IRS Extends Housing Credit Regulatory Relief Available During COVID-19 Pandemic
On January 11, the Internal Revenue Service (IRS) issued Notice 2022-05 extending and expanding on temporary relief for state Housing Credit agencies and owners and residents of Housing Credit properties in response to the COVID-19 pandemic. This is the fourth such notice IRS has issued since the beginning of the pandemic, as it has adjusted deadlines and temporary waiver periods of certain program requirements in response to the continuing public health crisis.
The notice closely follows recommendations NCSHA made in letters sent to IRS in August and October 2021. It significantly expands the universe of properties eligible for extensions to 10 percent test and placed-in-service deadlines and further extends deadlines available to certain properties that had benefited from extensions provided under previous guidance. Similarly, IRS further extends for some projects, and makes other previously ineligible projects eligible for extensions to, rehabilitation expenditure deadlines and casualty loss restoration period deadlines.
As NCSHA requested, the notice bifurcates the compliance monitoring requirements for tenant file reviews from the requirements for physical inspections. NCSHA had urged IRS to extend the waiver of tenant file review requirements that ended on September 30, 2021, until December 31, 2021, as compliance monitoring is reported to IRS on a calendar year basis. However, as Housing Credit agencies have successfully transitioned to virtual tenant file reviews, NCSHA did not request an extension of the waiver beyond the end of 2021. Notice 2022-05 is consistent with NCSHA’s recommendations. NCSHA also urged IRS to allow Housing Credit agencies to provide until January 1, 2023, a notification period of up to 30 days to property owners before conducting a tenant file review, rather than the 15-day period normally allowed. Again, the notice is consistent with NCSHA’s recommendation.
For on-site physical inspections, given the ongoing need to social distance so as not to jeopardize the health and safety of residents, owners, property managers, and state compliance staff, NCSHA urged IRS to waive on-site physical inspection requirements until the end of 2022. Notice 2022-05 provides a blanket waiver of physical inspection requirements through June 30, 2022, and allows state agencies, at their discretion and in consultation with public health experts, to extend the waiver for all or parts of their states until December 31, 2022.
The notice also formally allows Housing Credit agencies to conduct qualified allocation plan (QAP) public hearings under the same rules allowed for private activity bond hearings. In Revenue Procedure 2021-39, IRS temporarily allowed public hearings for tax-exempt bonds to be held telephonically (virtually), with that ability expiring on March 31, 2022. Should IRS extend this allowance for tax-exempt bonds again, the rules for QAP hearings would automatically follow suit. NCSHA had encouraged IRS to make this change on a permanent basis but recognizes that doing so should be outside the context of COVID-19 relief.
For more detailed information about all the Housing Credit deadlines and waivers provided by Notice 2022-05, including which properties are eligible for extensions and for how long, see NCSHA’s matrix of Housing Credit and Multifamily Housing Bond Regulatory Relief Available During the COVID-19 Pandemic.
