The Internal Revenue Service is suspending certain requirements under
§ 42 of the Internal Revenue Code for low-income housing credit
projects in the United States as a result of the devastation caused by Hurricane
Rita. This relief is being granted pursuant to the Service’s authority
under § 42(n) and § 1.42-13(a) of the Income Tax Regulations.
On September 24, 2005, the President declared major disasters for the
states of Louisiana and Texas as a result of Hurricane Rita. These declarations
were made under the Robert T. Stafford Disaster Relief and Emergency Assistance
Act, Title 42 U.S.C. 5121-5206 (2000 and Supp. II 2002). Subsequently, the
Federal Emergency Management Agency (FEMA) designated jurisdictions for Individual
Assistance.
The states of Louisiana and Texas have requested that the Service grant
relief similar to Notice 2005-69, 2005-40 I.R.B. 622 (applying to Hurricane
Katrina which temporarily suspended certain requirements under § 42
of the Internal Revenue Code) to allow owners of low-income housing credit
projects throughout the United States to provide temporary housing in vacant
units to individuals who resided in jurisdictions designated for Individual
Assistance in Louisiana and Texas and who have been displaced because their
residences were destroyed or damaged as a result of the devastation caused
by Hurricane Rita. The states of Louisiana and Texas have further requested
that the temporary housing of the displaced individuals in low-income units
without regard to income not cause the owners to lose low-income housing credits.
Based upon these requests and because of the widespread damage to housing
caused by Hurricane Rita, the Service has determined that any housing credit
agency of a state or a possession of the United States (state housing credit
agency) may provide approval to project owners in their respective state or
possession to provide temporary emergency housing for individuals displaced
by Hurricane Rita (displaced individuals) in accordance with this notice.
I. SUSPENSION OF INCOME LIMITATIONS
The Service has determined that it is appropriate to temporarily suspend
certain income limitation requirements under § 42 for certain qualified
low-income projects. The suspension will apply to low-income housing projects
approved by the state housing credit agency, in which vacant units are rented
to displaced individuals. The state housing credit agency will determine
the appropriate period of temporary housing for each project, not to extend
beyond September 30, 2006 (temporary housing period).
A. Units in the first year of the credit period
A displaced individual temporarily occupying a unit during the first
year of the credit period under § 42(f)(1) will be deemed a qualified
low-income tenant for purposes of determining the project’s qualified
basis under § 42(c)(1), and for meeting the project’s 20-50
test or 40-60 test as elected by the project owner under § 42(g)(1).
After the end of the temporary housing period established by the state housing
credit agency (not to extend beyond September 30, 2006), a displaced individual
will no longer be deemed a qualified low-income tenant.
B. Vacant units after the first year of the credit period
During the temporary housing period established by a state housing credit
agency, the status of a vacant unit (that is, market-rate or low-income for
purposes of § 42 or never previously occupied) after the first year
of the credit period that becomes temporarily occupied by a displaced individual
remains the same as the unit’s status before the displaced individual
moves in. Displaced individuals temporarily occupying vacant units will not
be treated as low-income tenants under § 42(i)(3)(A)(ii) (a low-income
unit that was vacant before the effective date of this notice will continue
to be treated as a vacant low-income unit even if it houses a displaced individual,
a market rate unit that was vacant before the effective date of this notice
will continue to be treated as a vacant market rate unit even if it houses
a displaced individual, and a unit that was never previously occupied before
the effective date of this notice will continue to be treated as a unit that
has never been previously occupied even if it houses a displaced individual).
Thus, the fact that a vacant unit becomes occupied by a displaced individual
will not affect the building’s applicable fraction under § 42(c)(1)(B)
for purposes of determining the building’s qualified basis, nor will
it affect the 20-50 test or 40-60 test of § 42(g)(1). If the income
of occupants in low-income units exceeds 140 percent of the applicable income
limitation, the temporary occupancy of a unit by a displaced individual will
not cause application of the available unit rule under § 42(g)(2)(D)(ii).
