rp-20-33.pdf

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26 CFR 601.601: Rules and Regulations.
(Also Part I, §§ 25, 143)

Rev. Proc. 2020-33

SECTION 1. PURPOSE

This revenue procedure provides guidance with respect to
the United States and area median gross income figures that are
to be used by issuers of qualified mortgage bonds, as defined in
§ 143(a) of the Internal Revenue Code, and issuers of mortgage
credit certificates, as defined in § 25(c), in computing the
income requirements described in § 143(f).
SECTION 2. BACKGROUND
.01 Section 103(a) provides that, except as provided in
§ 103(b), gross income does not include interest on any state or
local bond. Section 103(b)(1) provides that § 103(a) shall not
apply to any private activity bond that is not a qualified bond
(within the meaning of § 141). Section 141(e) provides that the
term "qualified bond" includes any private activity bond that

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(1) is a qualified mortgage bond, (2) meets the applicable
volume cap requirements under § 146, and (3) meets the
applicable requirements under § 147.
.02 Section 143(a)(1) provides that the term "qualified
mortgage bond" means a bond that is issued as part of a
"qualified mortgage issue". Section 143(a)(2)(A) provides that
the term "qualified mortgage issue" means an issue of one or
more bonds by a state or political subdivision thereof, but only
if (i) all proceeds of the issue (exclusive of issuance costs
and a reasonably required reserve) are to be used to finance
owner-occupied residences; (ii) the issue meets the requirements
of subsections (c), (d), (e), (f), (g), (h), (i), and (m)(7) of
§ 143; (iii) the issue does not meet the private business tests
of paragraphs (1) and (2) of § 141(b); and (iv) with respect to
amounts received more than 10 years after the date of issuance,
repayments of $250,000 or more of principal on financing
provided by the issue are used not later than the close of the
first semi-annual period beginning after the date the prepayment
(or complete repayment) is received to redeem bonds that are
part of the issue.
.03 Section 143(f) imposes eligibility requirements
concerning the maximum income of mortgagors for whom financing

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may be provided by qualified mortgage bonds. Section
25(c)(2)(A)(iii)(IV) provides that recipients of mortgage credit
certificates must meet the income requirements of § 143(f).
Generally, under §§ 143(f)(1) and 25(c)(2)(A)(iii)(IV), these
income requirements are met only if all owner-financing under a
qualified mortgage bond and all certified indebtedness amounts
under a mortgage credit certificate program are provided to
mortgagors whose family income is 115 percent or less of the
applicable median family income. Under § 143(f)(6), the income
limitation is reduced to 100 percent of the applicable median
family income if there are fewer than three individuals in the
family of the mortgagor.
.04 Section 143(f)(4) provides that the term "applicable
median family income" means the greater of (A) the area median
gross income for the area in which the residence is located, or
(B) the statewide median gross income for the state in which the
residence is located.
.05 Section 143(f)(5) provides for an upward adjustment of
the income limitations in certain high housing cost areas. Under
§ 143(f)(5)(C), a high housing cost area is a statistical area
for which the housing cost/income ratio is greater than 1.2. The
housing cost/income ratio is determined under § 143(f)(5)(D) by

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dividing (a) the applicable housing price ratio by (b) the ratio
that the area median gross income bears to the median gross
income for the United States. The applicable housing price ratio
is the new housing price ratio (new housing average purchase
price for the area divided by the new housing average purchase
price for the United States) or the existing housing price ratio
(existing housing average area purchase price divided by the
existing housing average purchase price for the United States),
whichever results in the housing cost/income ratio being closer
to 1. This income adjustment applies only to bonds issued, and
nonissued bond amounts elected, after December 31, 1988. See
§ 4005(h) of the Technical and Miscellaneous Revenue Act of
1988, 1988-3 C.B. 1, 311 (1988).
.06 The Department of Housing and Urban Development (HUD)
has computed the median gross income for the United States, the
states, and statistical areas within the states. The income
information was released to the HUD regional offices on April
01, 2020 and may be obtained by calling the HUD reference
service at 1-800-245-2691. The income information is also
available at HUD's World Wide Web site,
http://www.huduser.gov/portal/datasets/il.html, which provides a
menu from which you may select the year and type of data of

