San Francisco, Calif. (PRWEB) February 14, 2013
Members of the LIHTC Working Group, in a Jan. 30, 2013 letter to the Internal Revenue Service (IRS), requested guidance on questions regarding the potential loss of rural status for affordable housing properties whose income is determined using the national nonmetropolitan median income in accordance with Internal Revenue Code Section 42(i)(8). The LIHTC Working Group suggested that the issue be added to the 2012-2013 Guidance Priority List and a list of IRS regulation projects as part of the opportunity extended by the IRS in Notice 2012-25.
“Developing and managing affordable housing in rural areas presents a number of challenges,” said Stacey Stewart, CPA, a partner in Novogradac & Company LLP’s Dover, Ohio office who leads the LIHTC Working Group’s efforts. “Unfortunately, these challenges will be compounded by a change in the longstanding method used to determine an area’s rural status. Together, the consequences of this change will cause uncertainty regarding the feasibility of affordable housing properties in rural areas.”
On Sept. 30, 2012, a “grandfather” clause, which had been renewed multiple times since 1983, expired. That expiration left numerous properties in areas that were previously qualified under the “grandfathering” clause facing a sudden loss of their rural status, and benefits of said status, which would affect future development of LIHTC properties and would affect access to loans and other sources of funding for new and existing properties, thus greatly reducing the feasibility of rural properties. In addition to the loss of access to USDA sources of financing related to this expiration, affordable housing properties financed with 9 percent LIHTCs in affected areas would also lose the ability use the national nonmetropolitan median income in the determination of Section 42 rent and income limits.
“Rural affordable housing properties have long been developed based on established practices intended to address market conditions in rural areas and help properties remain viable, such as the ability to use the national nonmetro median income. Curtailing their ability to use this national standard will make it significantly more difficult to provide affordable housing in rural areas,” said Michael J. Novogradac, managing partner in the firm’s San Francisco office and the LIHTC Working Group’s adviser on industry and governmental affairs. “As such, in its letter the LIHTC Working Group has requested that the IRS issue guidance stating that if a property loses it rural status the property would be able to continue to be held harmless at the highest national nonmetropolitan median income that the property achieved before it lost its rural status.”
For more details and a copy of the letter, please go to http://www.lihtcworkinggroup.com. 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 http://www.lihtcworkinggroup.com or email lwg(at)novoco.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.