OIRA Reviewing Average Income Test Regs
The U.S. Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) recently received for review from the U.S. Treasury Department final regulations concerning the “average income test” under Section 42(g) for purposes of the low-income housing credit.
What they’re saying: According to OIRA, the final regulations were received for review on Sept. 12, 2022. OIRA gave brief description of the regulations: “The Consolidated Appropriations Act of 2018 added a new applicable minimum set-aside test under section 42(g) of the Internal Revenue Code known as the average income test. This proposed regulation will implement requirements related to the average income test.”
The context: The Treasury Department and IRS first proposed these regulations in October 2020. To qualify for LIHTC, developers must make commitments to create housing that’s affordable to households that meet specific income thresholds. Income averaging allows an owner to meet the same affordability goals by taking the average of the income for some households who are in the property as opposed to requiring all to meet the same threshold. This “average income test” for LIHTC qualification enables the creation of more financially stable, mixed-income developments and makes LIHTC-supported housing more feasible in sparsely populated rural areas. It will also facilitate the production of additional affordable and available units for extremely low-income tenants.
The bottom line: OIRA’s pending review is the latest development with the average income test rules. As part of its Housing Supply Action Plan, the Biden administration has committed to finalizing the proposed rules for the LIHTC average income test.