In light of the COVID-19 pandemic, the Internal Revenue Service (the “IRS”) recently issued Notice 2020-53 to provide temporary relief for qualified low-income housing projects and residential rental projects financed with exempt facility bonds. The relief granted by the IRS includes extension of various deadlines as described below.
- 10% Test. The last day to meet the 10% test for carryover allocation is postponed to December 31, 2020 if the original deadline is on or after April 1, 2020 and before December 31, 2020.
- 24-Month Minimum Rehabilitation Expenditure. If the 24-month rehabilitation expenditure period originally ends on or after April 1, 2020 and before December 31, 2020, the last day to incur the minimum rehabilitation expenditures is postponed to December 31, 2020.
- Set-Aside Requirements for Acquisition of Existing Projects. For the acquisition of an existing project, the last day of a 12-month “transition period” during which the project must satisfy the set-aside requirements is postponed to December 31, 2020 if the original transition period ends on or after April 1, 2020 and before December 31, 2020.
- Two-Year Rehabilitation Expenditure. If a bond is used to provide a qualified residential rental project and if the two-year rehabilitation expenditure period for the bond ends on or after April 1, 2020 and before December 31, 2020, the last day of that period is postponed to December 31, 2020.
In addition to these postponements of deadlines, the IRS also granted relief with respect to income recertification, compliance monitoring, and closure of amenity or common area. Between April 1, 2020 and December 31, 2020, owners of qualified low-income housing projects are not required to perform income recertifications, and state agencies are not required to conduct compliance monitoring inspections or reviews. However, after December 31, 2020, regular income recertifications and compliance monitoring should be resumed. Furthermore, if an amenity or common area in a low-income building or project is temporarily unavailable or closed during some or all of the period from April 1, 2020 to December 31, 2020 in response to the COVID-19 pandemic, this temporary closure will not cause a reduction of the eligible basis of the building.
Finally, the Notice also provides emergency housing relief for medical personnel and other essential workers. From April 1, 2020 to December 31, 2020, state agencies, issuers, owners, and operators of low-income housing projects may treat medical personnel and other essential workers who provide services during the pandemic as Displaced Individuals (as defined under Rev. Procs. 2014-49 and 2014-50) and therefore may provide emergency housing for these individuals pursuant to these revenue procedures.
If you have any questions regarding the relief granted in this IRS Notice, please contact one of the attorneys listed in this alert.