Low Income Housing Tax Credit Compliance Policies and Procedures Manual

1
Low Income Housing Tax Credit Compliance Policies
and Procedures Manual

• Revised annually
• Check Division website for updates
• Current version is required to be on-site

2
Lease-up Plan

• Useful lease-up plan
• Identifies total number of TC units required
• Presents a strategy for marketing vacant units to
  eligible tenants
• Describes method of surveying in-place tenants to
  assess their eligibility (rehab)
• Establishes procedures for ensuring ineligible
  existing tenants are not improperly terminated
  (rehab)
• Includes system for tracking progress of
  qualifying TC units

3
What is a Qualified Unit

• Income within limits
• Gross rent within limits
• Unit suitable for occupancy
• Non-discrimination in availability
• Non-transient

4
TC Fundamentals

• Tax credit units must be rented to households
  that are income eligible
• Rents for tax credit units must be restricted to
  gross maximum rent limits

5
Income Limits

• Set by HUD annually
• Available on Division website shortly after
  issuance
• NHD also recommends the rent income calculator
  at www.novoco.com (Novogradac website)

6
Target Low-Income Occupancy Test

• Can be from 20/50 or 40/60 up to 100 TC occupied
  
• Listed on Application and in Declaration
• Number of units leased by end of lease-up period
  affects percentage of Tax Credits claimed

7
Placed-In-Service Date

• PIS date determines the year Tax credits can be
  claimed
• For Rehab project there are two dates
• Acquisition Date
• Date Rehab completed

8
Placed-In-Service Deadline

• All projects must be PIS by end of second
  calendar year from date of allocation of TC
• PIS date recorded on IRS Form 8609
• Project Owner must have documentation of PIS date
  for every building in project

9
First Year 8609

• It is mandatory to submit to the Division a copy
  of the first year 8609 with bottom section
  completed to include first year credit
  determination
• The year credits are first claimed determines
  type of audit. First year is file audit only
• Physical audits begin two years after the last
  building is place in service.

10
8609 REALLY Important

• Failure to provide completed/signed copy of First
  Year 8609 WILL result in issuance of IRS 8823
• IRS is requiring copy of completed first year
  8609 be sent to them. Division also requires
  copy for our records.

11
Minimum Set-aside Test

• 20/50 set-aside
• 40/60 set-aside
• Project Owner selects and reports on First-year
  8609
• Note if 20/50 chosen , no TC unit in project
  can exceed 50 income limit

12
Minimum Set-aside Deadline

• Minimum set-aside must be met no later than close
  of first or second year of PIS date
• First or second year must be determined by the
  Project Owner
• Minimum set-aside must be met before any credits
  can be claimed

13
Tenant Facilities

• All tenant facilities included in Eligible Basis
  must be available to all tenants at no additional
  charge

14
Vacant Unit Rule

• Vacant units can be counted as TC unit if
  occupied by TC qualified tenant prior to vacancy
• Reasonable attempts must be made to market
• Cannot be held vacant
• Must be rent-ready

15
Waiting Lists

• If your property has multiple income/rent
  restrictions
• It is important you develop a waiting list policy
  to assure fairness

16
Tiered Rents

• Know your tiered income/rent limits.
• Have written policy for waiting list

17
Next Available Unit/140 Rule (mixed use)

• When household income increases to over 140 of
  applicable income limit Over-Income Unit
• Over-Income Unit may continue to be counted as
  low-income unit if
• Unit must continue to be rent-restricted
• Next comparable size unit in building must be
  rented to eligible low-income tenant

18
NAUR/140 continued

• Project Owner must continue to rent all
  comparable units available or subsequently
  available until Applicable Fraction (excluding
  Over-income units) is again met
• If next comparable unit is leased to an
  ineligible tenant any over-income unit ceases
  to count as TC unit

19
NAUR in 100 project

• Applies only if multiple levels of income limits
  and only to determine eligibility for specific
  lower limits
• Tenants cannot be evicted without proper cause
• Cannot be evicted because over-income

20
NAUR in Mixed Income Project

• Within building transfers allowed and allows
  status transfers even if over 140 at time of
  transfer
• This rule is violated if unit vacated by
  over-income household is rented to non-qualified
  tenant
• If this occurs, ALL over-income low-income units
  in same building lose their status as low-income
  units

21
Non-transient Occupancy

• Initial lease term 6 months or more
• Single Room Occupancy and transitional housing
  for homeless exempt from this requirement

