax action that was due to be performed from April 1, 2020 through July 15, 2020. The actions for which the extended deadline applies were outlined in Revenue Procedure 2018-58 and include several affordable housing provisions. Among the deadlines extended for low-income housing tax credit properties are the 10% of reasonably expected basis test, the 24-month period of minimum rehabilitation expenses, and the annual owner certification of compliance.

The IRS is awaiting further guidance from the Department of Treasury on what other specific considerations the IRS may grant with regard to the Section 42 program.

The IRS has also agreed to apply relevant sections of Revenue Procedure 2014-49 (for the LIHTC program) and 2014-50 (for Tax-Exempt Bonds)immediately. These procedures outline the waivers from certain requirements for projects located in federal disaster areas.

As of April 8, 2020, 46 states had disaster declarations due to the COVID – 19 outbreak.

Specific Requirements Outlined in 2014-49 (requires State approval)

  • Carryover Allocation and Placed in Service Requirements:
    • 10% deadline extension: Housing Finance Agencies (HFAs) may grant an extension for meeting the 10% expenditure test. Owners with carryover allocations must demonstrate that at least 10% of total project costs have been incurred within one year after the allocation date. Under 2014-49, the HFA may grant an extension of up to six-months.
    • Placed-in-Service extension: the two-year placed in service deadline may be extended by the HFA for up to 12-months.

These extensions may be granted on an individual project basis or for all or a group of owners in the disaster area.

Since 2014-49 and 50 were intended for projects that were “damaged” in a major disaster area, additional guidance is required in order to determine if delays in leasing will be able to obtain deadline extensions, but it is believed that such extensions will be granted.