March 18, 2020

Federal Tax Policy Priorities in Response to COVID-19

Updated: May 5, 2020

Low-Income Housing Tax Credit

The Low-Income Housing Tax Credit (Housing Credit) finances more than 90 percent of all affordable housing production and preservation, and the health of the program is critical for the housing stability of millions of low-income families. The need to keep affordable housing production moving forward is even greater, with more than 30 million individuals and counting who have lost their jobs. Even before the pandemic, one in four renters were already struggling paying more than 50 percent of their income in rent prior to the pandemic.
 
As the Covid-19 crisis causes consequential disruptions in Housing Credit transactions and construction, Enterprise and our ACTION partners are advocating for the following Housing Credit proposals to advance as part of Covid-19 response measures.

Statutory Asks. Enterprise and our ACTION partners urge Congress to include the following Housing Credit priorities in future Covid-19 response packages:

For immediate relief: 

  • Enact a minimum 4 percent Housing Credit rate (for buildings placed in service after January 20, 2020). 
  • Allow developments to access 4 percent Housing Credits by lowering the “50 percent test” (for buildings placed in service after January 20, 2020).

For economic recovery: 

  • Increase the annual Housing Credit allocation by 50 percent, phased in over two years at 25 percent per year, and adjusted for inflation, beginning in 2021.
  • Provide additional basis boosts for vulnerable properties impacted by Covid-19, including Housing Bond-financed properties that have felt the financing crisis most acutely, developments serving extremely low-income tenants, rural area properties, and properties in Native American communities.

Click here to read an ACTION Campaign sign-on letter. 

Regulatory Asks. We urge the IRS and the Treasury to take immediate action to provide deadline extensions and other necessary accommodations for the Housing Credit program in light of the severe disruptions the Covid-19 pandemic is having on development and construction activities and the ongoing operations of existing Housing Credit properties:

  • Provide a 12-month extension of the 10% Test deadline for carryover allocations as required by IRC Section 42(h)(1)(E)(ii) and IRS regulation 1.42-6.
  • Provide a 12-month extension of the 24-month minimum rehabilitation expenditure deadline as required by IRC Section 42(e)(3) and IRC Section 42(e)(4).
  • Provide a 12-month extension of the placed in service deadline as required in IRC Section 42(h)(1)(E)(i).
  • Provide at minimum a 12-month extension of the 25-month rehabilitation period currently allowed under IRS Revenue Procedures 2014-49 and 2014-50 to properties that suffered a casualty loss due to a Presidentially declared major disaster in the 25-month period prior to the onset of COVID-19. State Housing Credit agencies should be allowed to set restrictions within this period.
  • Provide a 12-month extension of the year-end deadline for property restoration for any property that suffers a casualty loss not associated with a major disaster during 2020 (until December 31, 2021). State Housing Credit agencies should be allowed to set restrictions within this period.
  • Provide a 12-month moratorium on both physical inspections and tenant file reviews as required by IRS regulation 1.42-5. State Housing Credit agencies should continue to monitor emergency work orders during this time, and should be allowed to continue or resume inspections depending on their assessment of the situation in their state and their ability to do so, but there should be no penalty for states or owners if inspections are not completed during this time.
  • Provide a 12-month moratorium on tenant income recertification requirements. State Housing Credit agencies should be allowed to continue or resume requiring property managers to conduct recertifications depending on their assessment of the situation in their state and their ability to do so.
  • Provide a 12-month extension for all open noncompliance corrective action periods. State Housing Credit agencies should be allowed to reinstate deadlines depending on their assessment of the situation in their state and their ability to do so.
  • Suspend the yet-to-be implemented IRS regulation 1.42-5 which will increase the number of required compliance monitoring physical inspections even further than required under current regulations and exacerbate the inspection backlog.
  • Provide guidance clarifying that the temporary closure of property amenities and common space facilities during the duration of the crisis (with the exception of laundry facilities) will not negatively impact a property’s eligible basis and result in loss of Credits.

Though the IRS has provided some short-term extensions to certain Housing Credit and Housing Bond deadlines as well as disaster related guidance, the relief provided thus far is insufficient and does not cover our full list of requests. NCSHA has created a matrix comparing the accommodations it is requesting to those allowed under the most recent IRS relief. Learn more about the recent IRS relief and our regulatory asks on ACTION’s blog. Enterprise and its ACTION partners will continue to press the IRS to provide specific Housing Credit Covid-19 guidance. 

Advocacy Update. The above Housing Credit priorities have not been included in Covid-19 response packages thus far. Enterprise and our ACTION partners will continue to advocate for these asks to be included in future Covid-19 response packages.  

For questions or suggestions, please contact Sarah Brundage, Senior Policy Director, at sbrundage@enterprisecommunity.org

Stay tuned for more updates from the ACTION Campaign and and support these advocacy efforts by joining the ACTION Campaign today.

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