IRS Ruling Establishes Limitations on Applicability of 4% Floor Under Select Circumstances
The Internal Revenue Service (IRS) on Wednesday issued a revenue ruling and a revenue procedure concerning three 4% low-income housing tax credit (LIHTC) situations. Revenue Ruling 2021-20 holds that buildings are not subject to the minimum 4% floor for draw-down bonds issued prior to 2021, a de minimis Section 42(h)(4)(A) obligation issued after Dec. 31, 2020, or a de minimis allocation of LIHTC funds occurring after Dec. 31, 2020. Revenue Procedure 2021-43 clarifies this ruling. A building’s financing is not deemed de minimis if the aggregate amount of the post-2020 obligations is at least 10% of the total amount of all obligations that finance the building. A post-2020 allocation of LIHTCs is not deemed de minimis if the allocation is at least 10% of the total allocations to the building that have been made on or before the date of the allocation in question.
Learn more about LIHTCs by virtually attending Thursday and Friday’s Novogradac 2021 Tax Credit Housing Finance Conference.