Low-Income Housing Credit Regs Detail Treatment of Submetered Utility Charges for Renewable Resource Energy (T.D. 9850)

Final regulations cover the treatment of submetered utility costs paid by a low-income housing tenant in situations where the building owner sells tenants energy produced from a renewable resource and the owner does not purchase the energy from a local utility company.

Treatment of Submetered Utility Payments

A low-income tenant’s payment (based on submetering) to a building owner for renewable resource energy acquired by the owner is treated as paid directly by the tenant to the person from whom the owner acquired the energy. Accordingly, the payment is not considered a payments of gross rent to the owner and the rent that the owner might otherwise have collected is reduced by a “utility allowance.”

Maximum Charge to Tenant

A building owner may not charge a low-income tenant more than a local utility would have charged if the utility had provided the renewable resource energy directly to the tenant.

If the energy is available from multiple local utilities, the rate that the owner charges is limited to the highest rate charged. In determining the applicable rate, an owner may rely on the rates published by the utilities.

Qualifying Renewable Resource Energy

Energy is produced from a renewable resource if it is produced from energy property described in Code Sec. 48 or by a facility described in specified sections Code Sec. 45.

A building owner does not need to claim an energy credit under either of these Code Sections or own the source from which the renewable energy is produced. These rules for building owners continue to apply even if the energy credits expire.

Effective Date

The final regulations apply to a building owner’s tax years beginning on or after March 4, 2019 when they are scheduled to be published in the Federal Register. A building owner, however, may apply the regulations to earlier tax years.

T.D. 9850

Other References:

Code Sec. 42

CCH Reference – 2019FED ¶4381B

CCH Reference – 2019FED ¶4384G

CCH Reference – 2019FED ¶4384I

Tax Research Consultant

CCH Reference – TRC BUSEXP: 54,214.10

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CCHTaxGroup

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