Due to the widespread devastation caused by Hurricane Sandy, the President has declared that major disasters exist in Connecticut, New York and New Jersey, making federal funding available to affected individuals in designated counties through the Federal Emergency Management Agency (FEMA). In a press release on November 5, the Internal Revenue Service (IRS) announced that the agency will waive certain low-income housing tax credit (LIHTC) rules in order to allow owners of low-income housing to provide temporary shelter to victims of Hurricane Sandy who do not qualify as low-income. This means that certain income limitations and non-transient requirements for qualified low-income housing projects will be temporarily suspended to enable LIHTC property owners to rent vacant units to displaced individuals in designated counties.
The notice indicates that low income projects in the first year of the credit period can provide temporary housing for people of any income until November 30, 2013 and those individuals will count toward meeting the project’s qualified basis and minimum set-aside. The state’s designated housing finance agency (HFA) must approve the project for the provision of temporary housing and the HFA will determine the appropriate length of the temporary period, not to extend beyond November 30, 2013.
Units occupied by displaced persons in a project in the second or subsequent year of its credit period must maintain characteristics held prior to being occupied by those affected by the storm (i.e. low-income, market or vacant). This means that these displaced individuals will not affect a project’s qualified basis or minimum set-aside during the temporary period. Notice 2012-68 also provides some extensions for carryover allocations in disaster areas. All other rules and requirements of Section 42 will continue to apply during the temporary housing period.
Click here to read Notice 2012-68.
Click here to read the IRS press release.
