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Guide for Completing Form 8823 - page 172 / 197





172 / 197

Chapter 20 Category 11o Low-Income Units Used on a Transient Basis


This category is used to report noncompliance when units have been used on a transient basis. Generally, the length of the initial lease agreement determines whether use is transient. A unit is nontransient if the initial lease term is six months or more. 1

There are two exceptions to the general rule that the initial lease term must be 6 months or longer.

Buildings Used for Transitional Housing for the Homeless Under IRC §42(i)(3)(B)(iii)

Certain transitional housing for the homeless may be considered used other than on a transient basis provided the residential rental unit contains sleeping accommodations and kitchen and bathroom facilities and is located in a building-

  • 1.

    which is used exclusively to facilitate the transition of homeless individuals2 to independent living within 24 months, and

  • 2.

    in which a government entity or qualified nonprofit organization3 provided such individuals with temporary housing and supportive services designed to assist such individuals in locating and retaining permanent housing.

Single-Room Occupancy (SRO) Units Under IRC §42(i)(3)(B)(iv)

SRO units which permit the sharing of kitchen, bathroom, and dining facilities, shall not be treated as used on a transient basis merely because it is rented on a month-by- month basis.

In Compliance

A unit is in compliance with this requirement if the initial lease term for each tenant is at least six months. The presence of a six month initial lease is the customary evidence used to document the owner and tenant’s intent to enter into a nontransient rental agreement.

1 H.R. Conf. Rep. No. 841, 99th Cong., 2d Sess. II-89 (1986), 1986-3 (Vol. 4) C.B. 89.) Residential units must be for use by the general public and all of the units in a project must be used on a nontransient basis. …Generally, a unit is considered to be used on a nontransient basis if the initial lease term is six months or greater. Additionally, no hospital, nursing home, sanitarium, life care facility, retirement home providing significant services other than housing, dormitory, or trailer park may be a qualified low- income project..…certain single room occupancy housing used on a nontransient basis may qualify for the credit, even though such housing may provide eating, cooking, and sanitation facilities on a shared basis.

2 Within the meaning of section 103 of the Stewart M. McKinney Homeless Act (42 U.S.C. 11302) , as in effect on the date of the enactment of this clause.


As defined in IRC §42(h)(5).


Revised October 2009

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