 |
|
|
|
|
|
|
|
|
|
|
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
 |
 |
 |
 |
 |
|
|
|
|
|
|
 |
|
|||
 |
 |
 |
|
|
 |
|
|||
 |
 |
|
||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
 |
|
|||
In an acquisition/rehabilitation tax credit deal, should I survey the income of my existing residents?
Yes. LIHTC procedures require owners/managers to identify those individuals who are currently residing in a tax credit establishment. Surveying tenants is a way to ensure that the tenants residing in the units are income qualified to live there.
If I have questions about the proper way to calculate a tenant’s annual income, where can I go to find answers?
Under the LIHTC program, a tenant’s income is calculated based on the gross annual income. For more information on income calculations, refer to MHC’s Compliance Monitoring Plan and HUD Handbook 4350.3 Rev.1.
I have students living on my property. Can I designate their units as tax credit units?
Generally, students are not allowed to live in a tax credit unit unless the household meets and documents at least one of the following IRS full-time student exceptions:
- The tenant(s) is(are) married and filed 9or entitled to file) a joint federal tax return;
- All tenants are receiving Title IV of the Social Security Act- Temporary Assistance for Needy Families (TANF);
- The household consist of a single parent(s) with children who are dependents of at least one of the parents, either the mother or the father, whether or not the absent parent will reside in the unit;
- All tenants are enrolled in a job training program under the Job Training Partnership Act (JTPA) or a similar federal, state, or local program, or
- The student(s) was previously under the care and placement of the state agency responsible for administering a plan under Part B, or Pare E, of the Title IV (i.e., a former foster care participant).
What income should I count for students?
Generally, the first $480.00 of the EARNED income of students (excluding the head, co-head or spouse) is counted on verified full-time students. In addition, any financial assistance (excluding student loans) above the cost of tuition must also be counted as income. For students over the age of 23 with dependent children and students living with their parents, financial assistance should NOT be counted. You should count any UNEARNED income received by the student.
Is a telephone verification a valid form of employment verification?
Yes, provided the proper procedures and documentation is followed. Third-party written verifications are preferred. However, in cases where this method is not feasible AND attempts to acquire a third-party written verification have been documented, telephone verifications may be used. For more information on telephone verifications, refer to MHC’s Compliance Monitoring Plan.
When verifying the income of tenants with Section 8 Certificates, is the income verification provided by the housing authority acceptable?
No. Owners/managers should obtain third-party written verifications from the income source.
When can I expect the income and rent limits to change and how can I obtain a copy of the latest change?
LIHTC income and rent limits are updated annually when HUD publishes its’ revised figures for area median incomes. Generally, these updates are released in early spring each year. MHC will provide owners with updated limits as they become available.
If a change in household income occurs between annual recertifications, is the manager required to recertify the household?
No. Tenants are only required to report a change in household income at the time their eligibility is re-certified. However, if it is found that there is/has been a change in household composition whereby resulting in the vacancy of ALL initial occupants or the addition of an adult household member (age 18 or older) within the first six months of occupancy, a NEW certification may be required.
How should rent changes in between certifications be documented?
Notation of a rental change must be made to the applicable TIC form in the “comments” section with the effective date and reason(s) for the change. A new certification is not needed to simply document a revised rental amount.
What happens if a unit is leased as a tax credit eligible household and later is found out that the household is not income qualified?
If a calculation error was made in certifying a household and it is found that the household never income qualified for the unit, the owner should not claim tax credits for this unit as long as the unit is leased to the ineligible household. The owner/manager may first check to see if the household’s income was ever below the applicable limits since occupying the unit. If the income is/was below the applicable limits, the household may be qualified as the date the income was below the applicable limits. However, documentation must support the income. To avoid this situation, it is important to verify the income of a household prior to occupancy.
Does the LIHTC program have occupancy requirements specifying the unit size (i.e., number of bedrooms) appropriate for a given household?
No. Owners are expected to establish their own occupancy requirements and apply them consistently throughout the development as well as comply with state or local laws regarding occupancy restrictions, if applicable.
Are LIHTC rent limits based on the household size or the unit size?
According to the LIHTC program, the rent limits for the LIHTC program are determined by both the unit size and the household size depending on the date tax credits were allocated. For developments receiving a tax credit allocation prior to 1990 (and did not opt to take Revenue Procedure 94-9), rent limits are based on the household size. Developments receiving a tax credit allocation after 1990 determine rent limits based on the unit size.
Must LIHTC rents be adjusted for tenant paid utilities?
Yes. According to Section 42 of the Internal Revenue Code, LIHTC total gross rent includes the cost of utilities, except for cable and telephone, and must be reduced according to the applicable utility allowance. This policy does NOT apply to owner paid utilities.
What should I do if I receive the income and rent limits from MHC and they are lower than the previous year limits?
In the event that the rent and income limits decrease from one year to the next, it is important that the owner reduce the rents immediately. Although it is unusual for LIHTC rents to go down, owners must revise rents for qualifying units that exceed the new limits. It is also important to note that the IRS as stated in Revenue Procedure 94-57 that rents are not required to be reduced below the initial approved rents in place at the time the building was placed in service or tax credits were allocated (depending on what the owner elected).
