IRS recently published Notice 2020-58 which extends the measuring period used in satisfying the substantial rehabilitation (sub rehab) test requirement for historic tax credits. Projects with a 24- or 60-month measuring period ending on or after April 1, 2020, and before March 31, 2021, now have until March 31, 2021 to incur sufficient qualified rehabilitation expenditures to satisfy the sub rehab test. This applies to both five-year credit projects and projects which still qualify for one-year credits under the transition rule included in the Tax Cuts & Jobs Act of 2017.
While this extension helps all HTC transactions, it particularly benefits projects that have experienced recent construction delays and were grappling with a 24-month period deadline of June 20, 2020, to remain eligible under the transition rule. Those projects can now use a sub rehab test end date as late as December 2020 if they can still reach completion in 2020, or March 31, 2021, if completion occurs in 2021. The March 31, 2021 date would provide a testing period in excess of 33 months for projects previously targeting an end date of June 2020.
