Natural Disasters and LIHTC

Written by Edward Clark, Director of Monitoring in MA

More than half of the states now have counties recognized by the Federal Government as having had natural disasters.  Such a designation can have a significant impact on LIHTC properties. If you have a property in an area affected by natural disaster, the federal designation may provide you with some leniency when it comes to relocating households impacted by the disaster, relaxing compliance standards and preserving the flow of credits.

Revenue Procedure 2007-54 (see the end of this entry to download this document) gives some clarity to what the IRS will allow allocating agencies to offer in terms of relief. Contact your agency for details. Some of the details are as follows:

  1. This revenue procedure only applies to cities/counties/local jurisdictions  designated by FEMA
  2. You can temporarily rent LIHTC units to low income households that were impacted by the disaster without completing a full certification.
  3. Agencies have the discretion to restrict options.
  4. Properties beyond year one that are affected can still claim credits for up to 24 months if the qualified basis is restored in a timely fashion (you must still report the reduction).
  5. Properties in the first year may get to re-set the clock (basically start over after everything is repaired).
  6. Housing displaced households in LIHTC units requires written permission by the agency.
  7. You can house low income households based on a self affidavit for up to four months. Start certifying them for real if they might be there any longer than that.
  8. Keep records of who was housed, where they came from, all income documentation used and move in-move out dates.

 

Check your written tenant selection criteria to see if it allows homeless households priority on the wait list. You may need to clarify with your allocating agency whether such priority is allowable if it isn’t already specified in your criteria. Remember to check with your agency to see what is allowable. They have the discretion to limit how this revenue procedure is applied.

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