IRS Guidance to HUD on Average Income AMI Calculations

The Internal Revenue Service (IRS) released Revenue Ruling 2020-04, which clarifies the manner to properly compute the 70 and 80 percent income limits applicable to the LIHTC under Section 42 of the Internal Revenue Code. The 70 percent limit is 140 percent or less of the income limit for a very low-income family of the same size and the 80 percent limited is 160 percent or less of the income limit for a very low-income family of the same size.

The Consolidated Appropriations Act of 2018 added a new minimum set-aside test, the average income test, to the existing minimum set-aside tests available to owners of LIHTC properties. This revenue ruling addresses how HUD should calculate the additional income limits (70 and 80 percent) available in the average income test.