rp-19-17.pdf

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26 CFR 601.601: Rules and regulations
(Also Part I, §§ 42 and 142)

Rev. Proc. 2019-17

SECTION 1. PURPOSE
This revenue procedure provides guidance regarding the general public use
requirements for qualified residential rental projects financed with tax-exempt bonds
under § 142(d) of the Internal Revenue Code (Code). Specifically, this revenue
procedure coordinates these requirements with the provisions in § 42(g)(9). Under
§ 42(g)(9), a project does not violate the general public use requirement under § 42 as a
result of specified occupancy restrictions or preferences (for example, certain housing
preferences for military veterans).

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SECTION 2. BACKGROUND
.01 State and local governments may issue tax-exempt bonds under § 103 to
fin ance exempt facilities (exempt facility bonds). A qualified residential rental project, as
defined in § 142(d), is one type of exempt facility that may be financed with exempt
facility bonds.
.02 To satisfy the requirements of § 142(d), a specified portion of the residential
units in a residential rental project must serve individuals with qualifying incomes. For
example, under § 142(d)(1)(A), a residential rental project satisfies these requirements if
20 percent or more of the residential units in the project are occupied by individuals
whose income is 50 percent or less of area median gross income.
.03 Under § 1.103-8(a)(2) of the Income Tax Regulations, to qualify as an
exempt facility, a facility must serve or be available on a regular basis for general public
use, or be part of a facility so used, as contrasted with similar types of facilities that are
constructed for the exclusive use of a limited number of private business users. For
example, an apartment building for which employees of an adjacent factory are given
preference over other potential tenants is not available for use by the general public.
See § 1.103-8(b)(9), Example 2.
.04 Section 42 provides a low-income housing credit in an amount equal to a
portion of the qualified basis (as defined in § 42(c)(1)) of each qualified low-income
building (as defined in § 42(c)(2)) that is part of a qualified low-income housing project
(as defined in § 42(g)).

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.05 Section 1.42-9(a) provides that a residential rental unit in a building that is
not for use by the general public is not eligible for a low-income housing credit under
§ 42. Section 1.42-9(a) further provides that a residential rental unit is for use by the
general public if the unit is rented in a manner consistent with housing policy governing
non-discrimination, as evidenced by rules or regulations of the Department of Housing
and Urban Development. Section 1.42-9(b), however, provides that if a residential
rental unit is provided only for a member of a social organization or provided by an
employer for its employees, the unit is not for use by the general public and is not
eligible for a low-income housing credit under § 42.
.06 Section 42(g)(9) provides that a project does not fail to meet the general
public use requirement 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. For example, there are
certain Federal or State programs that support housing for military veterans. Section
42(g)(9) was added to the Code by § 3004(g) of the Housing and Economic Recovery
Act of 2008, Pub. L. 110-289, 122 Stat. 2654, 2884.
.07 Section 142(d) does not contain a provision similar to § 42(g)(9). Low-
income housing credits under § 42 and exempt facility bonds issued under § 142(d) are
often used together to finance residential rental projects. Questions have arisen as to
whether a project that is treated as not failing the general public use requirement solely
based on the restrictions or preferences provided under § 42(g)(9) for purposes of the

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low-income housing credit under § 42 may be treated as not failing the general public
use requirement applicable to tax-exempt financing of qualified residential rental
projects under § 142(d).
SECTION 3. SCOPE
This revenue procedure only applies to exempt facility bonds that finance
qualified residential rental projects under § 142(d) and does not affect the rules
applicable to exempt facility bonds that finance other exempt facilities. For rules
applicable to exempt facility bonds that finance other exempt facilities, see, generally,
§ 1.103-8.
SECTION 4. APPLICATION
A qualified residential rental project (as defined in § 142(d)) does not fail to meet
the general public use requirement applicable to exempt facilities solely because of
occupancy restrictions or preferences that favor tenants described in § 42(g)(9) (for
example, certain housing preferences for military veterans).
SECTION 5. EFFECTIVE DATE
This revenue procedure applies to bonds sold before, on, or after April 3, 2019.
SECTION 6. DRAFTING INFORMATION
The principal author of this revenue procedure is Johanna Som de Cerff of the
Office of Associate Chief Counsel (Financial Institutions & Products). For further
information regarding this revenue procedure contact Johanna Som de Cerff on (202)
317-6980 (not a toll free call).