IRS Suspends Requirements at Tax-Exempt Bond Sites for Hurricane Victims

Recently, the IRS suspended certain requirements for qualified residential rental projects financed with tax-exempt bonds that are providing emergency housing for victims of Hurricane Sandy. IRS Notice 2013-9 temporarily suspends income limitations and the non-transient use requirement for the property. The IRS says Notice 2013-9 complements Notice 2012-68, which provides relief from certain requirements for residential rental projects financed with low-income housing tax credits.

In response to President Obama issuing major disaster declarations for several states because of the devastation caused by Hurricane Sandy, FEMA designated jurisdictions in several of these states for individual assistance. The exempt facility bond guidance allows issuers to approve the use of qualified residential rental projects to temporarily house displaced individuals, regardless of their income. Approved projects can be located in any state, regardless of whether a major disaster declaration with individual assistance has been issued for that state.

As with the LIHTC guidance, the term “displaced individual” means an individual who resided in a jurisdiction designated for individual assistance and who has been displaced because his or her residence was destroyed or damaged as a result of the devastation caused by Hurricane Sandy.

If an issuer that issued exempt facility bonds for a project wants to allow the use of the project to temporarily house displaced individuals, the issuer must approve that use and must determine an appropriate period for the temporary housing, not to extend beyond Nov. 30, 2013. Owners may not evict existing  income-qualified tenants to provide temporary housing for the Hurricane Sandy victims and must also comply with certain certification and record-keeping requirements. And to the extent such rent restrictions are applicable, rents for the low-income units that house displaced individuals must not exceed the lesser of the maximum gross rent for that unit under the bond and/or LIHTC rules.