Hurricane Disaster Relief for Low Income Housing Tax Credit Properties
by Kristen Hand, CPA
The Carolinas recently felt the record breaking impacts of Hurricane Florence, and the National Low Income Housing Coalition estimates that there are 30,000 federally assisted housing units in the counties where significant damage is most likely to have occurred.
For Low Income Housing Tax Credit (“LIHTC”) Projects that are in presidentially declared disaster areas (18 counties received that declaration in North Carolina after Hurricane Florence), the IRS has granted temporary relief from several compliance requirements as outlined in Revenue Procedures 2014-49 and 2014-50.
Relief for Carryover Allocations:
For owners with carryover allocations in major disaster areas, the State Allocating Agency (“Agency”) may grant the owner an extension for the 10-percent basis requirements for up to six months, if the disaster occurred prior to the deadline.
Recapture Relief:
Property owners will not be subject to recapture due to casualty losses from a major disaster, if the loss is restored within a reasonable time, as determined by the Agency. Additionally, credits may be taken during the restoration period, using the building’s qualified basis at the end of taxable year immediately preceding the first day of the incident period for the major disaster.
Compliance Monitoring Relief:
An Agency may extend the due date for scheduled compliance reviews for up to one calendar year from the date of the building’s restoration.
Buildings in the First Year of the Credit Period:
For buildings that are severely damaged, destroyed or determined uninhabitable, the Agency may elect to treat the allocation as a returned credit, or they may toll (delay) the beginning of the first year of the credit period. However, owners may not claim any credits during the restoration period.
Additional Credits for Rehabilitation Expenditures:
An owner may not receive additional credits to restore a building’s qualified basis. However, additional credits may be allowed for rehabilitation expenditures – any expenditure that exceeds the amount expended for restoration. Details on how to compute amounts in excess of restoration expenditures may be found here.
Housing Displaced Individuals:
The Agency may allow a Project to house displaced individuals. If the Project is in the first year of the credit period, the unit is treated as low-income when determining the Project’s qualified basis or meeting the Project’s 20-50, 40-60 or 25-60 test. For Projects outside of the first year, the unit will retain the status prior to housing the displaced individual.
To determine if your Project may qualify for these reliefs, please consult your State Housing Finance Agency or accounting professional.