LIHTC Working Group Requests Guidance on Conflicting Requirements

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Group Urges IRS to Address Compliance Issues that Stem from Conflicts Between Low-Income Housing Tax Credit Rules and Requirements of Other Programs

Members of the LIHTC Working Group, in a Feb. 28, 2013 letter to the Internal Revenue Service (IRS), requested guidance on questions regarding the application of Internal Revenue Code Section 42 requirements as they conflict with the requirements of other affordable housing programs. 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.

“In order to fund the construction of affordable housing, in addition to the low-income housing tax credit program, which is governed by Internal Revenue Code Section 42, supplementary financing from other government programs is often required. These programs have their own sets of restrictions that in some instances conflict with the Section 42 guidelines,” said Stacey Stewart, CPA, a partner in Novogradac & Company LLP’s Dover, Ohio office who leads the LIHTC Working Group’s efforts. “To allow affordable rental properties to serve the nation’s housing needs, we believe properties subject to the requirements of Section 42 should be held harmless when complying with requirements of other affordable housing programs.”

In its letter, the LIHTC Working Group describes examples of these conflicting requirements and asks that the IRS issue guidance allowing a property to be held harmless from Section 42 credit recapture in certain cases. For example, the group contends that an affordable housing property should not be subject to recapture for not renewing leases of over-income tenants by virtue of its adherence to the requirements of other affordable housing assistance programs - the requirements of which may be more restrictive and may be in conflict with low-income housing tax credit rules - if such programs provide financial assistance to the property, enabling it to be operationally feasible.

“In order to fulfill the goal of the low-income housing tax credit program, namely, providing affordable housing to low-income residents, properties must maintain economic feasibility, often through the use of subsidies in addition to the low-income housing tax credit funding,” said Michael J. Novogradac, managing partner in the firm’s San Francisco office and the LIHTC Working Group’s advisor on industry and governmental affairs. “Should properties be forced to sacrifice compliance with the requirements of said subsidies in favor of those outlined in Section 42, they could lose those financial subsidies and incur additional expenses, which cannot be recovered from increased rental revenue. The result would be a significant blow to a low-income housing property’s ability to maintain financial feasibility.”

For more 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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Stacey Stewart , CPA
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