IRS Revenue Procedure on General Public Use

IRS Revenue Procedure on General Public Use

As many of you are aware, one of the issues we have been working to resolve to facilitate affordable housing production is an omission that occurred back in 2008 with the Housing and Economic Recovery Act (HERA) regarding General Public Use.

Upon passage of HERA, Code section 42 provided that a project does not violate the general public use requirements solely because of occupancy restrictions or preferences that favor tenants (A) with special needs, (B) who are members of a specified group under a Federal program or State program or policy that supports housing for such a specified group, or (C) who are involved in artistic or literary activities. Among the specified groups included in the GPU provision for section 42 were veterans. Unfortunately this language was not conveyed to section 142 of the Code which pertains to tax-exempt bonds. This issue has now been resolved.

On April 3, 2019, the Internal Revenue Service (IRS) issued Rev. Proc. 2019-17, providing guidance regarding the general public use requirements for qualified residential rental properties financed with tax-exempt bonds under section 142 of the Internal Revenue Code (Code). The revenue procedure coordinates these requirements with the general public use requirements in Code section 42, thus ensuring that housing developments financed with bonds and the 4 percent LIHTC may include a preference for certain specified groups, such as veterans, without running afoul of the general public use requirements. This revenue procedure applies to bonds sold before, on, or after April 3, 2019.

This coordination is very good news in that it puts to rest concerns about whether 4 percent LIHTC properties serving veterans, or other specified groups, may move forward.

We also applaud the bipartisan efforts of Members of Congress to resolve this issue with the IRS and Treasury Department. House Speaker Nancy Pelosi (D-CA) and her staff worked with the House and Senate tax-writing chairs and ranking members, as well as with the Administration, to explore both regulatory and legislative clarifications. We also commend the efforts of Senators Dianne Feinstein (D-CA), John Cornyn (R-TX), Catherine Cortez Masto (D-NV), Jacky Rosen (D-NV), Kamala Harris (D-CA), and Mazie Hirono (D-HI). This bicameral, bipartisan united front was instrumental in making sure that the development of veterans housing will not be threatened.

Thank you.

Bob Moss & David Gasson

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