On July 30, 2020, the IRS issued Notice 2020-58 (“Notice”) as part of the federal government’s emergency response to the COVID-19 pandemic and mandate “to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate.”[1] The Notice promotes that mandate by extending the substantial rehabilitation test deadline taxpayers must meet when seeking historic tax credits (HTCs).

Taxpayers seeking HTCs must satisfy the substantial rehabilitation test within a 24-month period or within a 60-month period for projects completed in multiple phases. While the Tax Cuts and Jobs Act (TCJA) requires taxpayers to spread the rehabilitation credit over five years beginning in the year the building is placed in service, some projects may still qualify for pre-TCJA benefits under the TCJA transition rule that allows taxpayers to claim the rehabilitation credit all in one year. However, the transition rule requires either the 24-month or 60-month measuring period to begin within 180 days of December 22, 2017, which means the latest day the 24-month period can end is June 20, 2020, and the latest day the 60-month period can end is June 20, 2023.

Given construction and other performance delays caused by the COVID-19 pandemic, HTC projects face difficulty satisfying the substantial rehabilitation test. The Notice recognizes these difficulties, and taxpayers whose measuring period under the substantial rehabilitation test ends on or after April 1, 2020, and before March 31, 2021, now have until March 31, 2021 to satisfy the test. The extension applies to all HTC projects, including those covered under the TCJA transition rule.