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Guide for Completing Form 8823 - page 152 / 197





152 / 197

  • 3.

    prohibit the disposition to any person of any portion of the building unless all of the building is disposed of to that person.

  • 4.

    prohibit the refusal to lease to section 8 voucher holders because of the status of the prospective tenant as such a holder,

  • 5.

    provide that the agreement is binding on all successors of the taxpayer, and

  • 6.

    the extended use agreement must be recorded as a restrictive covenant with

respect to the property under state law.

In Compliance

The owner is in compliance when the extended use agreement is executed, recorded, and meets the requirements of IRC §42(h)(6). State agencies should require documentation that the extended use agreement has been recorded before issuing the Form 8609.

Out of Compliance

The owner is out of compliance in the absence of a properly executed and recorded extended use agreement and no credit is allowable if the extended use agreement is not in effect as of the end of a taxable year in the credit period. However, if the owner executes and records an extended use agreement within one year after the determination that an extended use agreement is not in effect, the noncompliance is corrected and the taxpayer can claim the low-income housing credit for past taxable years. If the noncompliance is not remedied within one year after the notification, the taxpayer loses the credit for past taxable years until the taxable year in which the extended use agreement is properly in effect.

*The one-year period for correcting the noncompliance begins when the owner is notified that an extended use agreement has not been properly executed and/or recorded. The state agency should provide written notification of the noncompliance immediately and document the owner’s receipt. The notification should:

  • 1.

    Cite IRC §42(h)(6) as authority

  • 2.

    Identify the problem and corrective action needed

  • 3.

    Explain that the date of the letter starts the one-year period for correcting the


When submitting the Form 8823, a copy of the letter should be included as an attachment.*

requirements of IRC §42(h)(6)(B)(i) otherwise apply for the extended use period, Congress must have intended the addition of the prohibition against the actions described in subclauses (I) and (II) of IRC §42(h)(6)(E)(ii) to apply throughout the extended use period. In Rev. Proc. 2005-37, 2005-28 I.R.B. 79, the Service established a safe harbor under which housing credit agencies and project owners could meet the requirements of IRC §42(h)(6)(B)(i) in lieu of an extended use agreement which specifically included the language of subclauses (I) and (II) of IRC §42(h)(6)(E)(ii).


Revised 10-2009

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