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IRS Creates New Safe Harbor for Certain Partnerships Allocations of Code Section 47 Rehabilitation Credits to their Partners

January 08, 2014

By MICHAEL D. HAUN & ALEXANDRA G. GREENE

In an effort to clarify the IRS’ treatment of allocations of rehabilitation tax credits under Section 47 of the Internal Revenue Code of 1986, as amended, the IRS has issued Revenue Procedure 2014-12 in which it provides a safe harbor for rehabilitation tax credit allocations from certain partnerships to their partners. Rev. Proc. 2014-12 provides that if a partnership complies with the specific requirements set forth in the revenue procedure, then the IRS will not challenge such partnership’s allocations of rehabilitation tax credits to investors in the partnership. While it is unclear what impact this guidance will have on the rehabilitation tax credit industry, it is likely that the information contained in Rev. Proc. 2014-12 will be adopted in future rehabilitation tax credit transactions.