IRS Memo: LIHTC Eligible Basis Should be Reduced for Common Area Noncompliance

Monday, July 1, 2019 - 1:45pm

Eligible basis should be reduced for noncompliance of the common area for low-income housing tax credit (LIHTC) properties, according to a memorandum from the Office of Chief Counsel of the Internal Revenue Service. The memo said that noncompliance of the common area reduces the eligible basis of the property for the taxable year in which the noncompliance takes place and that the recapture amount is based on the amount of costs attributable to the entire common area–not just the noncompliant section–that was included in the building’s eligible basis. The memo also said that the noncompliance of a common area should not be treated as if a low-income unit close to the common area was noncompliant.