[Code of Federal Regulations]
[Title 26, Volume 1]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.42-11]

[Page 166-167]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.42-11  Provision of services.

    (a) General rule. The furnishing to tenants of services other than 
housing (whether or not the services are significant) does not prevent 
the units occupied by the tenants from qualifying as residential rental 
property eligible for credit under section 42. However, any charges to 
low-income tenants for services that are not optional generally must be 
included in gross rent for purposes of section 42(g).
    (b) Services that are optional--(1) General rule. A service is 
optional if payment for the service is not required as a condition of 
occupancy. For example, for a qualified low-income building with a 
common dining facility, the cost of meals is not included in gross rent 
for purposes of section 42(g)(2)(A) if payment for the meals in the 
facility is not required as a condition of occupancy and a practical 
alternative exists for tenants to obtain meals other than from the 
dining facility.
    (2) Continual or frequent services. If continual or frequent 
nursing, medical, or psychiatric services are provided, it is presumed 
that the services are not optional and the building is ineligible for 
the credit, as is the case with a hospital, nursing home, sanitarium, 
lifecare facility, or intermediate care facility for the mentally and 
physically handicapped. See also Sec. 1.42-9(b).
    (3) Required services--(i) General rule. The cost of services that 
are required as a condition of occupancy must be included in gross rent 
even if federal or state law requires that the services be offered to 
tenants by building owners.
    (ii) Exceptions--(A) Supportive services. Section 42(g)(2)(B)(iii) 
provides an exception for certain fees paid for supportive services. For 
purposes of section 42(g)(2)(B)(iii), a supportive service

[[Page 167]]

is any service provided under a planned program of services designed to 
enable residents of a residential rental property to remain independent 
and avoid placement in a hospital, nursing home, or intermediate care 
facility for the mentally or physically handicapped. For a building 
described in section 42(i)(3)(B)(iii) (relating to transitional housing 
for the homeless) or section 42(i)(3)(B)(iv) (relating to single-room 
occupancy), a supportive service includes any service provided to assist 
tenants in locating and retaining permanent housing.
    (B) Specific project exception. Gross rent does not include the cost 
of mandatory meals in any federally-assisted project for the elderly and 
handicapped (in existence on or before January 9, 1989) that is 
authorized by 24 CFR 278 to provide a mandatory meals program.

[T.D. 8520, 59 FR 10074, Mar. 3, 1994, as amended by T.D. 8859, 65 FR 
2328, Jan. 14, 2000]