Tax News

CCH (cch.taxgroup.com) reports:

The IRS has notified owners of qualified low-income buildings and state housing credit agencies about an extension of time under section Code Sec. 42(j)(4)(E) for the restoration of low-income housing credit projects located within the Gulf Opportunity Zone (GO Zone) that were damaged by Hurricane Katrina.
For low-income buildings that qualify, a housing credit agency may determine what constitutes a reasonable restoration period for purposes of Code Sec. 42(j)(4)(E), ending no later than 48 months after the end of calendar year 2005. In order to qualify, the owner must have been engaged in the restoration of the building's qualified basis during the restoration period provided in section 7.01 of Rev. Proc. 95-28, 1995-1 CB 704. The term "engaged in the restoration of the building's qualified basis" means, with respect to the qualified low-income building:
(1) ongoing physical repairs;
(2) having entered into binding, written contracts for the repair or restoration to be completed within the restoration period; or
(3) active negotiation of contracts for the repair or restoration, including obtaining permits for construction.
If a building's qualified basis is restored within the determined period, the building will not be subject to recapture, and the building may continue to earn credit during that restoration period. However, if the building is not restored within the reasonable restoration period, the owner will lose all credit claimed during the restoration period and suffer recapture for any prior years of claimed credit under the provisions of Code Sec. 42(j)(1).
For purposes of Code Sec. 42(j)(4)(E), the reasonable restoration period provided in the Notice applies to qualified low-income buildings that are (1) beyond the first year of the credit period, and (2) that, because of Hurricane Katrina and its aftermath, suffered a reduction in qualified basis that would cause it to be subject to recapture and loss of credit.
Notice 2007-66, 2007FED ¶46,563
Other References:
Code Sec. 42
CCH Reference - 2007FED ¶4385.60
CCH Reference - 2007FED ¶4385.71
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