Utility Allowance Rules on Rent-Restricted Units Updated to Clarify Costs

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IRS proposes updating the utility allowance rules to clarify that utility costs paid by a tenant based on actual consumption in a submetered rent-restricted unit are treated as paid by the tenant directly to the utility company. The proposed rules (REG-136491-09) would affect the owners of low-income housing projects that want to claim the low-income housing tax credit. IRS and the Treasury Department say it is appropriate to treat a tenant's payment of a utility through a building owner (or its agent) as a direct payment to the utility, only to the extent that the tenant's utility cost is based on the unit's actual consumption.

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