IRS

This article is reprinted with the permission of Nixon Peabody LLP

In addition to the usual rules defining “low income communities” where projects are eligible for the new markets tax credit, the Code provides that certain individuals or groups of individuals who are low income or lack access to loans or equity investments, may qualify as a “targeted population” that is also eligible. The IRS first provided guidance, describing how an entity serving certain targeted populations could meet the requirements to be a qualified active low-income community business (or QALICB), in Notice 2006-60, and then, proposed regulations were published in September, 2008. Under those rules, a QALICB could rely on the Notice until the regulations became “final.”

Now, more than three years later, final regulations for targeted populations have been published. The IRS received many comments with respect to the proposed regulations to expand and clarify the rules. However, with few exceptions, the final regulations adopt the guidance from the Notice and the proposed regulations. The final regulations are effective December 5, 2011. Taxpayers may apply these new rules to taxable years ending before December 5, 2011 for targeted populations designated as eligible low-income communities by Treasury after October 22, 2004. Thereafter, Notice 2006-60 is obsolete and QALICBs must use the new final regulations.

As you may recall, an entity qualifies as a QALICB serving targeted populations if at least 50% of its gross income is “derived from” sales, rentals, services, or other transactions with low-income persons, at least 50% of its ownership is by low-income persons, or at least 40% of its employees are low-income persons. Such a QALICB could not be located in a census tract that exceeds 120% of the area median family income. A targeted population also includes individuals displaced by Hurricane Katrina.

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This article is reprinted with the permission of Nixon Peabody LLP

Over the past year the White House has sought to align federal rental policy. Sometimes called “Harmonization,” these efforts have focused on several areas where federal programs work in tandem among the U.S. Department of Housing and Urban Development (HUD), the U.S. Department of Treasury (essentially the Internal Revenue Service’s Low-Income Housing Tax Credit Program), and the U.S. Department of Agriculture (USDA) (mainly Rural Housing Services’ multifamily programs operated through Rural Development). The White House has convened several working group meetings culminating in a roll out meeting this past July 27. The Administration published its report called Federal Rental Alignment Opportunities—Conceptual Proposals, and sought comments over the summer. The report is broken out by its 11 subject areas: physical inspections, income reporting and definitions, subsidy layering reviews, reduction in state-to-state variability for income definition, financial reporting, common energy efficiency requirements, appraisal primer, market study standards, capital needs assessment, improve sharing of data on owner defaults, and compliance (fair housing MOUs).

The Administration is now starting implementation through pilot programs for physical inspections and subsidy layering reviews. The physical inspection pilot will involve limited numbers of properties in Michigan, Minnesota, Ohio, Oregon, Washington State, and Wisconsin. The subsidy layering pilot will be implemented in certain transactions in North Carolina, South Carolina, Michigan, and Nevada.

The physical inspection pilots have started their roll outs in the past two weeks in different states. Each pilot is focused on executing Memoranda of Understanding (“MOU”) in each pilot state between HUD, USDA, and the state Housing Finance Agency. Indications are that the Uniform Physical Condition Standard or UPCS would become the common inspection standard.

Similarly, the subsidy layering pilot will be implemented by state-specific MOUs between HUD, RD, and the state Housing Finance Agency.


The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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The IRS recently released a notice (Notice 2011-14) that:

provides guidance on the federal tax consequences of, and information reporting requirements for, payments made to or on behalf of financially distressed homeowners under programs designed by state housing finance agencies (State HFAs)1 with funds allocated from the Housing Finance Agency Innovative Fund for the Hardest-Hit Housing Markets (HFA Hardest Hit Fund)…[and] under the Department of Housing and Urban Development’s Emergency Homeowners’ Loan Program (EHLP) and any existing state program receiving funding from the EHLP

Read an analysis of the notice here: IRS Issues Guidance on HHF and EHLP Assistance Tax Consequences

 

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