n-05-69.pdf

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Part III-Administrative, Procedural, and Miscellaneous

Relief from Certain Low-Income Housing Credit Requirements Due to
Hurricane Katrina

Notice 2005-69

The Internal Revenue Service is suspending certain requirements under
§ 42 of the Internal Revenue Code for low-income housing credit projects in the
United States as a result of the devastation caused by Hurricane Katrina. 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 August 29, 2005, the President declared major disasters for the States
of Alabama, Louisiana, and Mississippi as a result of Hurricane Katrina. 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.
State housing credit agencies throughout the United States have
requested that the Service allow owners of low-income housing credit projects to
provide temporary housing in vacant units to individuals who resided in
jurisdictions designated for Individual Assistance in Alabama, Louisiana, and
Mississippi and who have been displaced because their residences were
destroyed or damaged as a result of the devastation caused by Hurricane Katrina

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(displaced individuals). State housing credit agencies 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 and because of the widespread damage to
housing caused by Hurricane Katrina, 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 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

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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

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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 any
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 an Alabama, Louisiana, or

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Mississippi jurisdiction designated for Individual Assistance by FEMA as a result
of Hurricane Katrina.
(2) Approval of State Housing Credit Agency

The project owner must obtain approval from the state housing credit
agency for 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 an Alabama, Louisiana, or Mississippi jurisdiction designated for
Individual Assistance by FEMA as a result of Hurricane Katrina, the individual
requires temporary housing. The owner must list the project on the National
Emergency Resource Registry (NERR) maintained by the Department of
Homeland Security. The NERR assists coordination efforts between resources
that are needed and resources that are available. The web site for listing the
project is: www.SWERN.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

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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 August 29, 2005 (the date of the President’s major
disaster declarations as a result of Hurricane Katrina).
PAPERWORK REDUCTION ACT
Pursuant to 5 CFR 1320.18(d), the Office of Management and Budget has
waived the requirements of the Paperwork Reduction Act (44 U.S.C. 3501 et
seq.) with respect to the recordkeeping requirements contained in this notice.
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.

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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).