Relief from Certain Low-Income Housing Credit Requirements Due to Severe Storms and Flooding in Missouri

grouping. The statement reporting a disposition of a specific activity within an existing grouping must contain a declaration
that the remaining activities (if more than
one) within the existing grouping constitute an appropriate economic unit for the
measurement of gain or loss for purposes
of § 469. Except as otherwise provided in
§ 1.469–4(g) (providing for the treatment
of partial dispositions where there is a disposition of substantially all of an activity),
the rules provided for in § 469(g) will not
apply to the disposition of a specific activity from an existing grouping. For example, assume A, an individual, owns and operates four bakeries which A has treated as
one activity under § 1.469–4. If, within a
taxable year, A sells A’s entire interest in
one of those bakeries, the rules provided
for in § 469(g) will generally not apply to
the sale, and any losses or credits attributable to the disposed of bakery will be
treated as a deduction or credit allocable
to the continuing bakery activity. If a taxpayer believes § 1.469–4(g) applies to the
disposition of a specific activity within an
existing grouping, the statement reporting
the disposition must contain a declaration
that the disposition satisfies the requirements of § 1.469–4(g).
D. Statement Required for Regroupings
The proposal provides that, under
§ 1.469–4(e)(2), if it is determined that the
taxpayer’s original grouping was clearly
inappropriate or a material change in the
facts and circumstances has occurred that
makes the original grouping clearly inappropriate, the taxpayer must regroup the
activities. If such a determination and
regrouping is made, the taxpayer shall file
a written statement with the taxpayer’s
original return for the taxable year in
which the trade or business activities or
rental activities are regrouped. This statement must identify the names, addresses,
and employer identification numbers, if
applicable, for the trade or business or
rental activities that are being regrouped.
If two or more activities are regrouped
into a single activity, the statement reporting a regrouping must also contain a
declaration that the regrouped activities
constitute an appropriate economic unit
for the measurement of gain or loss for
purposes of § 469. Furthermore, the statement reporting a regrouping must contain

August 4, 2008

an explanation of why the taxpayer’s original grouping was determined to be clearly
inappropriate or the nature of the material
change in the facts and circumstances that
makes the original grouping clearly inappropriate.
E. Reporting of Pre-Existing Groupings
Required only upon Change
The proposal clarifies that no written
statement is required to be filed reporting
the grouping of the trade or business activities and rental activities that have been
made as of the effective date of any published final guidance until the taxpayer
makes a change to the grouping as described in paragraphs A, B, C, or D of this
notice.
F. Effect of Failure to Report
Under the proposal, except as provided
in § 1.469–4(d)(5), if a taxpayer is engaged
in two or more trade or business activities or rental activities and fails to report
whether the activities have been grouped
as a single activity or as separate activities
in accordance with this proposal, then each
trade or business activity or rental activity
will be treated as having been grouped as a
separate activity for purposes of applying
the passive activity loss and credit limitation rules of § 469.

November 4, 2008. Comments should be
addressed to:
Internal Revenue Service
Office of the Associate Chief Counsel
(Passthroughs and Special Industries),
CC:PSI
Attn: Jonathan Cornwell, Room 5004
1111 Constitution Avenue, NW
Washington, DC 20224
In addition, comments may be submitted electronically via the Internet by sending them in an email to
[email protected]
and specifying that the comments concern
Notice 2008–64.
DRAFTING INFORMATION
The principal author of this notice is
Jonathan E. Cornwell of the Office of
Associate Chief Counsel (Passthroughs
& Special Industries). For further information regarding this notice, contact
Mr. Cornwell at (202) 622–3050 (not a
toll-free call).

Relief From Certain
Low-Income Housing Credit
Requirements Due to Severe
Storms and Flooding in
Missouri

EFFECTIVE DATE
The proposal would be effective on the
date that final guidance is published by the
Internal Revenue Service.
REQUEST FOR COMMENTS
The proposal contained in this notice
is one way, but not the only way, to implement a reporting system for taxpayer
groupings under section 469. The IRS
requests public comments on this proposal
and, specifically, whether it sufficiently
balances the need for reporting with the
burden of compliance. Comments regarding other possible approaches are also
requested. All comments will be available for public inspection and copying.
Therefore, submissions received by the
IRS should not include taxpayer-specific
information of a confidential nature. Submissions should include the name and
telephone number of a person to contact. Comments must be submitted by

270

Notice 2008–66
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 Missouri
beginning on June 1, 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 25, 2008, the President declared a major disaster for the State of
Missouri. 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

2008–31 I.R.B.

jurisdictions for Individual Assistance.
The State of Missouri 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 Missouri 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 Missouri Housing
Development Commission (Commission)
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
income limitation requirements under § 42
for certain qualified low-income projects.
The suspension will apply to low-income
housing projects approved by the Commission, in which vacant units are rented to
displaced individuals. The Commission
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
Commission (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 Commission, the status

