IRS Temporarily Waives Low-Income Housing Credit Rules for Hurricane Sandy Victims

The IRS has temporarily waived low-income housing tax credit rules for victims of Hurricane Sandy. This waiver will allow owners of low-income housing credit projects to provide temporary housing in vacant units to individuals, regardless of their income, who have been displaced because their residences were destroyed or damaged by the disaster.

The low-income housing tax credit is an incentive for owners to provide housing for individuals with less than median income. To qualify for the credit, the rental building must be considered a “qualified low-income building.” To meet this requirement, the building must at all times during a statutorily prescribed period be a part of a “qualified low-income housing project”, which is defined as any project for residential rental housing that meets one of the two following tests elected by the taxpayer:

  1. At least 20% of the residential units in the project are “rent-restricted” and occupied by individuals whose income is 50% or less of area median gross income; or
  2. At least 40% of the residential units in the project are “rent-restricted” and occupied by individuals whose income is 60% or less of area median gross income.

In addition to the above tests, a residential unit is not treated as a low income unit unless it is used other than on a transient basis.

The waiver by the IRS will temporarily suspend the requirements (listed above) for qualified low-income housing projects that provide housing to victims of Hurricane Sandy. The IRS will provide more specific guidance on dates and time frames at a later date.