The IRS recently issued Notice 2012-18 to clarify rules relating to compliance monitoring and physical inspection requirements under the Rental Policy Working Group’s (RPWG) Physical Inspections Pilot Program. This program hopes to achieve a more coordinated effort for conducting physical inspections at properties that benefit from multiple sources of Federal funding with different inspection protocol. Under this program, Housing Finance Agencies (HFAs) from six states, Michigan, Minnesota, Ohio, Oregon, Washington, and Wisconsin, are able to satisfy their property inspection responsibilities by using either their current property-inspection protocol through Section 42 of the Internal Revenue Code or the inspection protocol of HUD’s Real Estate Assessment Center (REAC).
The IRS notes that inconsistencies between HUD’s REAC physical inspection protocol and the certification review provisions under Section 42 could cause administrative burdens to HFAs looking to use the REAC inspection protocol. More specifically, the Section 42 20 percent rule which indicates that at least 20 percent of the low-income units in a project be physically inspected and the records for those same units reviewed, could prove to be burdensome. The agency indicates what will satisfy the completion of these requirements.
Interested participants are invited to submit written comments on issues relating to Notice 2012-18 and in general the 20 percent rule for physical inspections and certification rule under Section 42. Comments should be sent to the IRS no later than May 31, 2012.
Click here to read Notice 2012-18.