22
Declaration (DRC)

• Declaration of Restrictive Covenants for
  Low-Income Housing Tax Credits
• Details provisions and commitments of Project
  Sponsor regarding Tax Credit Project
• ALL PROPERTIES SHOULD HAVE
• COPY ON-SITE

23
Employee Units

• May be counted as low-income unit or common area
  unit
• Counted if staff member is qualified like any
  other resident. (If receiving free rent the amt
  is counted towards income)
• Not counted if staff would not qualify unit, then
  becomes part of projects common area
• (Recommend all units be qualified first)
• PLEASE UTILIZE THE NEW E.1
• Request for Manager/Employee/Exempt Unit form

24
Employee Unit cont.

• If unit changes, notify Division immediately
• Failure to notify of change could cause
  non-compliance at year-end transmission

25
Relocating/Transfer of Initial Qualifying Tenants

• During Initial Lease-up period, existing tenants
  CANNOT be relocated for purposes of qualifying
  more than one tax credit unit
• Within the same building units just swap status
• It is a new move-in when a resident moves to
  another building (There could be exceptions to
  this rule in an acquisition rehab property)

26
Section 8 Certificates and Vouchers

• Project Owner may not discriminate against
  Section 8 certificate or voucher holders
• Project Owner must certify annually they have not
  refused to lease
• Project Owner must also certify no findings of
  discriminations under Fair Housing have occurred
• Project Owner must document reasons for refusal
  to lease to any Section 8 applicant

27
Price of Non-Compliance

• Any period of non-compliance may result in loss
  of Tax Credits for the Owner
• File and Physical Inspection findings both cause
  non-compliance
• Reputation possible loss of ability to
  participate in future TC Bond programs in Nevada

28
Price of Non-Compliance Cont.

• Division may conduct additional audits and charge
  additional fees for staff time
• Division may impose additional requirements

29
IRS has final word

• The IRS makes the final decision regarding how or
  when to recapture tax credits
• Division only reports non-compliance on IRS Form
  8823

30
Keeping Track

• Maintain records by BIN and unit
• Three types of records
• Tenant Files
• Monthly unit/rent occupancy tracking data
• Project records (eligible basis records and
  original health, safety building code
  reports/notices)

31
Project Records

• Utility allowance data
• Fair Housing Compliance Records
• Tenant selection criteria and procedures
• Project maintenance information
• Project security information

32
Inspection Records

• Project Owner must retain original local health,
  safety, and building code violation reports or
  notices
• For projects with other funding sources such as
  HUD or USDA, records of the most recent
  compliance audit performed by these agencies must
  be kept and made available to the Division staff
  if requested

33
Recommended File Format

• Part 1 Lease and Addendum
• Part 2 TIC and verifications
• Part 3 - Application

• Part 4 Section 8 Documents
• Part 5 Misc. documents

34
FILE FORMAT CONT.

• Although the preceding is recommended by the
  Division, any format that is easy to follow and
  consistent throughout all files will be acceptable

35
Annual Reporting Requirements

• Exhibit C completed and transmitted via internet
  COL system
• Signed and hard-copy mailed to Division
• For BOND projects Certificate of Continuing
  Program Compliance Refer to Regulatory
  Agreement
• Exhibit C.1 submit when any mgt changes occur
• Exhibit C.2 Utility Allowance Certification
  (revised)

36
Contact Information Form(Form C.1)

• The division requires Project Owners to submit
  updated project, ownership and management
  information
• - At time property is placed in service
• - Whenever there is a change
• - Annually with year end reports

37
LIHTC Record Retention Requirements

• Compliance period plus 6 years for initial
  qualifying files
• 6 years past end of tax year of tenancy for other
  files
• Fire proof safes recommended
• Duplicates kept off-site recommended
• Electronic storage of records is allowed as long
  as the electronic storage system satisfies the
  requirements in Revenue Procedure 97-22

38
Monitoring Fees

• Project Owners are billed annually for monitoring
  fees due. Cost is per unit
• Division reserves right to change monitoring fees
  on a program or project basis to cover cost of
  compliance monitoring

39
Additional Fees if Non-compliant

• If the Division discovers excessive
  non-compliance, there may be additional fees
  assessed

40
On-Site Compliance Review

• NHD notifies Project Owner and Management Company
  in writing
• Notice will NOT specify which records will be
  examined
• PO/Mgmt Co to give advance notice to all tenants
  of possible inspection a minimum of 24 hours
  prior to scheduled inspection date