IRS Housing Tax Credit Rules Already Dampen Market, Agencies Say

Narrow guidance proposed by IRS for low-income housing tax credits is already causing declines in investment, housing agency directors and stakeholders say.

Proposed guidance under tax code Section 42 clarifies the number of rent-restricted units needed to qualify for a credit under the program’s average income test, and which credits are available for projects with a mix of low-income and market-rate units. The guidance also prevents housing agencies from changing a rental unit’s designated income cutoff after an initial limit is set, and gives a 60-day grace period to take mitigating actions for a unit that doesn’t meet the ...