On October 7, 2022, the U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) released final and temporary Treasury regulations (New Regulations) implementing the average income set-aside for purposes of the low-income housing tax credit rules under Section 42 of the Internal Revenue Code of 1986, as amended (Code). The New Regulations are scheduled to be published in the Federal Register on October 12, 2022, and are generally effective for taxable years beginning on or after January 1, 2023.
The New Regulations represent a significant departure from prior proposed regulations published by the Treasury and the IRS on October 30, 2020 (Proposed Regulations).1 For reasons noted below, industry participants heavily criticized the Proposed Regulations. The New Regulations address many of the criticisms of the Proposed Regulations in a taxpayer-favorable manner.
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