4th Annual MBOH LIHTC Compliance Training

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4th Annual MBOH LIHTCCompliance Training
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• REMEMBER
• 09-11-01

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LIHTC

• Affordable Housing for Montanans

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And if anyone asks

• YOU are the reason this program is a success.

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WHY?

• Manager
• Teacher
• Accountant
• Counselor
• Social worker
• Public Relations Spec
• Maintenance Supv
• Sales Person

• Advisor
• Enforcer
• Rental expert
• Policy advisor
• Collection agent
• Advertising specialist
• Baby Sitter
• Friend

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What have Tax Credits done.

• 175 project in Montana
• 4,914 units
• 27,474,190.63 Tax Credits allocated
• 274,741,906.30 Tax Credit Equity
• 370,155,968 Total Projected Cost to Build
• 78 Funded by Tax Credits

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Why are you here?

• Share ideas that work (and dont work)
• Find out the approach Montana takes to make our
  projects work effectively.
• Find out changes to new regulations
• Discuss new and exciting developments for the tax
  credit program
• Networking

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Minimum Set-aside
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Minimum Set-aside

• The minimum number of units on a property that
  must be reserved for qualifying tenants.
• 40/60 Election
• 20/50 Election

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Minimum Set-aside

• The 40/60 Election
• -Requires at least 40 of all units be rented to
  households earning 60 or less of Area Median
  Income. (AMI)
• The 20/50 Election
• -Requires at least 20 of all units be rented to
  households earning 50 or less of AMI.

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Agency Covenants
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Agency Covenants

• Beginning in 1990, extended use commitments
  became part of the LIHTC program.
• The Credit period is the first 10 years, with an
  additional 5 year IRS compliance period. After
  that, the extended use provision comes into play
  for an additional 15 years, or longer.

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Agency Covenants

• The Montana state agency has decided that during
  the extended use period compliance monitoring
  will be maintained in exactly the same way as
  during the original 15 year compliance period.
• Low income tenants are protected from eviction
  and rent increases not only during this 30 years
  of tax credit compliance commitment, but for an
  additional 3 years.

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Restrictive Covenants
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Restrictive Covenants

• Requirements that exceed the minimum required by
  Section 42
• Each project has a different set of Restrictive
  Covenants
• Recorded document to ensure restrictions stay
  with property
• Example
• Targeting Lower Income persons

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PIS
PLACED IN SERVICE (PIS) Certificate of Occupancy
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Acquisition PIS
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Rehabilitation PIS

• Artificial date
• Owner/Accountant decision
• May have C of O

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FIRST YEAR OF THE CREDIT PERIOD
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Claim credits end of year building is placed in
serviceorDefer until the next year
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Once credits are claimed qualified basis cannot
go down
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ORIGINAL LEASE UP
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Try to find out when credits have been promised
to the investor.
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New Construction Lease up

• When to start?
• Verifications are only good for 120 days

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Rehab Lease up/Qualification

• Tenants in place
• Can qualify at Acquisition or Rehab
• Have 120 days after acquisition
• If more than 120 days

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Tenant Files
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Tenant File Setup

• All files for a property must be set up
  identically.
• All items on each side, or within dividers,
  should be in the same basic order for each tenant
  file.
• All Tenant Income Certifications and
  corresponding verifications should be together.
• The documents for each year should be separated
  by a colorful divider or tab.

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• Tenant files must contain
• The initial lease
• The move-in Tenant Income Certification and all
  Third Party Verifications
• All annual recerts and the associated
  verifications
• Unit inspection form
• Original tenant application
• Utility Allowance by unit size
• Rent card, list or receipts

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Period of Retention

• Records should be kept at least 6 years beyond
  the due date for filing the tax return.
• The first year of the credit period must be kept
  longer. The IRS mandates that these records be
  maintained for 21 years.
• The IRS has approved electronic storage but it is
  strongly suggested that the 1st year records also
  be kept in hard copy.

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Tenant Application
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Leases
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Smoke detector addendum

• Example
• Operational smoke detectors in multi-family
  rental units are the law. Disarming a smoke
  detector is a fire code violation. Failure to
  report a problem with a smoke detector to
  management is a fire code violation. Removal of
  a smoke detector is a fire code violation.
  Batteries must be replaced immediately when the
  chirping alert is heard so that the smoke
  detectors remain in service. Contact the
  property manager if assistance is needed.
  Failure to comply with this rule and this lease
  addendum is considered a violation of your lease
  contract and could lead to eviction for ongoing
  non-compliance.

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Good Cause EvictionSection 42 see example of
lease rider
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Interview and selection process
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Application

• Include the following
• The name and birth date of each potential
  occupant
• The sources and amounts of all income for the
  next 12 months
• The estimated value of all assets to include
  actual and imputed income
• Signature and date lines
• Any other material information that can help
  determine eligibility

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Income limits
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Income limits

• Section 42 Section (g) Paragraph (1)
• Maximum Income allowable based on household size
• Set by HUD every year as late as April

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Income limits

• No minimum income limit for a Household
• Income limits must be adopted within 45 days

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Maximum rents
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Maximum rents

• For a unit to be considered Tax Credit eligible,
  the rent must be restricted.
• Restrictions to the maximum monthly rent by unit
  size are available on the Income Limits and Max
  Rent Table provided as a courtesy by MBOH.

