IRS Clarifies General Public Use Requirements to Allow Preferences

On April 3, 2019, the Internal Revenue Service (IRS) issued guidance ensuring that multifamily properties financed by tax-exempt bonds and the 4 percent Low-Income Housing Tax Credit (Housing Credit) may create preferences for military veterans and other special populations in coordination with rules already in place for the Housing Credit.

The general public use requirements governing the Housing Credit and tax-exempt bonds are intended to ensure that properties funded by these tools serve the general public, rather than specific groups such as employees of a nearby company. However, Housing Credit properties are allowed occupancy restrictions or preferences favoring certain special populations, such as military veterans and those with special needs.

Prior to the guidance released yesterday, it was not clear whether the general public use requirements governing tax-exempt bonds provided the same exception for preferences for certain groups. This discrepancy put at risk 4 percent Housing Credit properties with preferences for military veterans and other populations. With the new clarifying guidance, the Housing Credit and tax-exempt bonds are now aligned in their general public use requirements. Though there was also an effort to address this issue legislatively in December 2018, this guidance will now address the issue without requiring further legislation.

The AHTCC continues to support efforts to strengthen the impact of the Housing Credit and other complementary tools for financing affordable housing. This clarification from the IRS helps to ensure that populations with special needs, including our military veterans, can continue to access affordable homes made possible by the Housing Credit and tax-exempt bonds. The AHTCC commends the IRS for issuing this important guidance.