LIHTC Working Group Requests Annual Utility Allowance Certification

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Group Says Minor Regulation Change Would Increase Efficiency for Low-Income Housing Tax Credit Properties

Members of the LIHTC Working Group on Nov. 6, 2013 sent a letter to the Internal Revenue Service (IRS) requesting that the agency change Low-Income Housing Tax Credit (LIHTC) program utility allowance requirements to increase efficiency for LIHTC property owners and managers. The LIHTC Working Group submitted the comments in response to a Federal Register notice dated Aug. 27, 2013. The notice, among other things, requested comments on rules relating to Internal Revenue Code Section 42 utility allowance regulations concerning the LIHTC.

“The existing utility allowance regulations place a heavy burden upon property owners who rely on public housing authorities (PHAs) for their utility allowance estimates. Owners must constantly monitor the PHAs’ for changes in utility allowances to ensure that they remain in compliance with the current Section 42 requirements,” said Stacey Stewart, CPA, a partner in Novogradac & Company LLP’s Dover, Ohio office who leads the LIHTC Working Group’s efforts.

In its letter, the LIHTC Working Group says that owners who use PHA-established utility allowances to comply with the Section 42 utility allowance regulations must constantly monitor changes to their PHAs’ utility allowances because PHAs may update utility allowances at any time and LIHTC property owners must adopt the new utility allowances within 90 days of issuance, or risk noncompliance and the potential recapture of tax credits.

The LIHTC Working Group recommends that the IRS change the regulations so that an owner is required to check its PHA’s utility allowance once annually on a “utility allowance date.” The group recommends that the utility allowance date coincide with the U.S. Department of Housing and Urban Development’s issuance of area median gross income information. Owners would be required to implement the PHA utility allowance within 90 days of that date.

“A minor change to the Section 42 utility allowance regulations could significantly reduce the time that owners must put into monitoring utility allowances at their properties,” said Michael J. Novogradac, CPA, managing partner in the firm’s San Francisco office and the LIHTC Working Group’s adviser on industry and governmental affairs. “This change would help the LIHTC program better provide affordable housing by increasing procedure efficiencies and lessening the burden of LIHTC program administration and compliance.”

For details and a copy of the letter, please go to The LIHTC Working Group was established by Novogradac & Company LLP in 2008 to provide a platform for LIHTC industry participants to work together to resolve technical and administrative LIHTC program issues. Members meet monthly via conference call to provide input regarding pending action items as agreed to by the members of the group. Comments and suggestions generated during the group discussions are agreed to and submitted in writing directly to Treasury, the Department of Housing and Urban Development and/or various state agencies. For more information, visit or email lwg(at)novoco(dot)com.

Novogradac & Company LLP was founded in 1989, and has since grown to more than 400 employees and partners in offices in San Francisco and Long Beach, Calif.; the Washington, D.C., Atlanta, Ga., Detroit, Mich., Kansas City, Mo. and Seattle, Wash. metro areas; St. Louis, Mo.; Boston, Mass.; Austin, Texas; Dover, Columbus and Cleveland, Ohio; New York, N.Y. and Portland, Ore. Specialty practice areas include tax, audit and consulting services for tax-credit-assisted multifamily and affordable housing, community revitalization and rehabilitation of historic properties. Other areas of expertise include military base redevelopment, preparation and analysis of market studies and appraisals of multifamily housing investments and renewable energy tax credits.

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Michael J. Novogradac

Stacey Stewart
Novogradac & Company LLP
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