At recertification, if a tax credit eligible household is over the applicable income limit, but not over the 140% limit, must I evict them?
No. According to Section 42 of the Internal Revenue Code, a household’s income is allowed to increase by up to 140% of the current income limit and still qualify without penalty. It is only when a household’s income exceeds 140% that additional measures are to be taken.
When a household’s income is determined to be over the income limit by 140% at recertification, is the rent on that unit still restricted?
Yes. If a household’s income exceeds the limits by 140%, the household status is reported as “over-income” and the rent (in a mixed income development) must remain restricted until the next available unit is rented to a qualified household. After that time, the rent can increase to market rent for unrestricted units. However, in a 100% tax credit development, the rent for the unit whose income exceed by 140% must always remain restricted and the next available unit of equal or smaller size must be rented to a qualified household.
If a tax credit eligible household wishes to transfer to another unit within the same building, how should this be handled?
If a household moves to another unit in the same building, the unit status shifts with the household. A Documentation of Unit Transfer form should be completed. A new TIC should be completed and support documentation acquired if the transfer occurs at the time of recertification. The 140% rule is applicable in this instance.
If a qualifying household wishes to transfer to another unit in the development (different building), how should this be handled?
If a household moves to another unit in a different building, the unit status shifts with the household. A Documentation of Unit Transfer form should be completed. Caution: If a household’s income exceeds 140% of the applicable income limit at the time of the transfer the newly occupied unit will be treated as a non-qualifying unit. Please refer the latest Compliance Monitoring Plan for further details.
We recently received a change in the utility allowance (UA) estimates at a number of
our developments. How long do we have to implement these changes? What
happens if the UA change causes the maximum allowable rent to exceed the HTC
rent?
According to Section 1.42-10 of the Internal Revenue Code, “if at any time during a building’s extended use period (compliance period) the applicable utility allowance for a unit changes, then the new utility allowance must be used to compute gross rents of rent restricted units due 90 days after the change.” Likewise, if rent must be lowered because of a higher estimate, then the rent reductions must be implemented no later than 90 days of the effective date of the utility allowance change for ALL QUALIFYING UNITS regardless of the timing of the next certification and/or recertification.
Who should witness a mark of a tenant who is unable to sign his/her name?
The person witnessing the signature “mark” of a tenant must be a person other than management and/or the owner and of legal age and sound mind to do so.
What is the different between the Social Security Administration Award Letter andthe Social Security Printout?
The Social Security Administration Award Letter is a letter that the resident usually receives in late November stating their awarded monthly benefit amount for the following year. Generally, the Award Letter is valid for one (1) year (12 months). The Social Security Printout, on the other hand, is generally requested by the resident and shows the current monthly payments received. Printouts are valid for 120 days.
Recently we were notified that you will be conducting a physical inspection of the units at my development. What exactly will you be examining during the inspection?
The simplest way to answer this question is - common health and safety issues. According to Section 42, each tax credit development must be safe and decent. To ensure this, an inspection of all rooms in a unit will be inspected in accordance with HUD’s Uniform Physical Condition Standards (UPCS). Below is a list of commonly inspected items and questions I ask myself when examining for compliance. An answer in the affirmative generally results in a good clean inspection.
- Water structure (toilets, tub, sink) - Free of Leaks? Working properly?
- Safety devices- Fire extinguishers- fully charged? Smoke detectors – operable? GFI outlets in the kitchen and bathroom - trip when using a tester?
- Window Exits- Are they accessible? Will they stay up in the open position without support? Are the window sills and surrounding areas free of mold and mildew?
- Kitchen- Is the cooking range free of significant amounts of debris or grease? Is the stove /oven free of aluminum foil?
- Flooring and wall surfaces- Are all floors covered with secure materials? Are the walls free of large holes?
- Doorways- Are the exterior doorways free of cracks in the casing by the doorknob? Does the interior doors work properly and have secure casings?
- Light globes- Does all light fixtures, both interior and exterior, have globes or plates covering the globes?
Am I required to use the certification forms included in MHC’s Compliance Monitoring Plan?
It depends. MHC’s has several mandatory forms for compliance. Some of these forms are the Tenant Income Certification (TIC) Form, Employment Verification Form, Student Verification Form, Under $5,000 Asset Form and the Tenant Release and Consent Form. Please refer to the latest Compliance Monitoring Plan for an up-to-date listing of all available certification forms. The certification forms are required if the form applies to the household’s situation. The Plan identifies which form should not be changed and which forms may be substituted by management’s own forms, provided that management’s forms include all the required inquiries.
Generally speaking, when is a development considered to be out of compliance with the LIHTC program requirements?
Developments that fail to meet the provisions of their tax credit application; LURA if applicable), Section 42 or State Agency Compliance Monitoring Plan may fall out of compliance with requirements primarily for any of the following violations:
- Failing to meet and maintain minimum set-aside
- Failing to determine and verify tenant eligibility at least annually or improperly determining rent limits
- Charging rents in excess of applicable LIHTC rent limits
- Failing to maintain a safe, decent and sanitary housing conditions
- Failing to submit timely reports to the State Agency (MHC)
- Failing to pay the required noncompliance fees
For
more information regarding the HTC, contact:
Robert Collier
Senior VP of Compliance Monitoring
(601)718-4630