2008–31 I.R.B.

of a vacant unit (that is, market-rate or lowincome 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
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 Commission 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 Commission. 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

271

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 a Missouri jurisdiction designated for Individual Assistance by FEMA
as a result of the severe storms and flooding in Missouri beginning on June 1, 2008.
(2) Approval of the Missouri Housing
Development Commission
The project owner must obtain approval
from the Commission for the relief described in this notice. The Commission
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 a
Missouri jurisdiction designated for Individual Assistance by FEMA as a result of
the severe storms and flooding beginning
on June 1, 2008, the individual requires
temporary housing. The owner must notify the Commission that vacant units are
available for rent to displaced individuals.
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 Commission. The certifications and recordkeeping for displaced
individuals must be maintained as part of
the annual compliance monitoring process
with the Commission.
(4) Rent Restrictions
Rents for the low-income units that
house displaced individuals must not exceed the existing rent-restricted rates for

August 4, 2008

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 25, 2008
(the date of the President’s major disaster declarations as a result of the severe
storms and flooding in Missouri beginning
on June 1, 2008).

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).
26 CFR 601.105: Examination of returns and claims
for refund, credit or abatement; determination of
correct tax liability.
(Also Part I, §§ 860D, 860G, 1001; 1.860G–2,
1.1001–3, 301.7701–2, 301.7701–3, 301.7701–4.)

Rev. Proc. 2008–47

PAPERWORK REDUCTION ACT
SECTION 1. PURPOSE
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 1545–2108.
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 Missouri beginning on June 1, 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.

August 4, 2008

This revenue procedure describes the
conditions under which modifications to
certain subprime mortgage loans will not
cause the Internal Revenue Service (Service) to challenge the tax status of certain
securitization vehicles that hold the loans
or to assert that those modifications create
a liability for tax on a prohibited transaction.
The purpose of this revenue procedure
is to provide certainty in the current economic environment with respect to certain
potential tax issues that may be implicated by fast track loan modifications,
as described below. No inference should
be drawn about whether similar consequences would obtain if a transaction falls
outside the limited scope of this revenue
procedure. Furthermore, there should be
no inference that, in the absence of this
revenue procedure, transactions within its
scope would have impaired the tax status
of securitization vehicles or would have
created liability for tax on a prohibited
transaction.
Rev. Proc. 2007–72, 2007–52 I.R.B.
1257, provided similar guidance regarding
fast-track loan modifications that were
effected in a manner consistent with certain principles, recommendations, and
guidelines (the “Original Framework”),
which the American Securitization Forum
(“ASF”) released on December 6, 2007.
In July 2008, the ASF released an updated Framework, which covers additional
fast-track loan modifications.
This revenue procedure amplifies and
supersedes Rev. Proc. 2007–72 by extend-

272

ing its provisions to these additional loan
modifications.
SECTION 2. BACKGROUND—THE
ASF “JULY 2008 FRAMEWORK”
.01 On July 8, 2008, the American
Securitization Forum (“ASF”) released a
document entitled, “Statement of Principles, Recommendations and Guidelines
for a Streamlined Foreclosure and Loss
Avoidance Framework for Securitized
Subprime Adjustable Rate Mortgage
Loans” (the “July 2008 Framework”).
An Executive Summary of the July 2008
Framework (entitled “Streamlined Foreclosure and Loss Avoidance Framework
for Securitized Subprime Adjustable Rate
Mortgage Loans”) was released simultaneously and is attached as an Appendix to
this revenue procedure.
.02 Both the Original Framework and
the July 2008 Framework have been
broadly supported as appropriate steps
in addressing certain risks in the current
economic environment.
.03 The July 2008 Framework applies
to first-lien subprime residential adjustable
rate mortgage (ARM) loans that—
(1) Have an initial fixed rate period of
36 months or less (including “2/28s” and
“3/27s”);
(2) Were originated between January 1,
2005, and July 31, 2007;
(3) Are included in securitized pools;
and
(4) Have an initial interest rate reset
date between January 1, 2008, and July 31,
2010.
This revenue procedure refers to these instruments as “Loans.”
.04 The July 2008 Framework provides
a “fast track” procedure for modifying
Loans in advance of an initial, or any subsequent, interest rate reset date and details
the criteria for determining which Loans
are eligible for the procedure. Modifications pursuant to the procedure are referred
to as “fast track modifications.”
.05 A fast track modification affects the
interest rate on the Loan, generally for five
years following the date on which the rate
would have reset in the absence of the
modification. During the period affected
by the modification, the interest rate on the
modified Loan is generally fixed at the rate
in effect prior to the upcoming reset date.

2008–31 I.R.B.