NAHMA LIHTC Update: IRS Issues Guidance on Implementation of 4 Percent Minimum Rate

• By: admin
• On: 12/02/2021 14:27:08
• In: NAHMA Update

IRS Issues Guidance on Implementation of 4 Percent Minimum Rate

• Revenue Ruling 2021-20 provides guidance regarding whether the 4 percent applicable percentage (4 percent floor) applies to the low-income buildings described in the revenue ruling.  This revenue ruling holds that a draw-down bond that is issued prior to 2021 (with draws occurring in a subsequent year), a de minimis § 42(h)(4)(A) obligation issued after December 31, 2020, or a de minimis allocation of low-income housing credit dollar amount occurring after December 31, 2020, do not cause a building to be subject to the minimum 4 percent floor.

• Revenue Procedure 21-43 clarifies the ruling and provides safe harbors for when an § 42(h)(4)(A) obligation or an allocation of a low-income housing credit dollar amount is more than de minimis for purposes of the associated revenue ruling providing guidance on whether the 4 percent applicable percentage applies to certain low-income buildings. The procedure specifies that a building's financing is not deemed de minimis if the aggregate amount of the post-2020 obligations is at least 10% of the total amount of all obligations that finance the building and a post-2020 allocation of LIHTCs is not deemed de minimis if the allocation is at least 10% of the total allocations to the building that have been made on or before the date of the allocation in question.