Further IRS Extensions and Waivers to Affordable Rental Housing Projects as COVID-19 Persists

Ballard Spahr LLP

Ballard Spahr LLP


The IRS has extended certain deadlines relating to affordable housing projects with Low Income Housing Tax Credits (LIHTC) under Section 42 of the Internal Revenue Code of 1986, as amended (the Code) or financed with tax-exempt private activity bonds under Section 142(d) of the Code.

The Upshot

While COVID-19 disruptions continue, owners, operators, issuers, and state housing agencies have more time to comply with various requirements applicable to affordable housing projects.

The Bottom Line

The extension, published as Notice 2022-05 on January 18, 2022, will affect construction and operation of certain low-income residential rental projects. Please contact one of the authors if you would like to discuss the application of this guidance to your project or state housing agency.

In response to the new surge in COVID-19 infections and the presence of new disease variants, the Internal Revenue Service (IRS) released Notice 2022-05 (Notice), which was published in the Internal Revenue Bulletin dated January 18, 2022. The Notice extends previous relief under Notice 2021-12, as clarified by Notice 2021-17, that extended deadlines related to projects with low-income housing tax credits under Section 42 (LIHTC). The Notice also grants state housing agencies certain operational waivers for LIHTC projects. You can access the Notice here.

Operational Waivers for LIHTC Projects:

Compliance Monitoring. State housing agencies are required to resume tenant file review as of January 1, 2022. However, during calendar year 2022, agencies may give up to 30 days prior notice to owners of such review. Beginning January 1, 2023, such prior notice will again be limited to up to 15 days. The Notice allows state housing agencies to defer compliance-monitoring physical inspections of LIHTC projects through June 30, 2022. The Notice allows further deferrals through the end of 2022 if, in consultation with local public health experts, an agency determines that the level of transmission makes continued deferral appropriate. Depending on rates of transmission, inspections may be deferred statewide, by locality, or on a project-by-project basis.

Closure of Common Areas and Amenities. A state housing agency may grant full, partial, or conditional waivers of the condition for access to common areas and amenities without triggering a reduction in eligible basis. A waiver must be based on conditions arising from the COVID-19 pandemic.

Emergency Housing for Medical Personnel and Other Essential Workers. LIHTC projects may be used to provide emergency housing to medical personnel and other essential workers during the period of April 1, 2020, to December 31, 2022, in accordance with Revenue Procedure 2014-49 or Revenue Procedure 2014-50.

Extended Deadlines for Bond-financed Projects:

Transition Period for Acquiring Existing Projects. The last day of the 12-month transition period for meeting the income set-aside for acquisition of existing projects is postponed to December 31, 2022, if the last day of the transition period was originally on or after April 1, 2020, and before December 31, 2022.

Two-Year Rehabilitation Expenditure Period. If the last day of the two-year rehabilitation period for a project was originally on or after April 1, 2020, and before December 31, 2023, then the last day of the two-year period is postponed to the earlier of 18 months from the original due date or December 31, 2023.

Extended Deadline for LIHTC Projects:


Original Deadline (without regard to prior extensions)


Section 42 Reference

10-Percent Test for Carryover Allocations

April 1, 2020 – December 31, 2020

Original deadline plus two years


January 1, 2021 – December 31, 2022

December 31, 2022

24-Month Minimum Rehabilitation Expenditure Period

April 1, 2020 – December 31, 2021

Original deadline plus 18 months




January 1, 2022 – June 30, 2022

June 30, 2023


July 1, 2022 – December 31, 2022

Original deadline plus 12 months

January 1, 2023 – December 30, 2023

December 31, 2023

Placed in Service Deadline

December 31, 2020

December 31, 2022


December 31, 2021 &
10-Percent Test Deadline: Prior to April 1, 2020

December 31, 2022

December 31, 2021 &
10-Percent Test Deadline: April 1, 2020 – December 31, 2020

December 31, 2023

December 31, 2022 &
10-Percent Test Deadline in 2021

December 31, 2023

Reasonable Period for Restoration or Replacement in the Event of Certain Casualty Loss

On or after April 1, 2020

Agency may postpone for up to 18 months but not beyond December 31, 2022


Occupancy for Qualified Basis

April 1, 2020 – December 31, 2022

Qualified basis for first year of credit period is calculated by taking into account any increase in number of low-income units by close of the six month period following close of that first year


Correction Period for Noncompliance

April 1, 2020 – December 31, 2021

Agency may extend up to one year but not beyond December 31, 2022

Reg. § 1.42-5

January 1, 2022 – December 31, 2022

Agency may extend up to December 31, 2022

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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