IRS Extends Physical Inspections Pilot Program Deadline
The IRS has extended through 2014 the Physical Inspections Pilot Program for participating states, which is an alternative method, announced in Notice 2012-18 to satisfy certain physical inspection and certification review requirements under Regulation Section 1.42-5(c)(2).
This regulation provides inspection and review procedures that a state or local housing credit agency is required to follow in monitoring for LIHTC program compliance. In 2011, the Physical Inspections Pilot Program was announced for housing finance agencies in participating states in order to preclude duplicate inspections. The agencies can use the inspection protocol of the Real Estate Assessment Center (REAC) of the Department of Housing and Urban Development to meet their physical inspection responsibilities under Regulation Section 1.42-5(c)(2).
Notice 2012-18 provided that participation in the pilot program by an agency would be deemed to satisfy the requirements regarding on-site physical inspections of at least 20 percent of the low-income units and of all buildings in a project. Additionally, the agency could satisfy the certification review requirements of Regulation Section 1.42-5(c)(2)(ii) by reviewing the appropriate records for 20 percent of the low-income units in the project regardless of whether any of the units whose files were reviewed were among the units that were physically inspected. These provisions applied from Nov. 7, 2011, through Dec. 31, 2012. The new guidance extends the provisions of Notice 2012-18 through Dec. 31, 2014.