North Carolina Housing Group Seeks Extended LIHTC Relief

September 16, 2021

Ms. Nicole Cimino
Branch Chief
Office of Chief Counsel
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Mr. Michael Novey
Associate Tax Legislative Counsel
Office of Tax Policy
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Dear Ms. Cimino and Mr. Novey:

The North Carolina Housing Coalition joins with the National Council of State Housing Agencies in urging the Internal Revenue Service (IRS) and U.S. Department of the Treasury (Treasury) to extend certain temporary relief provisions in IRS Notice 2021-12, in light of the continuing disruption the COVID-19 pandemic is having on the low income housing tax credit program.

The Coalition continues to see the impact of the pandemic on housing and the broader economy. This is particularly true of the supply of construction materials, labor, and the functioning of local governments in the permitting process. The Coalition is asking the IRS and Treasury to extend certain provisions in IRS Notice 2021-12. Many of the relief measures expire on September 30, so issuing this guidance prior to that date is critical. We are asking the IRS to:

• Extend the carryover allocation 10% Test deadline as required in IRC Section 42(h)(1)(E)(ii) by 12 months for projects with allocations on or before December 31, 2022.

• Extend the rehabilitation expenditure deadline as required in IRC Section 42(e)(3) and 42(e)(4) by 12 months for projects with allocations on or before December 31, 2022.

• Extend the placed-in-service deadline as required in IRC Section 42(h)(1)(E)(i) by 12 months for all developments allocated Housing Credits in calendar years 2018-2022.

• Extend the rehabilitation period allowed under IRS Revenue Procedures 2014-49 and 2014-50 for casualty loss due to a Major Disaster by 12 months for projects suffering a casualty loss on or before December 31, 2022.

• Extend the year-end restoration period deadline for properties suffering a casualty loss not for Major Disaster reasons by 12 months for projects suffering a casualty loss on or before December 31, 2022.

• Extend the provision on satisfying occupancy obligations under Section 42(f) by allowing any increase in the number of low-income units by the close of the six-month period, following the close of the first year of the credit period so that it applies to projects for which the close of the first year of the credit period is on or before December 31, 2022.

• Continue to allow a 12-month extension of noncompliance corrective action periods and change the current December 31, 2021 deadline to December 31, 2022 at the discretion of the state allocating agency.

• Extend the waiver of tenant file reviews as required in IRS regulation 1.42-5 until December 31, 2021. Because IRS Form 8610 requires Housing Credit agencies to report their ability to meet compliance monitoring requirements on a calendar year basis, replacing the current September 30, 2021 deadline with December 31, 2021 conforms to this annualized structure.

• Extend the waiver of compliance monitoring physical inspections as required in IRS regulation 1.42-5 until December 31, 2022.

• Extend the provision clarifying that closure of property amenities and common space facilities in response to the COVID-19 pandemic do not result in reduction of eligible basis so that it applies to closures through December 31, 2022.

• Make permanent the provision allowing Housing Credit allocating agencies to satisfy QAP public approval requirements under Section 42(m)(1)(A) using telephonic hearings and specify that virtual platforms may also be used to satisfy the public approval requirement.

At this time, we do not recommend extending the remaining provisions of IRS Notice 2021-12. We appreciate the IRS and Treasury's attention to these important provisions, to continuing ensuring the safe and efficient development of affordable housing.

Sincerely,

Samuel Gunter
Executive Director
North Carolina Housing Coalition
Durham, NC