Implications for LIHTC in IRS ruling on same-sex marriage
On the heels of the Supreme Court’s decision finding Section 3 of the Defense of Marriage Act to be unconstitutional, the federal government released IRS Revenue Ruling 2013-17 on Aug. 29, 2013, which states that the IRS will now recognize individuals married to a person of the same sex if they were lawfully married under state law. Furthermore, legally married same-sex couples will be recognized even if the couple resides in another state whose laws do not authorize it.
Groundbreaking news to be sure, but what does this have to do with the Low-Income Housing Tax Credit (LIHTC) Program?
Let’s connect the dots: The IRS is the governing entity responsible for LIHTC, and LIHTC includes student eligibility restrictions in its regulations. And one of those exceptions for student household eligibility centers on married couples that are entitled to file their federal tax returns jointly.
What this means for LIHTC is that a full-time student household where the members are a legally married same-sex couple now meets the exception for student eligibility through the IRS. Currently, fourteen states have legal same-sex marriage including California, Connecticut, Iowa, Maryland, New Jersey, Delaware, Minnesota, New Hampshire, New York, Rhode Island, Vermont, Maine, Maryland and Washington. So, a copy of a marriage certificate from one of these states should be sufficient verification that the exception has been met.
The IRS noted in their ruling that this new provision will be effective and applied prospectively from September 16, 2013 with a clarification given by the IRS’ Grace Robertson. According to the clarification, full-time students living at LIHTC Section 42 properties, that are legally married same-sex couples, will qualify for the exception as well.
As for me, I consider this to be a significant development for LIHTC. In our Tax Credit Specialist (TCS) classes, I’ve been asked this about this a number of times and I’ve never been really sure how to answer since we didn’t have any guidance on it. Fortunately now we do, so LIHTC managers please take note and respond accordingly if you encounter these circumstances at your housing credit properties.