On December 1, the Internal Revenue Service (IRS) released guidance (see Revenue Ruling 2021-20 and Revenue Procedure 2021-43) to clarify the applicability of the minimum 4 percent Housing Credit rate. The rate was enacted at the end of 2020 for properties placed in service after December 31, 2020.
The new guidance states that the minimum rate is not available for:
- Draw down bonds issued prior to 2021,
- A “de minimis” obligation issued after December 31, 2020, or
- A “de minimis” allocation of Housing Credits occurring after December 31, 2020.
The above restrictions clarify that the minimum 4 percent rate is not available for draw down bonds from prior to 2021. For any developments that received issuances of bonds in both 2020 and 2021, at least 10 percent of the development must be financed with new bonds in order for the 4 percent minimum rate to apply.
See additional analysis from the National Council of State Housing Agencies (NCSHA).