Notice 2008-56, Relief from Certain Low-Income Housing Credit Requirements Due to Severe Storms and Flooding in Indiana

Part III. Administrative, Procedural, and Miscellaneous
Relief From Certain
Low-Income Housing Credit
Requirements Due to Severe
Storms and Flooding in
Indiana
Notice 2008–56
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 to provide emergency housing relief
needed as a result of the devastation caused
by severe storms and flooding in Indiana
beginning on June 6, 2008. 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 June 8, 2008, the President declared a major disaster for the State of
Indiana. This declaration was made under the Robert T. Stafford Disaster Relief
and Emergency Assistance Act, 42 U.S.C.
5121–5206 (2000 and Supp. II 2002).
Subsequently, the Federal Emergency
Management Agency (FEMA) designated
jurisdictions for Individual Assistance.
The State of Indiana has 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 Indiana and
who have been displaced because their
residences were destroyed or damaged as
a result of the devastation caused by the
severe storms and flooding. Based upon
this request and because of the widespread
damage to housing caused by the severe
storms and flooding, the Service has determined that the Indiana Housing and
Community Development Authority (Authority) may provide approval to project
owners 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

July 14, 2008

income limitation requirements under § 42
for certain qualified low-income projects.
The suspension will apply to low-income
housing projects approved by the Authority, in which vacant units are rented to displaced individuals. The Authority will determine the appropriate period of temporary housing for each project, not to extend
beyond July 31, 2009 (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 Authority (not to extend beyond July 31, 2009),
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 the Authority, 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). However,
even if it houses a displaced individual, a
low-income or market rate unit that was
vacant before the effective date of this notice will continue to be treated as a vacant low-income or market rate unit. Similarly, 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

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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 that house 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 Authority 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 Authority. 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 nontransient
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 a unit to a displaced individual after
the end of the temporary housing period,
the 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 Indiana jurisdiction designated for Individual Assistance by FEMA
as a result of the severe storms and flooding in Indiana beginning on June 6, 2008.
(2) Approval of the Indiana Housing
and Community Development Authority

2008–28 I.R.B.

The project owner must obtain approval
from the Authority for the relief described
in this notice. The Authority will determine the appropriate period of temporary
housing for each project, not to extend beyond July 31, 2009.
(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 Indiana jurisdiction
designated for Individual Assistance by
FEMA as a result of the severe storms
and flooding beginning on June 6, 2008,
the individual requires temporary housing. The owner must list the project on
http://www.indianahousingnow.org.
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 Authority. The certifications and recordkeeping for displaced
individuals must be maintained as part of
the annual compliance monitoring process
with the Authority.
(4) Rent Restrictions
Rents for the low-income units that
house 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 June 8, 2008
(the date of the President’s major disaster
declarations as a result of the severe storms
and flooding in Indiana beginning on June
6, 2008).
PAPERWORK REDUCTION ACT
The collection of information contained
in this notice has been reviewed and approved by the Office of Management and

2008–28 I.R.B.

Budget in accordance with the Paperwork
Reduction Act (44 U.S.C. 3507) under
control number 1545–2105.
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” under “(3) Certifications
and Recordkeeping.” This information is
required to enable the Service to verify
whether individuals are displaced as a result of the devastation caused by severe
storms and flooding in Indiana beginning on June 6, 2008, 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 and
businesses.
The estimated total annual recordkeeping burden is 125 hours.
The estimated annual burden per
recordkeeper is approximately 15 minutes.
The estimated number of recordkeepers is
500.
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
David Selig of the Office of the Associate
Chief Counsel (Passthroughs and Special
Industries). For further information regarding this notice, contact Mr. Selig at
(202) 622–3040 (not a toll free call).

China Earthquake Occurring
in May 2008 Designated as
a Qualified Disaster Under
§ 139 of the Internal Revenue
Code

EARTHQUAKE DISASTER
On May 12, 2008, a magnitude 7.9
earthquake with hundreds of resulting aftershocks affected a large region of China
(“China earthquake”). More than 67,000
people were killed, more than 292,000
were injured, and at least 5,470,000 were
displaced from their homes as a result of
this disaster. USAID China-Earthquake
Fact Sheet No. 4 (May 27, 2008); USAID
China-Earthquake Fact Sheet No. 2 (May
15, 2008).
This notice enables employer-sponsored private foundations to assist certain
victims in areas affected by the China
earthquake and enables recipients of this
assistance to exclude the relief payments
from gross income.
QUALIFIED DISASTER RELIEF
PAYMENTS EXCLUDED FROM
RECIPIENT’S GROSS INCOME
Section 139(a) provides that gross income shall not include any amount received by an individual as a qualified disaster relief payment.
Section 139(b) provides that a qualified disaster relief payment includes any
amount paid to or for the benefit of an individual—
(1) to reimburse or pay reasonable
and necessary personal, family, living,
or funeral expenses (not otherwise compensated for by insurance or otherwise)
incurred as a result of a qualified disaster,
or
(2) to reimburse or pay reasonable and
necessary expenses (not otherwise compensated for by insurance or otherwise) incurred for the repair or rehabilitation of
a personal residence or repair or replacement of its contents to the extent that the
need for such repair, rehabilitation, or replacement is attributable to a qualified disaster.
Under § 139(c)(3) the term “qualified
disaster” includes a disaster resulting from
an event that is determined by the Secretary to be of a catastrophic nature.

Notice 2008–57

DESIGNATION AS QUALIFIED
DISASTER

This notice designates the China earthquake occurring in May 2008 as a qualified
disaster for purposes of § 139 of the Internal Revenue Code.

The Commissioner of Internal Revenue, pursuant to delegation by the Secretary, has determined that the China earthquake occurring in May 2008 is an event

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July 14, 2008