In Notice 2022-05, the IRS further extends deadlines for complying with IRC Section 42 requirements for low-income housing tax credits (LIHTCs). The Notice also extends other compliance deadlines, including those for qualified residential rental projects.

Due to the continuing effects of the COVID-19 pandemic, the IRS said it was amplifying Notice 2020-23, Notice 2020-53, Notice 2021-12, Notice 2021-17, Revenue Procedure 2004-39, Revenue Procedure 2014-49 and Revenue Procedure 2014-50 to give taxpayers more temporary relief.

Low-income housing credit

Notice 2022-05 extends the deadlines for several LIHTC requirements that had already been extended in previous guidance. In this Notice, "original deadline" refers to the deadline without regard to any extension under Notice 2020-23, Notice 2020-53, or Notice 2021-12 (as clarified by Notice 2021-17).

For the IRC Section 42(h)(1)(E)(ii) 10% test for carryover allocations, the deadline is extended to:

• The original deadline plus two years, if the original deadline was on or after April 1, 2020, and on or before December 31, 2020
• December 31, 2022, if the original deadline was on or after January 1, 2021, and before December 31, 2022

For the IRC Section 42(e) 24-month minimum rehabilitation expenditure period, the deadline is extended to:

• The original date plus 18 months, if the original deadline was on or after April 1, 2020, and on or before December 31, 2021
• June 30, 2023, if the original deadline was on or after January 1, 2022, and on or before June 30, 2022
• The original date plus 12 months, if the original deadline was on or after July 1, 2022, and on or before December 31, 2022
• December 31, 2023, if the original deadline was on or after January 1, 2023, and on or before December 30, 2023

For the IRC Section 42(h)(1)(E)(i) place-in-service requirement, the new deadline to place a low-income building in service is:

• The close of calendar year 2022 (December 31, 2022), if the original deadline was the close of calendar year 2020
• The close of calendar year 2022 (December 31, 2022), if the original deadline was the close of calendar year 2021 and the original deadline for the 10% test for carryover allocations was before April 1, 2020
• The close of calendar year 2023 (December 31, 2023), if the original deadline was the close of calendar year 2021 and the original deadline for the 10% test for carryover allocations was on or after April 1, 2020, and on or before December 31, 2020
• The close of calendar year 2023 (December 31, 2023), if the original deadline was the close of calendar year 2022 (so the original deadline for the 10% test was in 2021)

Qualified residential projects

If the last day of the 12-month transition period to meet set-asides for qualified residential rental projects originally was on or after April 1, 2020, and before December 31, 2022, then that last day is postponed to December 31, 2022.

If the last day of the IRC Section 147(d) two-year rehabilitation expenditure period for bonds used to provide qualified residential projects originally was on or after April 1, 2020, and before December 31, 2023, then that last day is postponed to the earlier of 18 months from the original due date or December 31, 2023.

Other relief

Notice 2022-05 also extended LIHTC deadlines for (1) the reasonable period for restoration or replacement in the event of casualty loss, (2) satisfying occupancy obligations, and (3) the correction period for complying with the requirements.

In addition, Notice 2022-05 grants relief from complying with certain compliance-monitoring provisions of low-income housing projects.

Implications

Notice 2022-05 is very helpful for taxpayers as more and more projects are facing delays due to supply chain issues and workforce shortages. We have seen more and more projects looking to return their reservations/allocations to the state housing agency due to challenges meeting the 10% test under IRC Section 42(h)(1)(E)(ii) and/or the placed-in-service deadline under IRC Section 42(h). This guidance should allow projects to continue to move forward, reduce the burden on state housing agencies and allow for a more effective use of the limited LIHTCs that each state has available to allocate to projects.

———————————————