1. Developers or project owners receive low-income housing tax credits by applying directly to the state housing authority (HFA). [Place an internal link for “state housing authority” to link to Resources Page to look up compliance guide books by state.] 2. A state’s HFA receives an allocated amount of tax credits from the IRS, based on the state’s population. 3. The HFA awards tax credits to developers based on federal guidelines and state-specific standards from a Qualified Action Plan (QAP). However, the limited number of tax credits makes the demand greater than the supply.
What is a Qualified Action Plan (QAP)?
A Qualified Action Plan (QAP) is criteria promoted by a state housing authority to meet the state’s priorities and goals for economic development.
What is the difference between 9 percent tax credits and 4 percent tax credits?
1. Tax credits are awarded as 9 percent credits (capped based on state population) or 4 percent credits (not capped and financed through tax-exempt bonds). 2. Tax credit recipients can claim 9 percent or 4 percent tax credit of a building’s qualified basis each year. A qualified basis is determined by the total cost of construction or acquisition of a property that will ultimately benefit low-income renters.
How long is a tax credit compliance period?
1. Tax credit properties require a 15-year initial compliance period and subsequent 15-year extended use period. 2. Tax credits are subject to recapture if a LIHTC property fails to comply with Section 42 of the federal tax code during the initial 15-year compliance period.
02. What is the LIHTC program?
About LIHTC program
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4 Key Stages in the life of a LIHTC property
1. A LIHTC development project begins when low-income housing tax credits or another affordable housing program is allocated by the state housing authority. The development period lasts until the project is placed in service (i.e., when the first unit is ready for occupancy).
2. A lease-up period starts once the project is placed in service and lasts until the project owner begins to claim the project’s tax credits. Owners can start to claim tax credits at the end of the following tax year after the project was placed in service. All units set aside for LIHTC purposes must be qualified during the lease-up period.
3. The compliance period begins in the first year a property owner begins to claim tax credits for the project and continues for the next 15 consecutive years.
4. A LIHTC extended use period begins after an LIHTC property’s initial 15-year compliance period ends. Property owners and managers must maintain the property’s low-income occupancy for an additional 15 years. At the end of the extended use period, LIHTC properties still participating in the program become eligible for market-rate conversions. However, some properties may require or qualify for a longer extended use period.
03. What Will Happen If My Property is Non-Compliant
Non-Compliant FAQs
1. All non-compliance findings discovered during a state inspection or audit are reported the IRS on Form 8823. 2. Substantial monetary repercussions could affect the property owner. 3. A tax credit “recapture” might result in losing previously taken tax credits and stop the ability to claim future tax credits from the property. 4. Losing tax credits can affect the ability to properly operate the property. 5. Compliance rules change frequently. A LIHTC compliance solutions company can help avoid potential non-compliance risks.
Non-compliance can occur by:
· Not calculating assets or income correctly · Not updating annual utility allowance figures · Failure to correctly update annual income limits in a timely manner · Failure to submit compliance forms in time · Failure to complete annual income certifications on time or for properties that are not 100 percent LIHTC · Failure to make next available unit available to a housing credit-qualified household when existing household’s income exceeds 140 percent of the maximum allowable income · Exceeding the Maximum Allowable Rent by using incorrect AGMI or Utility Allowances · Rent overcharge · Ineligible households · Ineligible students · Improper transfers · Misplacing resident file information (e.g., application, certification, and lease) · Health and safety issues
04. How Do I successfully Manage Compliance for My LIHTC Property?
Your Land Use Restriction Agreement (LURA) is a valuable guide to keep your property in compliance. Keep the following information always available:
· Number of units set aside for LIHTC requirements · Applicable maximum incomes for each family size · Maximum allowable gross rents · LIHTC utility allowances for each unit size · Required resident services from the LURA and Extended Use Agreement (EUA)
Keep the following information posted for all residents and prospective residents:
· Income limits and rents · Utility allowance chart · Resident selection policy · Late charge policy · Fair Housing poster (English and Spanish) · Office hours · Emergency contact information
Follow these basic conditions to count units for LIHTC compliance:
· All units with the same building identification number must be occupied by certified qualifying households · A resident’s income at the time of move-in cannot exceed the applicable income limit for the property · A resident’s paid rent in addition to the utility allowance must not exceed the maximum allowable rent for the unit · A unit’s physical condition must need local health, safety, and building codes · A six-month lease or more must be signed with the household · A LIHTC unit must be listed as an eligible unit on all reports submitted to state and local agencies · A resident’s eligibility must be reexamined annually, and rents maintained at or below applicable rent limits
A successful marketing plan relies heavily on the pulling-power of advertising copy. Writing result-oriented ad copy is difficult, as it must appeal to, entice, and convince consumers to take action.
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