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Page 2 of 5 Fileid: … s/i8609a/202112/a/xml/cycle04/source 11:56 - 14-Feb-2022
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
If “No,” and the entire credit has been low-income units to all residential rental 0.1250 on line 2 ([0.5 + 0.5 + 0.5] / 12 =
claimed in prior tax years (generally, this units (the “unit fraction”) or the fractional 0.1250).
can occur after the 11th year for which the amount of floor space of the low-income This first year adjustment does not
credit has been claimed for the building), units to the floor space of all residential affect the amount of qualified basis on
do not complete Part II. rental units (the “floor space fraction”). which the credit is claimed in the next 9
This fraction must be shown on line 2 as a tax years. In general, the credit is claimed
Part II—Computation of Credit decimal carried out to at least four places in those years by reference to the qualified
Line 1. Generally, the eligible basis of a (for example, /50 100 = .5000). Low-income basis at the close of each tax year.
building for its entire 15-year compliance units are units occupied by qualifying
period is the amount of eligible basis tenants, while residential rental units are If the close of the first year of the
entered on Form 8609, line 7. all units, whether or not occupied. TIP credit period with respect to a
building is on or after April 1,
Generally, a unit is not treated as a
Basis increases for buildings in 2020, and on or before December 31,
low-income unit unless it is suitable for
certain high cost areas. In order to 2022, then, for purposes of section 42(f)
occupancy, used other than on a transient
increase the credit for buildings in certain (3)(A)(ii), the qualified basis for the
basis, and occupied by qualifying tenants.
high cost areas, the housing credit agency building for the first year of the credit
Section 42(i)(3) provides for certain
may increase the eligible basis of period is calculated by taking into account
exceptions (for example, units that provide
buildings located in these areas (after any increase in the number of low-income
transitional housing for the homeless may
adjustments, if any, for federal subsidies units by the close of the 6-month period
qualify as low-income units). See section
and grants). The agency may make this following the close of that first year. See
42(i)(3) for more details. Also see section
increase under the high cost area Notice 2021-12, section IV.E, as clarified
42(g)(2)(D) regarding the available unit
provisions of section 42(d)(5)(B). For by Notice 2021-17, and as amended by
rule and Regulations section 1.42-5(c)(1)
buildings placed in service before July 31, Notice 2022-5, section IV.E.
(ix) regarding the vacant unit rule.
2008, the high cost area provisions under
former section 42(d)(5)(C) apply. If individuals are medical personnel or Because the first year credit is not
other essential workers (as defined by determined solely by reference to the
Note. This increase cannot cause the state or local governments) who provided qualified basis at the close of the year, any
credit on line 15 to exceed the credit services during the COVID-19 pandemic, reduction in credit resulting from the
amount allocated on line 1b, Part I, of then, for purposes of emergency housing application of the first year adjustment
Form 8609. provided from April 1, 2020, to December may be claimed in the 11th year. See the
31, 2022, owners of low-income housing instructions for line 17.
Basis reductions for buildings projects may treat these individuals as if Line 3. Generally, multiply line 1 by line 2
placed in service before July 31, 2008. they were “displaced individuals.” That is, to figure the portion of the eligible basis of
The amount of eligible basis entered on owners could have provided emergency the building attributable to the low-income
Form 8609 does not include the cost of housing for these individuals during this residential rental units.
land or the amount of any federal grant period pursuant to the provisions of Rev.
received for the building during the first Proc. 2014-49, 2014-37 I.R.B 535 (at Imputed qualified basis of zero.
year of the credit period. Do not reduce IRS.gov/pub/irs-drop/rp-14-49.pdf), and However, the qualified basis of the
the eligible basis on line 1 by the amounts Rev. Proc. 2014-50, 2014-37 I.R.B. 540 building (line 3) is zero if any of the
of any federal grants received after the (at IRS.gov/pub/irs-drop/rp-14-50.pdf), as following conditions apply.
first year of the credit period. The applicable. See Notice 2021-12, • The minimum set-aside requirement
calculation for line 14 will reduce the credit section V.E, as amended by Notice elected for the project on Form 8609,
by the amount of any federal grants 2022-5, section V.E. line 10c, is not met, or the entire building is
received during the compliance period out of compliance with the requirements
that did not reduce the eligible basis If you dispose of the building, or your
during the first year of the credit period. entire interest in the building, before the under section 42.
close of the tax year, the low-income • The deep rent skewed test (15-40 test)
For more details on determining eligible portion must be determined on the date elected for the project on Form 8609,
basis, see the instructions for Form 8609, you disposed of the building. If you line 10d, is violated. The 15-40 test is not
line 7. dispose of less than your entire interest in an additional test for satisfying the
Basis reductions for buildings the building, the low-income portion must minimum set-aside requirements of
placed in service after July 30, 2008. be determined at the close of the tax year. section 42(g)(1). The 15-40 test is an
election that relates to the determination of
The amount of eligible basis entered on First-year modified percentage. For a low-income tenant's income. If this test
Form 8609 does not include the cost of the first year of the credit period, you must is elected, at least 15% of all low-income
land or the amount of any costs financed use a modified percentage on line 2 to units in the project must be occupied at all
with the proceeds of a federally funded reflect the average portion of a 12-month times during the compliance period by
grant. Do not reduce the eligible basis on period that the units in a building were tenants whose income is 40% or less of
line 1 by the amounts of any federal grants occupied by low-income individuals. the area median gross income (or, when
received after the first year of the credit Figure the low-income portion as of the applicable, national non-metropolitan
period. The calculation for line 14 will end of each full month that the building median gross income or national
reduce the credit for any costs financed was in service during the year. Add these non-metropolitan median income).
with the proceeds of a federal grant. percentages together and divide by 12. • You disposed of the building or your
For more details on determining eligible Enter the result on line 2. For example, if a entire interest therein during the tax year
basis, see the instructions for Form 8609, building was in service for the last 3 full and did not follow the procedures
line 7. months of your tax year, and was half (described earlier under Recapture and
Line 2. Only the portion of the basis on occupied by low-income tenants as of the building dispositions) to prevent recapture.
line 1 attributable to the low-income rental end of each of those 3 months, then In addition to using an imputed basis of
units in the building at the close of the tax assuming the smaller fractional amount zero on line 3, you may have to recapture
year qualifies for the credit. This is the was the unit fraction, you would enter a portion of credits previously taken. File
smaller of the fractional amount of Form 8611 to figure and report the
-2- Instructions for Form 8609-A (Rev. 12-2021)
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