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interest.
.07 The most recent nationwide average purchase prices and
average area purchase price safe harbor limitations were
published on April 06, 2020, in Rev. Proc. 2020-18, 2020-15
I.R.B. 592.
SECTION 3. APPLICATION
.01 When computing the income requirements of § 143(f),
issuers of qualified mortgage bonds and mortgage credit
certificates must use either (1) the median gross income for the
United States, the states, and statistical areas within the
states, as released to the HUD regional offices on April 24,
2019, or (2) the median gross income for the United States, the
states, and statistical areas within the states, as released to
the HUD regional offices on April 01, 2020.
.02 If an issuer uses the median gross income for the
United States, the states, and statistical areas within the
states, as released to the HUD regional offices on April 24,
2019, to compute the housing cost/income ratio under
§ 143(f)(5), the issuer must use the median gross income for the
United States, the states, and statistical areas within the
states, as released to the HUD regional offices on April 24,
2019, for all purposes under § 143(f). Likewise, if an issuer

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uses the median gross income for the United States, the states,
and statistical areas within the states, as released to the HUD
regional offices on April 01, 2020, to compute the housing
cost/income ratio under § 143(f)(5), the issuer must use the
median gross income for the United States, the states, and
statistical areas within the states, as released to the HUD
regional offices on April 01, 2020, for all purposes under
§ 143(f).
SECTION 4. EFFECT ON OTHER REVENUE PROCEDURES
.01 Rev. Proc. 2019-21, 2019-21 I.R.B. 190, is obsolete
except as provided in §§ 3.01, 3.02, or 5 of this revenue
procedure.
.02 This revenue procedure does not affect the effective
date provisions of Rev. Rul. 86-124, 1986-2 C.B. 27. Those
effective date provisions will remain operative at least until
the Service publishes a new revenue ruling that conforms the
approach to effective dates set forth in Rev. Rul. 86-124 to the
general approach taken in this revenue procedure.
SECTION 5. EFFECTIVE DATES
Issuers must use the United States and area median gross
income figures specified in § 3.01 of this revenue procedure for
commitments to provide financing that are made, or (if the

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purchase precedes the financing commitment) for residences that
are purchased, in the period that begins on April 01, 2020, and
ends on the date when these United States and area median gross
income figures are rendered obsolete by a new revenue procedure.
SECTION 6. REQUEST FOR COMMENTS
This revenue procedure provides that the United States and
area median gross income figures specified in § 3.01 released by
HUD may be relied upon until the Internal Revenue Service (IRS)
publishes a revenue procedure in the Internal Revenue Bulletin
indicating that HUD has released updated income limits. The
Department of the Treasury and the IRS solicit public comments
on whether, instead of publishing this revenue procedure
annually, the IRS should publish permanent guidance that would
allow issuers to rely on the United States and area median gross
income figures immediately upon release of those figures by HUD.
See, e.g., Rev. Rul. 94-57, 1994-2 C.B. 5 (permitting taxpayers
to rely on HUD income limits for certain purposes of § 42). The
Department of the Treasury and the IRS also solicit public
comments on whether such guidance should: (1) allow an issuer
the choice to use the HUD figures for the current year or the
HUD figures for the prior year or earlier years; and (2) provide
a transition period that allows an issuer to rely on HUD figures

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from the prior year or earlier years and, if a transition period
should be provided, the number of days in the transition period.
Comments should be submitted in writing on or before October 13,
2020, and should contain a reference to this Rev. Proc. 2020-33.
All comments will be available for public inspection and
copying. Commenters are strongly suggested to submit comments
electronically, as access to mail may be limited. Comments may
be submitted in one of two ways:

(1) Electronically via the Federal eRulemaking Portal at
www.regulations.gov (type IRS Rev. Proc. 2020-33 in
the search field on the regulations.gov homepage to
find this revenue procedure and submit comments).
(2) Alternatively, by mail to Internal Revenue Service,
CC:PA:LPD:PR (Rev. Proc. 2020-33), Room 5203, P.O. Box
7604, Ben Franklin Station, Washington, DC 20044.
DRAFTING INFORMATION
The principal authors of this revenue procedure are Timothy
Jones and David White of the Office of Associate Chief Counsel
(Financial Institutions & Products). For further information
regarding this revenue procedure contact Mr. White at (202) 317-
6980 (not a toll-free call).