The Affordable Housing Tax Credit Coalition (AHTCC) has been pursuing a solution to address issues that have arisen related to when Housing Credits could be claimed relative to the receipt of the Low-Income Housing Credit Allocation and Certification (Form 8609), which could create delays that ultimately impact the amount of tax credit equity available for affordable housing properties. Click here to see the overview of the steps we have taken with the Internal Revenue Service (IRS) and an approach to consider, with the understanding that the AHTCC is not providing tax advice, and each company will have to consult with its attorneys and accountants to weigh the benefits and risks and draw its own conclusions. We encourage you to share this information with any interested parties.
Current Guidance Provides Solution for 2018
The Bipartisan Budget Act of 2015 (BBA) overhauled the partnership audit regime, which changes how partnerships amend previously filed returns and can delay the year in which Housing Credits are claimed by partners. Prior to the changes, Housing Credits earned in a prior year could be claimed by amending a previously filed return upon receipt of the Forms 8609 even if the receipt of the forms was after the extended due date for the partnership return. The BBA changes no longer allow partnerships to file amended returns. Instead, a partnership is generally required to file an administrative adjustment request (AAR) and the investor generally claims the Housing Credits included in an AAR on the return for the year in which the AAR is filed rather than the year in which the Housing Credits were generated.
The IRS released a new COVID-19 related revenue procedure in early April which, while not specifically addressing the Housing Credit, once again allows the amending of BBA partnership returns. For Housing Credit partnerships, once Forms 8609 are received for 2018 returns, the partnership may now file an amended return by September 30, 2020. Though the new revenue procedure resolves this issue for many partnerships for 2018, a solution is still needed for 2019 and future years, as well as for some 2018 partnerships.
AHTCC Urges IRS to Consider a “Reasonable Cause” Approach
The AHTCC has worked with the IRS and many of our members, including leading affordable housing accounting and law firms, in asking the IRS to allow a partnership to claim Housing Credits prior to the receipt of Forms 8609 based on a “reasonable cause” approach, if the failure to have Forms 8609 is due to reasonable cause and not due to willful neglect consistent with Section 42(l)(1).
A reasonable cause approach would be consistent with Section 42(l)(1), which states that if Housing Credits are claimed without the taxpayer certifying to a number of items (all of which normally would be on the 8609), then Housing Credits will not be allowable unless the failure to provide the required certification is due to reasonable cause rather than willful neglect. Click here to see the general roadmap that several accounting and law firm members of the AHTCC believe would be a reasonable approach for members of the industry to consider.
The AHTCC continues to urge the IRS to formally issue guidance allowing for a “reasonable cause” approach that would allow for affordable housing developments certainty as to how to move forward as expected, at a time when affordable housing is so urgently needed.
For questions about individual developments, contact your accounting firm or tax attorney. For general questions about the AHTCC’s efforts around the 8609 issue, contact Emily Cadik, Executive Director, at firstname.lastname@example.org.