The Internal Revenue Service (IRS) and the U.S. Department of the Treasury issued new final regulations on the average income test (AIT). Notably, the new regulations allow an owner to meet the AIT if at least 40 percent of a building’s units collectively average 60 percent or less of area median gross income, as opposed to all the low-income units. In doing so, the new regulations remove the so-called “cliff” by limiting the impact of a unit going out of compliance to just that unit instead of causing the whole building to fail the AIT. This change now brings the AIT regulations in line with 20-50 and 40-60 properties. The new regulations also allow owners to redesignate units and are required to report any changes to their housing finance agency (HFA).
NH&RA submitted comments to the IRS and is pleased to see many of our suggestions in the final rule. For more on AIT, see the National Council of Housing Market Analysts (NCHMA) white paper on Recommended Practices for LIHTC Average Income Properties and join us at the Fall Developers Forum next week. Ellen Lurie Hoffman with the U.S. Department of the Treasury will walk through the changes and the Unpacking the New Average Income Regulations panel will offer industry stakeholders to react to the regulations.
