IRS Issues Housing Credit Utility Allowance Submetering Regulations
On March 3, the Internal Revenue Service (IRS) published in the Federal Register combined final regulations amending the Housing Credit utility allowance rules to provide greater clarity for Housing Credit properties that submeter to account for actual tenant energy consumption, and temporary regulations for properties in which an owner acquires energy directly from renewable sources, rather than from a utility company.
The final regulations codify an IRS 2012 proposed rule requiring that utility costs paid by a tenant and based on the tenant’s actual energy consumption in a submetered Housing Credit-qualified unit are treated as paid by the tenant directly to the utility company and thus do not count against the maximum rent that the building owner can charge.
NCSHA provided comments in support of the 2012 proposed rule, which we argued would generally allow for more accurate utility allowance determinations, provide greater flexibility to make such determinations, and help Housing Finance Agencies promote energy efficiency in Housing Credit properties.
The temporary regulations IRS included with these final regulations further extend these rules to the provision of energy that the building owner acquires directly from renewable sources (for example solar panels on a property) and provides to low-income tenants. In such cases, charges by building owners must not exceed the rates that the local utility company would have charged if they had instead acquired energy from that company.
Comments on the temporary regulations are due to IRS by May 2. NCSHA may submit comments on the temporary regulations. To inform our comments, please send your suggestions to Jennifer Schwartz by April 22.