n-06-11.pdf

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Part III-Administrative, Procedural, and Miscellaneous
Relief from Certain Low-Income Housing Credit Requirements Due to Hurricane
Rita
Notice 2006-11
The Internal Revenue Service is suspending certain requirements under §
42 of the Internal Reve nue Code for low-income housing credit projects in the
United States as a result of the devastation caused by Hurricane Rita. This relief
is being granted pursuant to the Service’s authority under § 42(n) and § 1.42-
13(a) of the Income Tax Regulations. BACKGROUND
On September 24, 2005, the President declared major disasters for the
states of Louisiana and Texas as a result of Hurricane Rita. These declarations
were made under the Robert T. Stafford Disaster Relief and Emergency
Assistance Act, Title 42 U.S.C. 5121-5206 (2000 and Supp. II 2002).
Subsequently, the Federal Emergency Management Agency (FEMA) designated
jurisdictions for Individual Assistance.
The states of Louisiana and Texas have requested that the Service grant
relief similar to Notice 2005-69, 2005-40 I.R.B. 622 (applying to Hurricane Katrina
which temporarily suspended certain requirements under § 42 of the Internal
Revenue Code) to allow owners of low-income housing credit projects throughout
the United States to provide temporary housing in vacant units to individuals who
resided in jurisdictions designated for Individual Assistance in Louisiana and
Texas and who have been displaced because their residences were destroyed or
damaged as a result of the devastation caused by Hurricane Rita. The states of

Louisiana and Texas have further requested that the temporary housing of the
displaced individuals in low-income units without regard to income not cause the
owners to lose low-income housing credits.
Based upon these requests a nd because of the widespread damage to
housing caused by Hurricane Rita, the Service has determined that any housing
credit agency of a state or a possession of the United States (state housing credit
agency) may provide approval to project owners in their respective state or
possession to provide temporary emergency housing for individuals displaced by
Hurricane Rita (displaced individuals) in accordance with this notice.
I. SUSPENSION OF INCOME LIMITATIONS
The Service has determined that it is appropriate to temporarily suspend
certain income limitation requirements under § 42 for certain qualified low-income
projects. The suspension will apply to low-income housing projects approved by
the state housing credit agency, in which vacant units are rented to displaced
individuals. The state housing credit agency will determine the appropriate
period of temporary housing for each project, not to extend beyond September
30, 2006 (temporary housing period).
II. STATUS OF UNITS
A. Units in the first year of the credit period

A displaced individual temporarily occupying a unit during the first year
of the credit period under § 42(f)(1) will be deemed a qualified low-income
tenant for purposes of determining the project’s qualified basis under §
42(c)(1), and for meeting the project’s 20-50 test or 40-60 test as elected by the

project owner under § 42(g)(1). After the end of the temporary housing period
established by the state housing credit agency (not to extend beyond
September 30, 2006), a displaced individual will no longer be deemed a
qualified low-income tenant.
B. Vacant units after the first year of the credit period
During the temporary housing period established by a state housing credit
agency, the status of a vacant unit (that is, market-rate or low-income for
purposes of § 42 or never previously occupied) after the first year of the credit
period that becomes temporarily occupied by a displaced individual remains the
same as the unit’s status before the displaced individual moves in. Displaced
individuals temporarily occupying vacant units will not be treated as low-income
tenants under § 42(i)(3)(A)(ii) (a low-income unit that was vacant before the
effective date of this notice will continue to be treated as a vacant low-income
unit even if it houses a displaced individual, a market rate unit that was vacant
before the effective date of this notice will continue to be treated as a vacant
market rate unit even if it houses a displaced individual, and a unit that was never
previously occupied before the effective date of this notice will continue to be
treated as a unit that has never been previously occupied even if it houses a
displaced individual). Thus, the fact that a vacant unit becomes occupied by a
displaced individual will not affect the building’s applicable fraction under §
42(c)(1)(B) for purposes of determining the building’s qualified basis, nor will it
affect the 20-50 test or 40-60 test of § 42(g)(1). If the income of occupants in
low-income units exceeds 140 percent of the applicable income limitation, the

