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Overview of the IRC §42 Program

IRS IRC § 42 Audit Technique Guide — Part I (Introduction and Pre-Contact Analysis) · 2026 edition · updated 2026-07-29 · United States

The taxpayer agrees to provide low-income housing for at least thirty years.

  • In exchange for the investment in low-income housing, the taxpayer will receive tax credits for each of ten years, which is known as the "credit period."

  • To keep the credit, the taxpayer must provide low-income housing for fifteen years, which is known as the "compliance period." Failure to maintain the housing in compliance with IRC §42 requirements for the entire compliance period can result in the recapture of a portion of the credit allowable in prior years.

  • After IRS jurisdiction ends, the state agency has sole jurisdiction and the taxpayer must continue to provide low-income housing for at least another fifteen years. The "extended use period" is at least 30 years, beginning with the first year of the credit period.

All three time periods begin on the same day; i.e., the first day of the tax year in which the building is placed in service, or if the taxpayer elects, the beginning of the following tax year.

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▸Contents — IRS IRC § 42 Audit Technique Guide — Part I (Introduction and Pre-Contact Analysis)
IRS IRC § 42 Audit Technique Guide — Part I (Introduction and Pre-Contact Analysis)

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