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Maximum rents

• Tenants often get confused and feel rent is not
  reasonable because the assumption is that rent
  should equal 30 of their income.
• The LIHTC max rent is based on 30 of an income
  limit.

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Maximum rents

• Gross rent is the unit rent plus any utility
  allowance.

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Additional Fees

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Mandatory Fees
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UTILITY ALLOWANCES

• Cost of utilities
• Heat, lights, air conditioning, water, sewer,
  oil, gas, etc
• If tenants pay all or some of the utilities you
  must subtract the utility allowance from the
  maximum rent..the tenant cannot pay more than
  this amount.

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• Unit rent lt LIHTC Rent Max Utility Allowance

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RD assisted buildings
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HUD assisted buildings
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Other buildings

• Section 8 vouchers
• Public Housing Authority
• Utility Allowance

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Qualification
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Tenant Income Certification form
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TENANT SELECTION
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• Waiting Lists
• Available to the General Public
• Minimum Income limitations

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Household Members

• Year round occupants
• Members temporarily away at school
• Children in foster care
• Armed forces personnel on temporary duty
• Children under joint custody, living 50 or more
  of the time with this household
• Unborn Children

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Persons who do not count

• Live in aides, nurses or attendants
• Absent children under 18 years of age
• Foster children or foster adults (i.e.
  individuals with disabilities, unrelated to the
  tenant family, who are unable to live alone)
• Permanently absent family members such as those
  in a nursing home (choice of the family)

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Changes in household composition

• MBOH strongly suggests a written policy regarding
  additions to households that take place within
  six months of initial lease.
• NEW RULES

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Students
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FULL TIME STUDENTS

• Full time by definition of the institution
• Who during each of 5 months during the calendar
  year is a full time student, as defined by the
  educational institution which they attend
• This is 5 months within the calendar year.

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Exceptions

• Married and able to file a joint return
• Single parent w/children that are not dependents
  of someone else
• Single parent w/children receiving TANF
• Enrolled in a job training under the Job Training
  Partnership Act or similar

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ANNUAL INCOME

• All amounts monetary or not, that go to or are
  received on behalf of the family head, spouse, or
  co-head (even if the family member is temporarily
  absent), or any other family member
• Anticipated to be received from a source outside
  the family during the 12-month period

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INCOME INCLUSIONS
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Student Income

• Student financial assistance minus tuition will
  need to be included for full or part time
  students who are part of the household

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Exclusion of Student Income

• If the student is 24 or older and has dependent
  children, you exclude the full amount of student
  financial assistance.

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INCOME EXCLUSIONS
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Assets

• Assets are items of value that may be turned into
  cash. ACCESS is the key.

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Assets

• Net family assets of 5,000 or more, must be
  calculated to include either
• The actual income the assets earned
• Or
• An imputed income from the assets
• Whichever is greater.

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Assets disposed of for less then fair market
value within the two year period prior to
signing the TIC or the recertification, are
counted.
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Annual compliance packages

• Returned Packages

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ANNUAL COMPLIANCE

• Due in MBOH office on or before January 25th each
  year
• No exceptions
• A mass email reminder will be sent in mid
  November including forms
• NEEDS TO BE COMPLETE OR 8823S WILL BE ISSUED

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8823s
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Site Visits

• MBOH is required by IRS statute to conduct
  on-site compliance reviews of a minimum of 20 of
  all tax credit units in every property at least
  once every 3 years.
• Projects will be given notice by MBOH of pending
  site visits.
• On-site reviews will consist of units and the
  corresponding files of those units. Units will
  be selected randomly by MBOH.
• All common areas and management units are subject
  to inspection, as well.

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Site Visits

• Deficiencies noted during inspections will have a
  correction period determined by the type of
  deficiency encountered.
• Documentation that reports corrections made to
  the deficiencies listed needs to be received by
  MBOH on or before the date specified. (8823s
  will be issued if not corrected in that time
  period)
• On-site inspections will also include the overall
  general condition of the property.

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Site Visits

• Issues encountered during the inspection will
  result in the issuance of Form 8823 to report to
  the IRS on the nature of the non-compliance.

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Training
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FAIR HOUSING
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Federal fair housing law

• It is illegal to discriminate against any person
  because of
• race color
• Religion Sex
• disabled familial Status
• national origin

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Fair Housing

• American with Disabilities Act
• New Construction Requirements
• Reasonable Accommodation
• Handicapped Units

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Fair Housing Cont.

• Familial Status Issues
• Occupancy Standards
• Elderly Housing
• Independent Living
• Service/Assistance Animals

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CERTIFICATIONONLINE
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8823 GUIDE
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HUDCHANGES