The IRS recently issued guidance relating to COVID-19 relief for LIHTC projects (July 1). The National Council of State Housing Agencies (NCSHA) requested clarification from the IRS on two of the provisions in the IRS Notice (Notice 2020-53): (1) suspension of the owner requirement to perform tenant income recertifications, and (2) suspending the Housing Credit allocating agency requirement to conduct compliance monitoring inspections or reviews.
The IRS has provided clarification to NCSHA in these two areas and Erica Etterling, the Rental Compliance Support Manager at Virginia Housing, was kind enough to share that response with me – I am now sharing it with my subscribers.
Income Recertifications
According to IRS Notice 2020-53, an Owner of a LIHTC project is not required to perform tenant income recertifications that were due for the period April 1, 2020 to December 31, 2020. The owner must resume the income recertifications as due after December 31, 2020. NCSHA asked whether owners need to perform income recertifications that are skipped during this period after December 31, and if so, the timeframe the owner has for completing them.
In response to this question, the IRS indicated that the income recertifications do not need to be made up because the requirement to perform them during this time period is waived. So, income recertification due between April 1, 2020 and December 31, 2020 do not need to be done. Owners should commence the 2021 recertifications when they would have been due if the 2020 recertifications had not been waived.
Compliance Monitoring
Based on Notice 2020-53, HFAs are not required to conduct compliance monitoring reviews or inspections during the period April 1, 2020 to December 31, 2020. The HFA must resume compliance monitoring inspections or reviews as due after December 31, 2020. NCSHA asked two questions relative to this guidance:
- Does the word “reviews” in this section refer to tenant file reviews, or is the relief in this section limited to physical inspections only? In response, the IRS indicated that the word “reviews” refers to tenant file reviews.
- Do HFAs need to conduct the inspections or reviews skipped from April 1, 2020 to December 31,2020 in 2021, and if so, what timeframe does the Agency have for completing them? The IRS indicated that the compliance monitoring inspections or reviews do not need to be made up because the requirement to perform them during this time is waived.
Owners should keep in mind that HFAs may impose their own requirements in these areas and that should be expected. Three potential areas where the agencies may impose more stringent requirements are (1) the recertification requirements for first year recertifications (i.e., the first year after move-in), (2) student status and household composition recertifications, and (3) the agencies may not want to go six years between reviews of a property, which based on the waiver of reviews and inspections could theoretically occur.
As always, owners and managers should coordinate closely with the appropriate HFA with regard to annual recertifications and monitoring.