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Big News from FASB, HUD, and IRS: Technical and Accounting Updates


2/19/14

The following article was distributed as part of CohnReznick's Affordable Housing News and Views - Winter 2014 newsletter.

FASB finalizes new method of accounting for affordable housing tax credit investments

On January 15, 2014, FASB issued ASU 2014-01, Accounting for Investments in Qualified Affordable Housing Projects, (ASU 2014-01 or the ASU) which represents a consensus of FASB's Emerging Issues Task Force. The ASU sets forth new accounting for qualifying investments in flow-through limited liability entities that invest in affordable housing projects.

This new guidance will allow an investor that meets certain conditions to amortize the cost of its investment in proportion to the tax credits and other tax benefits it receives. The new accounting method, referred to as the proportional amortization method, will allow amortization of the tax credit investment to be reflected along with the primary benefits, the tax credits and other tax benefits, on a net basis in the income statement within the income tax expense (benefit) line. 

To help you better understand the impact and opportunity the new accounting represents for your company, CohnReznick has provided the following resources:

For more information, please contact Michael Beck, Partner, at 404-847-7728.

HUD extends annual financial statement filing deadline for some owners

Owners of properties in the U.S. Department of Housing and Urban Development’s (HUD’s) multifamily housing programs with fiscal years that ended Dec. 31, 2013 will have 30 extra days to file their annual financial statement submissions this year. Submissions for these owners are now due on April 30, 2014.

HUD has given these owners an extension to give them time to adapt to the requirements in two recent HUD notices. Housing Notice H 2013-23 allows profit-motivated and limited distribution owners that receive less than $500,000 in federal financial assistance to submit owner-certified financial statements instead of audited financial statements. The Financial Assessment Subsystem – Multifamily Housing (FASSUB) release on Dec. 6, 2013 implemented revisions to the HUD Consolidated Audit Guide, Handbook IG2000.04.

For more information, please visit the HUD website here, or contact Marc Podnos, Partner, at 301-657-7758.

New IRS guidance for LIHTC owners and managers

Owners and managers of low-income housing tax credit (LIHTC) properties should carefully read the new draft audit guide from the IRS. The draft guide is written for IRS examiners to help them audit the tax returns of entities with an ownership stake in LIHTC properties. The topics, discussions, and lists in the draft guide show owners and managers what specific documentation they should have prepared in order to be ready for a potential IRS audit. The draft guide also reveals the factors that matter most to IRS examiners, which can give owners important guidance on how to operate their properties.

The IRS is soliciting public comments on the draft audit technique guide. Comments should be submitted by March 28, 2014, to Grace.F.Robertson@irs.gov.

The 312-page draft guide includes five chapters on eligible basis, plus material on the extended use agreements, the applicable fraction, the applicable percentage, and first-year certification. The guide compliments an existing IRS guide that shows officials at state housing credit agencies how to properly report incidences of noncompliance at LIHTC properties to the IRS using form 8823. 

To review the guide, please find it here.

For more information, please contact Beth Mullen, Partner and Affordable Housing Industry National Director, at 916-930-5750.


This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
 

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