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Guide for Completing Form 8823 - page 166 / 197





166 / 197

jurisdiction over the building and (2) make the utility estimate available to all tenants in the building at the beginning of the 90-day period. An agency may require additional information from the owner during the 90-day period.*

*Cost of Securing Utility Estimates - Taxable Years Beginning After July 28, 2009*

*The building owner must pay all the costs incurred in obtaining the estimates from a utility company or state/local housing credit agency, HUD’s Utility Schedule Model, or an energy consumption model. The building owner also bears the costs of notifications to the tenants and state/local agency.*

*Record Retention*

*The building owner must retain any consumption estimates and supporting data as part of the taxpayer’s records for purposes of Treas. Reg. 1.6001-1(a). Under this requirement, taxpayers are required to keep such permanent books of account or records as are sufficient to establish the amount of gross income, deductions, credits, or other matters required to be shown by such person.

Under Treas. Reg. 1.6001-1, the IRS may require the owner to render such statements or keep such specific records as will enable the IRS to determine whether or not the owner is liable for tax. The books and records shall be kept at all times available for inspection by the IRS and shall be retained so long as the contents thereof may become material in the administration of the Internal Revenue Code.*

In Compliance

Low-income housing projects are in compliance when the appropriate utility allowance is used, the utility allowance is properly calculated, and rents are reduced for a utility allowance when utilities are paid directly by the tenant.

*Owners must demonstrate that that the basis on which utility allowances have been established (consumption and rates) have been reviewed at least once during each calendar year. If applicable, the owner must also demonstrate that (1) tenants and the state/local housing credit agency have been timely notified of any changes, and (2) the new utility allowance was used to compute gross rents for LIHC units due after the end of the 90-day period. 13*

Example 1: Utility Allowance Increases

The maximum gross rent is $500. The owner charged rent of $450, which reflected a $50 utility allowance; i.e., $450 rent + $50 utility allowance = $500 gross rent. The annual utility allowance estimate increases to $75. The owner reduces the rent to $425 based upon the increased utility allowance of $75; for a gross rent of $500 ($425

  • +

    $75 = $500).


*The 90-day period applies to taxable years beginning after July 28, 2008 utility allowances.*


Revised October 2009

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