INSIDER's Pop Quiz!

Q: You can let a full-time site employee occupy a low-income unit at your tax credit site even if her income doesn’t make her eligible to occupy such a unit. True or false?

A: False. To keep counting the unit as low-income, you must first make sure that the employee’s income makes her eligible to occupy such a unit. For instance, if your minimum set-aside is 20-50, you must check whether an employee earns no more than 50 percent of area median gross income (AMGI). And if you must rent certain low-income units to members of a special population group—such as the elderly or homeless—an employee must also meet these additional eligibility requirements to occupy such a unit.

If you decide to rent a low-income unit to an employee, make sure you treat the rental just as seriously as you would any other low-income rental. This means you must perform a full income certification with verifications.

You may also have to take whatever steps are required to keep the unit in compliance with the tax credit program’s requirements for the rest of the compliance period. If your site is a mixed-use site and you discover at the employee’s annual recertification that she earns more than 140 percent of AMGI (or 170 percent if it’s a deep rent-skewed unit), you must follow the next available unit rule to ensure that the owner can continue claiming credits for the unit.

For three options for renting units to employees and the pros and cons of each, see “How to Set Aside Employee Units Without Jeopardizing Owner’s Tax Credits,” available to subscribers here.