In August 2012, the Internal Revenue Service (IRS) has issued 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.
Among other things, the notice clarifies that property owners cannot use ratio-utility based solutions (RUBS) to estimate utilities costs and that models and estimates are to be based on actual use data for similar or common rental units. However, the notice would also allow LIHTC-administering housing agencies to validate a utility estimation method, as opposed to simply approving or rejecting the results of a utility estimates submission as is currently the case. NMHC/NAA are concerned that such a change could result in housing agencies banning some of the estimation options now available.
An NMHC/NAA-led effort led the IRS, in 2008, to issue a final rule changing the way utility adjustments are estimated and expanding the options available to owners. Prior to that, estimates were limited to actual use data, which is extremely limited and difficult to secure, or estimates from public housing authorities, which not only are often inconsistent but also typically overvalue utility expenses.
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