Gross Rent Floor

Written by Lois Churchill, Spectrum Enterprises

Gross rents at a tax credit property never have to fall below what they are the first credit year. This is known as the Gross Rent Floor. But how is the gross rent floor determined?

Rev. Proc. 94-57 gives guidance:

  1. If the taxpayer received an allocation of credit under IRC §42(h)(1), the IRS will treat the gross rent floor as taking effect on the date the state agency initially allocated the housing credit to the building
  2. For a bond-financed building described in IRC §42(h)(4), the IRS will treat the gross rent floor as taking effect on the date the state agency initially issues a determination letter to the building.

However, in either case, the building owner has the option to choose the building’s placed in service date as the date the gross rent floor takes effect. This can happen if the building owner informs the state agency that made the allocation of this decision no later than the placed in service date. If this is done, the IRS will treat the gross rent floor as taking effect on the building’s placed in service date.

Tags:

Leave a Reply


Subscribe to Our Blog

 

 Subscribe in a reader