Topic: Compliance

Placing a building in service—that is, making it functional within the tax credit program—can be tricky if you’re not sure what’s required and what your options are. And knowing how to place a building in service is important because it affects when your building’s owner can begin claiming its credits.Here are four tips to follow when placing your building in service. Go over these tips with the owner. That way, you can make sure the owner can claim the tax credits it was allocated for your building.

If you violate the federal tax credit law and don’t promptly correct the noncompliance, the owner may lose tax credits. Item 11 on IRS Form 8823 (Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition), which is the form the state housing agency uses to report noncompliance to the IRS, lists the main ways you can violate the tax credit law. These federal violations are sometimes called IRS violations.

When you place ads to fill vacancies or waiting lists at your tax credit site, what those ads say or how they depict your site can greatly influence who responds. For this reason, fair housing advocacy groups pay close attention to ads for rental housing. If you say or depict the wrong thing, you could find yourself the target of a lawsuit or HUD enforcement action. And if your state housing agency discovers a fair housing violation, it must report you to the IRS for noncompliance.

On March 23, President Trump signed the Consolidated Appropriations Act, 2018 (H.R. 1625), a $1.3 trillion spending bill that funds the federal government through Sept. 30, 2018. In addition to preventing a government shutdown, this omnibus spending bill incorporated two key improvements adopted from the Cantwell-Hatch Affordable Housing Credit Improvement Act intended to strengthen and expand the LIHTC.

In the November 2017 issue of the Insider, we discussed the vacant unit rule and its requirement to make reasonable attempts to rent vacant units (see “Follow Five Dos & Don'ts to Comply with the Vacant Unit Rule).” Beyond showing compliance with the vacant unit rule, there are other important reasons to keep good records of your efforts to market your units to qualified low-income households.

As a tax credit manager, you need to know about certain elections that owners make when they file Form 8609 with the IRS to keep your site in compliance with the tax credit program’s requirements. But because owners complete this form, you may not get to see it. As a result, you may operate your site based on inaccurate information or false assumptions about which elections your site owner made.

When the President declares a major disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, LIHTC sites are afforded temporary relief from certain requirements of the LIHTC program. As a result of Hurricanes Maria, Irma, and Harvey, major disaster declarations have been made for various counties in Texas, Florida, and Georgia, as well as Puerto Rico and the U.S. Virgin Islands.

To qualify your site for the tax credit program, you must lease up enough units to qualified low-income households. But those units don’t automatically stay low-income for the rest of the compliance period. As a tax credit site’s manager, you must follow rules to make sure units stay low-income. If you make mistakes, you might disqualify some units, which means the owner may no longer be entitled to claim credits for them. This could lead to major problems if your site ends up with too few qualified low-income units to maintain its minimum set-aside.

Good leasing agents can help you fill vacancies quickly with qualified households. But if your agents don’t know enough about the tax credit law, they can also create problems. For instance, there’s no way to know whether prospects are eligible until you’ve calculated and verified their income. So agents who lead prospects to believe they can live at your site could get you into trouble if it turns out the prospects aren’t eligible.

Section 504 of the Rehabilitation Act of 1973 bans disability-based discrimination in any program or activity that receives federal financial assistance from any federal agency (including HUD) or in any programs conducted by federal agencies. Many tax credit managers haven’t heard of this law and those who have heard of Section 504 may mistakenly believe that it doesn’t ever apply to tax credit sites. If Section 504 applies to your site and you don’t know it, you risk HUD investigations and possible penalties.