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Guide for Completing Form 8823 - page 162 / 197

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company or a state or local housing credit agency, or calculated using HUD’s Utility Schedule Model or an energy consumption model.

In the case of deregulated utility services, the interested party is required to obtain an estimate from only one utility company even if multiple companies can provide the same utility service to the unit. However:

1.

The utility company must offer utility services to the building in order for that utility company’s rates to be used in calculating the utility allowance.

2.

The estimate should include all component deregulated charges for providing the utility service.

The utility allowance is “obtained” when the building owner receives, in writing, information from the utility company providing the estimated per unit cost of the utility. Receipt of the information from the utility company begins the 90-day period after which the new utility allowance must be used to compute gross rents.*

*State or Local Housing Credit Agency - Taxable Years Beginning After July 28, 2008*

Under Treas. Reg. §1.42-10(b)(4)(ii)(C)5, a building owner may obtain a utility allowance from the state agency that has jurisdiction over the building, provided the state agency agrees to provide the estimate. The building owner may obtain a utility allowance at any time during the building’s extended use period6 and the associated costs are borne by the building owner.

The utility allowance is “obtained” when the building owner receives, in writing, information from the state agency providing the estimated per unit cost of the utility. Receipt of the information from the state agency begins the 90-day period after which the new utility allowance must be used to compute gross rents.

Factors to Consider

The utility allowance must take into account, among other things, (1) local utility rates, (2) property type, (3) climate and degree-day variables by region in the state, (4) taxes and fees on utility charges, (5) building materials, and (6) mechanical systems.

Actual Building Usage

The state agency may use actual utility company usage data and rates of the building for which the utility allowance is requested.

1. The data used to compute the estimate is limited to the building’s consumption data for a 12-month period ending no earlier than 60 days prior to the date the utility allowance will change. For newly constructed or renovated buildings with less than 12 months of consumption data, consumption data for the 12-month period for similarly sized and constructed units in the geographical area in which the building is located will be used.

5 6 *As amended by TD 9420.* *Under IRC §42(h)(6)(D), the extended use period begins on the first day of the building’s 15-year compliance period under IRC §42(i)(1) and ends on the later of the date specified in the agreement or 15 years after the close of the compliance period.*

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Revised October 2009

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