In addition, the project owner is not required during the temporary housing
period to make attempts to rent to low-income individuals the low-income units
housing displaced individuals.
III. SUSPENSION OF NON-TRANSIENT REQUIREMENTS
The non-transient use requirement of § 42(i)(3)(B)(i) shall
not apply to any unit providing temporary housing to a displaced individual
during the temporary housing period determined by the state housing credit
agency in accordance with section I of this notice.
All other rules and requirements of § 42 will continue to
apply during the temporary housing period established by the state housing
credit agency. After the end of the temporary housing period, the applicable
income limitations contained in § 42(g)(1), the available unit rule
under § 42(g)(2)(D)(ii), the non-transient requirement of § 42(i)(3)(B)(i),
and the requirement to make reasonable attempts to rent vacant units to low-income
individuals shall resume. If a project owner offers to rent to a displaced
individual after the end of the temporary housing period, a displaced individual
must be certified under the requirements of § 42(i)(3)(A)(ii) and
§ 1.42-5(b) and (c) to be a qualified low-income tenant. To qualify
for the relief in this notice, the project owner must additionally meet all
of the following requirements:
(1) Major Disaster Area
The displaced individual must have resided in a Louisiana or Texas jurisdiction
designated for Individual Assistance by FEMA as a result of Hurricane Rita.
(2) Approval of State Housing Credit Agency
Project owners must obtain approval from their state housing credit
agency to obtain the relief described in this notice. The state housing credit
agency will determine the appropriate period of temporary housing for each
project, not to extend beyond September 30, 2006.
(3) Certifications and Recordkeeping
To comply with the requirements of § 1.42-5, project owners
are required to maintain and certify certain information concerning each displaced
individual temporarily housed in the project, specifically: name, address
of damaged residence, social security number, and a statement signed under
penalties of perjury by the displaced individual that, because of damage to
the individual’s residence in a Louisiana or Texas jurisdiction designated
for Individual Assistance by FEMA as a result of Hurricane Rita, the individual
requires temporary housing. The owner must list the project on the FEMA registry
for assistance under “Locate or List Rental Properties”. The
web address for listing the project is: www.fema.gov.
The owner must also certify the date the displaced individual began
temporary occupancy and the date the project will discontinue providing temporary
housing as established by the state housing credit agency. The certifications
and recordkeeping for displaced individuals must be maintained as part of
the annual compliance monitoring process with the state housing credit agency.
(4) Rent Restrictions
Rents for the low-income units housing displaced individuals must not
exceed the existing rent-restricted rates for the low-income units established
under § 42(g)(2).
(5) Protection of Existing Tenants
Existing tenants in occupied low-income units cannot be evicted or have
their tenancy terminated as a result of efforts to provide temporary housing
for displaced individuals.
This notice is effective September 24, 2005 (the date of the President’s
major disaster declarations as a result of Hurricane Rita).
The collection of information contained in this notice has been reviewed
and approved by the Office of Management and Budget in accordance with the
Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-1997.
An Agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless the collection of information
displays a valid OMB control number.
The collection of information in this notice is in the section titled
“OTHER REQUIREMENTS” and “(3) Certifications and
Recordkeeping”. This information is required to enable the
Service to verify whether individuals are displaced as a result of Hurricane
Rita and thus warrant temporary housing in vacant low-income housing credit
units. The collection of information is required to obtain a benefit. The
likely respondents are individuals, businesses, and nonprofit institutions.
The estimated total annual recordkeeping burden is 1,250 hours.
The estimated annual burden per recordkeeper is approximately 15 minutes.
The estimated number of recordkeepers is 5,000.
Books or records relating to a collection of information must be retained
as long as their contents may become material to the administration of the
internal revenue law. Generally, tax returns and tax return information are
confidential, as required by 26 U.S.C. 6103.
The principal author of this notice is Jack Malgeri of the Office of
the Associate Chief Counsel (Passthroughs and Special Industries). For further
information regarding this notice, contact Mr. Malgeri at (202) 622-3040 (not
a toll-free call).
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