The IRS has published Notice 2022-52, providing unexpected extensions to HFAs and LIHTC properties due to the COVID pandemic.
The relief has been granted due to unavoidable labor and supply-chain disruptions delaying the construction, rehabilitation, and restoration of properties throughout the United States.
The following relief extensions are included in the Notice:
- Extension of certain placed-in-service deadlines: this provision extends placed-in-service deadlines for projects receiving allocations in 2019, 2020, and 2021.
- If the original deadline for a low-income building to be placed in service was the close of the calendar year 2020, the new deadline is the close of the calendar year 2022 (that is, December 31, 2022).
- If the original placed-in-service deadline was the close of the calendar year 2021 and the original deadline for the 10-percent test in § 42(h)(1)(E)(ii) was before April 1, 2020, the new placed-in-service deadline is the close of the calendar year 2023 (that is, December 31, 2023).
- If the original placed-in-service deadline was the close of calendar year 2021 and the original deadline for the 10-percent test in § 42(h)(1)(E)(ii) was on or after April 1, 2020, and on or before December 31, 2020, then the new placed-in-service deadline is the close of calendar year 2023 (that is, December 31, 2023).
- If the original placed-in-service deadline is the close of calendar year 2022 (and thus the original deadline for the 10-percent test in § 42(h)(1)(E)(ii) was in 2021), then the new placed-in-service deadline is the close of calendar year 2024 (that is, December 31, 2024).
- If the original placed-in-service deadline is the close of calendar year 2023 (and thus the original deadline for the 10-percent test in § 42(h)(1)(E)(ii) was in 2022), then the new placed-in-service deadline is the close of calendar year 2024 (that is, December 31, 2024).
- Extension of Agency-set reasonable restoration periods: This notice modifies and amplifies section IV.D of Notice 2022-05 by permitting a twenty-four-month extension of reasonable restoration periods set by an Agency.
- For purposes of § 42(j)(4)(E) both in the case of a casualty loss not due to a pre-COVID-19-pandemic Major Disaster and in situations governed by section 8.02 of Rev. Proc. 2014-49 in the case of a casualty loss due to a pre-COVID-19-pandemic Major Disaster, if a low-income building’s qualified basis is reduced by reason of the casualty loss and the reasonable period to restore the loss by reconstruction or replacement that was originally set by the Agency (original Reasonable Restoration Period) ends on or after April 1, 2020, then the last day of the Reasonable Restoration Period is postponed by twenty-four months but not beyond December 31, 2023.
- Notwithstanding the preceding sentence, the Agency may require a shorter extension or no extension at all.
- If a property meets the deadline imposed by the HFA (not beyond December 31, 2023), the qualified basis of the building for taxable years ending after the first day of the casualty and before the completion of the restoration shall be the qualified basis at the end of the taxable year immediately preceding the first day of the casualty.
- Extension of Agency-set correction periods: This section extends the correction period set by an Agency by twelve months.
- If a correction period that was set by the Agency ends on or after April 1, 2020, and before December 31, 2022, then the end of the correction period (including as already extended, if applicable) is extended by a year, but not beyond December 31, 2023.
- If the correction period originally set by the Agency ends during 2023, the end of the period is extended to December 31, 2023.
- Notwithstanding the preceding sentences, the Agency may require a shorter extension or no extension at all.
- Extension of waivers of compliance monitoring physical inspections: this section extends the temporary waiver for compliance monitoring physical inspections.
- An Agency was not required to conduct compliance monitoring physical inspections in the period beginning on April 1, 2020, and ending on June 30, 2022.
- Agencies may extend the waiver if the level of COVID transmission makes such an extension appropriate.
- Depending on varying rates of transmission, the extension may be State-wide, may be limited to specific locales, or may be on a project-by-project basis.
- No such extension may go beyond December 31, 2023.
- The Agency must resume compliance-monitoring reviews as due under § 1.42-5 once the waiver expires.
- Between April 1, 2020, and the end of 2022 only, when the Agency gives an Owner reasonable notice that it will physically inspect not-yet-identified low-income units, it may treat the reasonable notice as being up to 30 days.
- Beginning on January 1, 2023, for this purpose reasonable notice again is generally no more than 15 days
Owners and managers should note that this extended relief does not include an extension for qualifying units in order to avoid the “2/3” unit rule. For projects claiming first-year credits in 2022, units qualified no later than six months after the end of the tax year will be included in qualified basis as of the end of 2022. Units qualified after the six-month period will be treated as “2/3” units.