IRS Notice 2022-52 Extends Major LIHTC Statutory Deadline Relief Provided in Notice 2022-05, But Not All

Published by Peter Lawrence, Stephanie Naquin on Tuesday, October 11, 2022 - 12:00am

Somewhat lost in the headlines because of the release of the final average income test regulations, the Internal Revenue Service (IRS) released Oct. 7 Notice 2022-52, which builds on Notice 2022-05 and other previous notices (including Notices 2021-12 and 2020-53) that provides pandemic-related relief to low-income housing tax credit (LIHTC) properties. The Notice 2022-52’s publication was previewed by the Biden-Harris Administration in the progress update on its Housing Supply Action Plan.

The relief provided in Notice 2022-52 is very welcome, given the continuing challenges triggered by the pandemic that are leading many properties to be at risk of not meeting key deadlines. It was also more timely than previous IRS relief, coming well before year-end deadlines, which may have necessitated “credit swaps” where properties at risk of not meeting deadlines must return their allocations to LIHTC allocating agencies in exchange for a new LIHTC allocation. Not all agencies allow for such a practice. However, it should be noted that not all of the relief provided in Notice 2022-05 is extended in Notice 2022-52 so it is important to review the notice carefully and consult your tax advisor accordingly.

Notice 2022-52 amends Notice 2022-05 with regard to the following issues:

Placed in Service (PIS) Deadlines

In general, Notice 2022-52 provides 12-month extensions of PIS deadlines:

  • For properties that received a 2018 LIHTC allocation and had an original PIS deadline of Dec. 31, 2020, the new PIS deadline is Dec. 31, 2022;
  • For properties that received a 2019 LIHTC allocation and had an original PIS deadline of Dec. 31, 2021, the new PIS deadline is Dec. 31, 2023. Notice 2022-05 provided properties that had an original 10% test deadline in the first quarter of 2020 only until Dec. 31, 2022, while properties that had a 10% deadline in the second, third, or fourth quarter of 2020 had until Dec. 31, 2023, to place in service;
  • For properties that received a 2020 LIHTC allocation and had an original PIS deadline of Dec. 31, 2022, the new PIS deadline is Dec. 31, 2024. Notice 2022-05 provided these properties a one-year extension until Dec. 31, 2023; and
  • For properties that received a 2021 LIHTC allocation and had an original PIS deadline of Dec. 31, 2023, the new PIS deadline is Dec. 31, 2024. Notice 2022-05 did not provide relief to these properties.

Casualty Loss Reasonable Restoration Period

Notice 2022-52 also provides important relief on the reasonable restoration period for casualty losses caused by any reason, whether they are a result of a major presidentially declared disaster or not. The notice extends the deadline for restoration by up to 24 months at the discretionary of the LIHTC allocating agency if the original restoration deadline ended on or after April 1, 2020. However, the extended restoration deadline may be no later than Dec. 31, 2023. Notice 2022-05 provided this extension for up to 18 months and not beyond Dec. 31, 2022. The recent major hurricanes Ian and Fiona (as well as other major disasters) compounded the challenges that the pandemic created for properties attempting to restore casualty losses.

Noncompliance Correction Period

Notice 2022-52 extends the period for owners correcting noncompliance if the original correction period ended between April 1, 2020, and before Dec. 31, 2022, by up to 12 months. However, the correction period may go no further than Dec. 31, 2023, and LIHTC allocating agencies may require a shorter extension or no extension at all. Notice 2022-05 also provided up to a 12-month extension, but not beyond Dec. 31, 2022.

Physical Inspection Compliance Monitoring Waiver

Notice 2022-52 allows LIHTC allocating agencies the flexibility to extend a waiver of physical inspections compliance monitoring until Dec. 31, 2023, as the pandemic is still complicating these efforts in certain areas. Notice 2022-05 provided this flexibility to states through Dec. 31, 2022.

What’s NOT Extended

Unlike Notice 2022-05, Notice 2022-52 does not provide any further extensions of the 10% test, the rehabilitation expenditure deadline, the lease-up period, or tenant file reviews. The 10% test deadline for properties with an original 10% test deadline falling on or before Dec. 31, 2020, is still two years from the original deadline, and the 10% test deadline for properties falling on or after Jan. 1 2021, and before Dec. 31, 2022, is still Dec. 31, 2022. At their discretion, LIHTC allocating agencies may still provide up to a six-month extension of the 10% test for properties located in major presidentially declared disaster areas beyond Dec. 31, 2022.

Similarly, the rehabilitation expenditure deadline remains what was set forth in Notice 2022-05:

  • For properties with an original rehabilitation expenditure deadline falling on or after April 1, 2020, and on or before Dec. 31, 2021, the deadline is 18 months from the original rehabilitation expenditure deadline;
  • For properties with an original rehabilitation expenditure deadline falling on or after Jan. 1, 2022, and on or before June 30, 2022, the deadline is June 30, 2023;
  • For properties with an original rehabilitation expenditure deadline falling on or after July 1, 2022, and on or before Dec. 31, 2022, the deadline is 12 months from the original rehabilitation expenditure deadline; and
  • For properties with an original rehabilitation expenditure deadline falling on or after Jan. 1, 2023, and on or before Dec. 30, 2023, the deadline is Dec. 31, 2023.

For the lease up period, Notice 2022-52 does not provide further extensions for properties originally provided in Notice 2022-05 to allow units leased six months after the first year of the credit period to counted in qualified basis. Similarly, reasonable notice to owners for tenant file reviews returns to being 15 days starting on Jan. 1, 2023.

Responding to Stakeholder Concerns

Notice 2022-52 responds to letters sent by the National Council of State Housing Agencies (NCSHA) and the Affordable Housing Tax Credit Coalition to IRS and U.S. Department of the Treasury discussing the challenges of meeting key deadline as a result of supply chain shortages, inability for properties to meet requirements for financial closings, workforce and other related challenges. Neither letter requested relief on the 10% test, the rehabilitation expenditure deadline, the lease-up period, or tenant file reviews.

NCSHA has a helpful matrix providing more detail on the current state of COVID-19 relief provided by IRS for LIHTC properties and stakeholders, including all the extensions in Notice 2022-52 and, where applicable, relief provided by Notice 2022-05 that is still in effect and is not superseded by Notice 2022-52.

For specific questions, contact a Novogradac professional.