IRS Issues Disaster Relief Guidance for LIHTC Sites
The IRS recently released two revenue procedures that provide guidance about temporary disaster relief for qualified developments that were financed by the LIHTC or tax-exempt bonds. The new revenue procedures modify similar guidance that the IRS issued in 2007, in Revenue Procedure 2007-54. The old guidance: (1) provided relief from the carryover allocation provisions; (2) clarified the consequences if an owner failed to restore a building within a reasonable restoration period; (3) provided relief from certain compliance monitoring requirements; (4) allowed agencies to provide relief for buildings severely damaged or destroyed in the first year of the credit period; and (5) described the amount of credit allowable for a restored building.
Revenue Procedure 2007-54 also allowed owners to rely on the self-certification of income eligibility of an individual who was displaced from his or her principal residence as a result of a “major disaster” and whose principal residence was in a city, county, or other local jurisdiction designated for individual assistance by FEMA as a result of the major disaster. The self-certification couldn’t extend for more than four months beyond the date of the president’s major disaster declaration. During the four-month self-certification period, the self-certified tenant was deemed a qualified low-income tenant. After the four-month self-certification period, the self-certified tenant was treated as a qualified low-income tenant only if the owner obtained all documentation required under Section 42 to support the tenant’s continued status as a qualified low-income individual.
The recently released Revenue Procedure 2014-49 offers key modifications to Revenue Procedure 2007-54. These include:
- Changing the reasonable restoration period for recapture relief and the tolling period for severely damaged, destroyed, or uninhabitable buildings in the first year of the credit period;
- In determining qualified basis, using the building’s qualified basis at the end of the taxable year immediately preceding the first day of the incident period as determined by FEMA, rather than at the end of the taxable year preceding the president’s major disaster declaration;
- Incorporating a temporary suspension of certain income limitations for displaced individuals;
- Eliminating the need for self-certification of income eligibility;
- Permitting an agency to allow an owner within its jurisdiction to provide emergency housing relief to displaced individuals from other jurisdictions;
- Describing the consequences of providing emergency housing relief in the first year of the credit period and after the first year of the credit period; and
- Modifying the safe harbor relating to the amount of credit allowable to a restored building to provide relief in circumstances where the restoration cost is less than the eligible basis cost.