On Jan. 11, the Internal Revenue Service (IRS) issued Notice 2022-05 providing new and extended relief for various low-income housing tax credit (LIHTC) requirements addressed in Notice 2021-12. Like the previous guidance, this iteration is a mix of helpful allowances and provisions, which are one month too late. While the description summarizes the notice, it is not a substitute for reading the notice itself.

The IRS defines the term “original deadline” to mean the deadline without regard to any extension under Notices 2020-23, 2020-53 or 2021-12.

10% Test

If the original deadline for a LIHTC property owner to meet the 10% test is between Jan. 1, 2021, and Dec. 31, 2022, then under the notice, the new deadline is Dec. 31, 2022.

Rehabilitation Expenditures

If the original deadline for the 24-month minimum rehabilitation expenditure period for a building is on or after:

• April 1, 2020, and on or before Dec. 31, 2021, then the deadline is extended to the original date plus 18 months;
• Jan. 1, 2022, and on or before June 30, 2022, then the new deadline is June 30, 2023;
• July 1, 2022, and on or before Dec. 31, 2022, then the deadline is extended to the original date plus 12 months;
• Jan. 1, 2023, and on or before Dec. 30, 2023, then the new deadline is Dec. 31, 2023.

Placing In Service

If the original deadline for a LIHTC building to be placed in service (PIS) was the close of calendar year 2021, the notice says it’s now the close of 2022. However failure to PIS by the deadline automatically results in a LIHTC allocation being terminated, so the opportunity to extend the deadline passed on Dec. 31, 2022.

Casualty Loss

If a building's qualified basis is reduced by a casualty loss and the period to restore originally set by the LIHTC allocating agency ends on or after April 1, 2020, then the last day is postponed by the later of:

• 18 months,
• as allowed by the agency, or
• Dec. 31, 2022.

For taxable years ending before the completion of the restoration of a LIHTC property, owners must use the building's qualified basis at the end of the taxable year immediately preceding the first day of the casualty.

First LIHTC Year

If the owner elects to make 2022 the first year of the 10-year LIHTC period, the building’s qualified basis is calculated (for purposes of Section 42(f)(3)(A)(ii)) by taking into account any increase in low-income units through the following six months. In other words, the date to be fully leased to avoid LIHTCs claimed over 15 years changes from Dec. 31, 2022, (for calendar year taxpayers) to June 30, 2023.

Compliance

If a compliance correction period ended before Dec. 31, 2021, the notice extends it by one year, but not beyond Dec. 31, 2022. If it’s set to end during 2022, then the date is now Dec. 31, 2022.

An agency may require a shorter extension or allow no extension at all.

Agencies did not need to review tenant files in the period between April 1, 2020, and Dec. 31, 2021; effectively a retroactive allowance. Agencies also are not required to conduct compliance monitoring physical inspections until either June 30, 2022, or year end if the level of COVID-19 transmission makes an extension appropriate.

In 2022, an agency may give owners up to 30 days’ notice (instead of 15 days’ notice) of its review of certifications and physical inspections.

Common Areas

An amenity or common area being unavailable in response to the pandemic does not result in a reduction of eligible basis in 2022. Agencies may deny or limit closures based on public health criteria. The notice gives an example: “[Agencies] may apply the waiver to access an amenity or common area that is limited to persons wearing masks or to persons fully vaccinated.”

Conclusion

The extensions under the notice will help many LIHTC property owners and agencies through the difficult times they have been facing as a result of the pandemic. Please contact a Novogradac professional to stay in compliance with these updates.