The Internal Revenue Service (IRS) recently issued Notice 2013-40 and 2013-39 to suspend certain low-income housing tax credit (LIHTC) and tax exempt facility bond rules in order to allow owners of low-income housing to provide temporary shelter to non-low-income victims of the May 2013 Oklahoma tornadoes. A recently issued subsequent notice, Notice 2013-47, extends the incident period for this disaster to be May 18, 2013 through June 2, 2013, amends the incident type for the disaster to include flooding, and includes additional jurisdictions qualified for Individual Assistance.

The original Notices temporarily suspend certain income limitations and non-transient requirements for qualified low-income housing projects to enable LIHTC property owners to rent vacant units to any individual who has been displaced because his or her residence was destroyed or damaged as a result of the tornadoes or floods.  The Notices indicate that low income projects in the first year of their credit period can provide temporary housing for people of any income and those individuals will be deemed a qualified low-income tenant for purposes of determining the project’s qualified basis and for meeting the project’s 20-50 test or 40-60 test. 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 May 31, 2014.

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 2013-40 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 the most recent Notice 2013-47
Click here to read Notice 2013-40
Click here to read Notice 2013-39