On July 2, 2021, HUD published a notice in the Federal Register extending the period by 180 days for which certain 2019 and 2020 qualified census tracts (QCTs) and difficult development areas (DDAs) are effective for purposes of the low-income housing tax credit (LIHTC). The notice, in response to the COVID-19 pandemic and presidentially declared emergency, extends the eligibility period from 730 days to 910 days for properties in QCTs and DDAs that are not on subsequent lists of QCTs and DDAs and that submitted applications while the area was a 2019 or 2020 QCT or DDA.
HUD published lists of DDAs and QCTs for 2019 on October 22, 2018; for 2020 on September 25, 2019; and for 2021 on September 24, 2020. HUD is revising the effective date of the 2019 and 2020 QCTs and DDAs to aid the ability of areas affected by COVID-19 to place LIHTC properties into service.
Effective Dates
The 2019 lists of QCTs and DDAs are effective:
- For allocations of credit after December 31, 2018; or
- For purposes of IRC §42(h)(4) if the bonds are issued and the building is placed in service after December 31, 2018.
If an area is not on a subsequent list of DDAs, the 2019 lists are effective for the area if:
- The allocation of credit to an applicant is made no later than the end of the 910-day period after the applicant submits a complete application to the LIHTC-allocating agency, and the submission is made before the effective date of subsequent lists; or
- For purposes of IRC §42(h)(4), if:
- The bonds are issued, or the building is placed in service no later than the end of the 910-day period after the applicant submits a complete application to the bond-issuing agency, and
- The submission is made before the effective date of the subsequent lists, provided that both the issuance of the bonds and the placement in service date of the building occur after the application is submitted.
An application is deemed to be submitted on the date it is filed in the application is determined to be complete by the credit-allocating or bond-allocating agency. A “complete application” means that no more than de minimis clarification of the application is required for the agency to make a decision about the allocation of credits or the issuance of bonds requested in the application.
In the case of a “multiphase project.” The DDA or QCT status of the project that applies for all phases of the project is that which applied when the project first received its first allocation of LIHTC. For purposes of §42(h)(4), the DDA or QCT status of the site of the project that applies for all phases of the project is that which applied when the first of the following occurred: (a) the building(s) in the first phase were placed in service, or (b) the bonds were issued.
Multiphase projects must be fully identified in the first application of credit for any building in the project.
Example of Effective Date
Project A is located in a 2019 DDA that is NOT a designated DDA in 2020, 2021, or 2022. A complete application for tax credits for Project A was filed with the allocating agency on November 15, 2019. Credits are allocated to the project on January 30, 2022. Project A is eligible for the increase in basis accorded a project in the 2019 DDA because the application was filed BEFORE January 1, 2020 (the effective date for the 2020 DDA lists), and because tax credits were allocated no later than the end of the 910-day period after the filing of the complete application for an allocation of tax credits (May 13, 2022).
The 2020 lists of QCTs and DDAs are effective:
- For allocations of credit after December 31, 2019; or
- For purposes of IRC §42(h)(4) if the bonds are issued and the building is placed in service after December 31, 2019.
If an area is not on a subsequent list of DDAs, the 2020 lists are effective for the area if:
- The allocation of credit to an applicant is made no later than the end of the 910-day period after the applicant submits a complete application to the LIHTC-allocating agency, and the submission is made before the effective date of subsequent lists; or
- For purposes of IRC §42(h)(4), if:
- The bonds are issued, or the building is placed in service no later than the end of the 910-day period after the applicant submits a complete application to the bond-issuing agency, and
- The submission is made before the effective date of the subsequent lists, provided that both the issuance of the bonds and the placement in service date of the building occur after the application is submitted.
An application is deemed to be submitted on the date it is filed in the application is determined to be complete by the credit-allocating or bond-allocating agency. A “complete application” means that no more than de minimis clarification of the application is required for the agency to make a decision about the allocation of credits or the issuance of bonds requested in the application.
In the case of a “multiphase project.” The DDA or QCT status of the project that applies for all phases of the project is that which applied when the project first received its first allocation of LIHTC. For purposes of §42(h)(4), the DDA or QCT status of the site of the project that applies for all phases of the project is that which applied when the first of the following occurred: (a) the building(s) in the first phase were placed in service, or (b) the bonds were issued.
Multiphase projects must be fully identified in the first application of credit for any building in the project.
Example of Effective Date
Project A is located in a 2020 DDA that is NOT a designated DDA in 2021, 2022, or 2023. A complete application for tax credits for Project A was filed with the allocating agency on November 15, 2020. Credits are allocated to the project on January 30, 2023. Project A is eligible for the increase in basis accorded a project in the 2020 DDA because the application was filed BEFORE January 1, 2021 (the effective date for the 2021 DDA lists), and because tax credits were allocated no later than the end of the 910-day period after the filing of the complete application for an allocation of tax credits (May 14, 2023).
Owners with projects that received a basis boost due to being in a QCT or DDA in 2019 or 2020, and these areas were not designated as a QCT or DDA in subsequent years, should carefully review the HUD Notice for applicability to their project.