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NCSHA Testifies at IRS Hearing on Housing Credit Average Income Test

Published on March 25, 2021 by James Tassos
NCSHA Testifies at IRS Hearing on Housing Credit Average Income Test

On March 24, the Internal Revenue Service (IRS) convened a public hearing on the Low Income Housing Tax Credit Average Income Test (AIT) proposed regulations published in October of last year. James Tassos, deputy director of tax policy and strategic initiatives, testified on behalf of NCSHA, one of 15 organizations represented at the hearing. Housing Credit allocating agency officials from California, Colorado, Minnesota, Texas, Virginia, and Washington joined NCSHA and numerous industry partners to express significant concerns with the proposed rule.

Consistent with comments we submitted on the proposed rule in December, NCSHA’s testimony focused on the conflict between the proposed rule and congressional intent in establishing the AIT minimum set-aside, inconsistencies with other Housing Credit program requirements, significant conflicts with Fair Housing and accessibilities laws and the Violence Against Women Act, unique challenges for multiple subsidy developments, and the impact of the proposed rule on developer and investor interest in using AIT.

NCSHA recommended that IRS reconsider the methodology in the proposed rule for evaluating compliance with the AIT minimum set-aside, and that IRS allow property owners the ability to modify unit designations to correct noncompliance. We also urged IRS to publish a new proposed rule to provide the Housing Credit industry another opportunity for public comment.

Officials from IRS and the Treasury Department asked numerous questions of the witnesses, including questions on the impact of violating the AIT minimum set-aside, how unit redesignation could work in practice, evaluating compliance in low-income units beyond those necessary to meet the minimum set-aside, and the reasonable timeline for noncompliance correction.