temporary occupancy of a unit by a displaced individual will not cause application
of the available unit rule under § 42(g)(2)(D)(ii). In addition, the project owner is
not required during the temporary housing period to make attempts to rent to low-
income individuals the low-income units housing displaced individuals.
III. SUSPENSION OF NON-TRANSIENT REQUIREMENTS
The non-transient use requirement of § 42(i)(3)(B)(i) shall not apply to a ny
unit providing temporary housing to a displaced individual during the temporary
housing period determined by the state housing credit agency in accordance with
section I of this notice.
IV. OTHER REQUIREMENTS
All other rules and requirements of § 42 will continue to apply during the
temporary housing period established by the state housing credit agency. After
the end of the temporary housing period, the applicable income limitations
contained in § 42(g)(1), the available unit rule under § 42(g)(2)(D)(ii), the non-
transient requirement of § 42(i)(3)(B)(i), and the requirement to make reasonable
attempts to rent vacant units to low-income individuals shall resume. If a project
owner offers to rent to a displaced individual after the end of the temporary
housing period, a displaced individual must be certified under the requirements of
§ 42(i)(3)(A)(ii) and § 1.42-5(b) and (c) to be a qualified low-income tenant. To
qualify for the relief in this notice, the project owner must additionally meet all of
the following requirements:
(1) Major Disaster Area
The displaced individual must have resided in a Louisiana or Texas

jurisdiction designated for Individual Assistance by FEMA as a result of Hurricane
Rita.
(2) Approval of State Housing Credit Agency
Project owners must obtain approval from their state housing credit
agency to obtain the relief described in this notice. The state housing credit
agency will determine the appropriate period of temporary housing for each
project, not to extend beyond September 30, 2006.
(3) Certifications and Recordkeeping
To comply with the requirements of § 1.42-5, project owners are required
to maintain and certify certain information concerning each displaced individual
temporarily housed in the project, specifically: name, address of damaged
residence, social security number, and a statement signed under penalties of
perjury by the displaced individual that, because of damage to the individual’s
residence in a Louisiana or Texas jurisdiction designated for Individual
Assistance by FEMA as a result of Hurricane Rita, the individual requires
temporary housing. The owner must list the project on the FEMA registry for
assistance under “Locate or List Rental Properties”. The web address for listing
the project is: www.fema.gov.
The owner must also certify the date the displaced individual began
temporary occupancy and the date the project will discontinue providing
temporary housing as established by the state housing credit agency. The
certifications and recordkeeping for displaced individuals must be
maintained as part of the annual compliance monitoring process with the

state housing credit agency.
(4)
Rent Restrictions
Rents for the low-income units housing displaced individuals must not
exceed the existing rent-restricted rates for the low-income units established
under § 42(g)(2).
(5) Protection of Existing Tenants
Existing tenants in occupied low-income units cannot be evicted or have
their tenancy terminated as a result of efforts to provide temporary housing for
displaced individuals. EFFECTIVE DATE
This notice is effective September 24, 2005 (the date of the President’s
major disaster declarations as a result of Hurricane Rita). PAPERWORK
REDUCTION ACT
The collection of information contained in this notice has been reviewed
and approved by the Office of Management and Budget in accordance with the
Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-1997.
An Agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless the collection of information
displays a valid OMB control number.
The collection of information in this notice is in the section titled “OTHER
REQUIREMENTS” and “(3) Certifications and Recordkeeping”. This information
is required to enable the Service to verify whether individuals are displaced as a
result of Hurricane Rita and thus warrant temporary housing in vacant low-
income housing credit units. The collection of information is required to obtain a

benefit. The likely respondents are individuals, businesses, and nonprofit
institutions.
The estimated total annual recordkeeping burden is 1,250 hours.
The estimated annual burden per recordkeeper is approximately 15
minutes. The estimated number of recordkeepers is 5,000.
Books or records relating to a collection of information must be retained as
long as their contents may become material to the administration of the internal
revenue law. Generally, tax returns and tax return information are confidential, as
required by 26 U.S.C. 6103. DRAFTING INFORMATION
The principal author of this notice is Jack Malgeri of the Office of the
Associate Chief Counsel (Passthroughs and Special Industries). For further
information regarding this notice contact Mr. Malgeri on (202) 622-3040 (not a toll
free call).