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NMHC/NAA led a 10-member industry effort to submit formal comments on Oct. 4, 2012, to the Internal Revenue Service (IRS) on a proposed rule (77 FR 46987) that would make changes to current regulations governing utility allowances at Low-Income Housing Tax Credit (LIHTC) properties in cases where residents pay their own utilities. More specifically, the industry letter outlined concerns that the IRS may modify the rule to permit LIHTC-administering housing agencies to limit some of the estimation methods currently available.
The IRS issued the current regulations in 2008 following a five-year development process. Among other things, the rules expanded the number of approved methods to estimate tenant utility costs, which serve as a basis to adjust rents paid at LIHTC properties.
NMHC/NAA and the real estate coalition support the practice of permitting industry-certified engineers to prepare utility estimates based on validated energy consumption and use models. Current regulations allow housing agencies the authority to approve or reject the results of the estimates once submitted. However, the proposed rule would give the housing agencies broader discretion, allowing them to also determine which certified engineers are authorized to prepare estimates.
Many apartment owners use the model estimates prepared by certified engineers to help set rents. Compare with other utility cost estimation methods, energy consumption models are more accurate and better represent the property characteristics, mechanical systems, local utility costs and climate.
Questions about the IRS rule or industry comments should be directed to NMHC’s David Cardwell at 202/974-2336 or dcardwell@nmhc.org).
Full Document
2008 LIHTC Utility Adjustment GuidanceStaff Resource
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