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IRS expands utility allowance regulations for low income housing to include energy generated by the property and used by tenants

On March 3rd, the IRS issued final and temporary regulations regarding submetering at low income/tax credit housing. The temporary regulations allow owners to submeter and bill for energy generated at the property and not provided by a utility. These charges to residents are considered part of the utility allowance, as if the resident were the customer of record with a providing utility. These charges are not considered additional rent. The charges for property-generated energy are treated just as submetered water and sewer charges, including the ability for owners to use a unit’s consumption/costs to calculate the utility allowance instead of using HUD models or other forecasting tools.

For water and sewer services to residents, IRS clarified that regulated properties can use a submetered or RUBS methodology. If the property uses a submetered methodology, those amounts are part of the utility allowance. If the property uses a RUBS methodology, those amounts are considered to be part of gross rent.