Section 42 Temporary Relief
The Internal Revenue Service provides administrative, procedural and miscellaneous
temporary relief from certain Section 42 requirements for owners of low-income housing
buildings in major disaster areas declared by the President. This relief
is provided in Revenue Procedure 2007-54. Projects located in counties, designated
by FEMA for individual assistance and/or public assistance, are potentially eligible
for this relief. Iowa Finance Authority intends to evaluate each project on a case-by-case
basis and the decision to allow relief will be heavily influenced by the impact
that the major disaster has had on the location of the property relative to flooding
or tornado damage areas. Other extenuating situations will also be considered. Owners
should submit requests for consideration to IFA when the extent of damages has been
discerned and impact on the project estimated, but no later than September 1, 2008.
Relief for Carryover Allocations
For a building located in a major disaster area, IFA will accept the 10-percent basis requirement if the Owner incurs more than 10 percent of the Owner’s reasonably expected basis in the project (land and depreciable basis) no later than six months after the date that IFA would normally require it. In the case of the Carryover Application for 2008 funded projects, application for 10% Test is due on November 17, 2008, but IFA will allow the 10% Test to be met by April 17, 2009. Applications for Carryover Allocation will still be submitted on October 1, 2008. For approved buildings, IFA will provide a list of items for submission by April 17.
Relief for Placed in Service
For a project funded in with 2006 or 2007 credits that have not yet been Placed in Service, normally the Owner would have two years to place the building in service. For applicable buildings, IFA will extend the deadline for placed in service to no later than November 1 of the year following the end of the 2-year period.
Recapture Relief
If a building is beyond the first year of the credit period, and because of the disaster, that building has suffered a reduction in qualified basis that would cause it to be subject to recapture or loss credit, that building will not be subject to recapture of loss of credit of the building’s qualified basis if the basis is restored within a reasonable restoration period. IFA shall determine what a reasonable restoration period is, but it shall not exceed December 31, 2010.
Request to Receive Temporary Relief from Certain Requirements of Section 42
Relief for Carryover Allocations
For a building located in a major disaster area, IFA will accept the 10-percent basis requirement if the Owner incurs more than 10 percent of the Owner’s reasonably expected basis in the project (land and depreciable basis) no later than six months after the date that IFA would normally require it. In the case of the Carryover Application for 2008 funded projects, application for 10% Test is due on November 17, 2008, but IFA will allow the 10% Test to be met by April 17, 2009. Applications for Carryover Allocation will still be submitted on October 1, 2008. For approved buildings, IFA will provide a list of items for submission by April 17.
Relief for Placed in Service
For a project funded in with 2006 or 2007 credits that have not yet been Placed in Service, normally the Owner would have two years to place the building in service. For applicable buildings, IFA will extend the deadline for placed in service to no later than November 1 of the year following the end of the 2-year period.
Recapture Relief
If a building is beyond the first year of the credit period, and because of the disaster, that building has suffered a reduction in qualified basis that would cause it to be subject to recapture or loss credit, that building will not be subject to recapture of loss of credit of the building’s qualified basis if the basis is restored within a reasonable restoration period. IFA shall determine what a reasonable restoration period is, but it shall not exceed December 31, 2010.
Request to Receive Temporary Relief from Certain Requirements of Section 42
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