The IRS released final regulations on the Average Income Test (AIT), also known as ‘income averaging,’ in October 2022 that included changes urged by the AHTCC and our partners for nearly two years. The AHTCC, our partners, and affordable housing champions in Congress initially advocated for the AIT, the third minimum set aside for the Housing Credit, to make more types of affordable housing financially feasible and allow the Housing Credit to serve a broader range of low-income tenants. It was first introduced in the Affordable Housing Credit Improvement Act of 2017 and was enacted through the 2018 omnibus spending package.
However, the IRS proposed regulations in October 2020 regarding the AIT that would have severely limited utilization of the income averaging flexibility, and were already having that effect in their proposed form. The AHTCC and our partners weighed in with the IRS directly to request changes that ensure the AIT remained a viable option. In October 2022, as part of its Housing Supply Action Plan, the Biden Administration released a final regulation on AIT that adopts the majority of AHTCC’s recommended changes to the 2020 proposed rule. The final regulations address our major concerns and will make more affordable housing developments financially feasible.
Read more about the final regulations and other components of the Housing Supply Action Plan in our blog.
