SECTION 2. BACKGROUND

.01 Questions have arisen regarding when individuals must satisfy the applicable income limitation under § 42(g)(1)

or § 142(d)(4)(B)(i) when they move into a residential unit in an existing building under § 42(i)(5) on or after the date a taxpayer acquires the existing building for rehabilitation under § 42(e), but before the beginning of the first taxable year of the building’s credit period under § 42(f)(1). Because of these questions, some taxpayers require that the individuals’ incomes not exceed the applicable income limitation at the beginning of the first taxable year of the building’s credit period, even though the individuals’ income did not exceed the applicable income limitation when the individuals moved into the unit. This has resulted in some individuals being evicted, where permissible under local law, from low-income housing projects.

.02 Section 42(a) provides that, for purposes of § 38, the amount of the low-income housing credit determined for any taxable year in the credit period is an amount equal to the applicable percentage of the qualified basis of each qualified low-income building.

.03 Section 42(c)(2)(A) generally defines a qualified low-income building as any building which is part of a qualified low-income housing project at all times

November 24, 2003 1097 2003-47 I.R.B.

credit period under § 42(f)(1), but their incomes exceed the applicable income limitation at the beginning of the first taxable year of the building’s credit period.