Before you rent any unit at your tax credit site to a new household, it’s important to confirm that the rental will comply with the tax credit law. If your rental of a unit won’t comply, the owner’s credits for that unit may be at risk. And if the unit is one you must count to meet or maintain your site’s minimum set-aside, that one noncomplying unit may place all the owner’s credits in jeopardy.
As a tax credit manager, you probably know that you can violate the “transient unit rule” if you rent units to low-income households on a transient basis. The IRS presumes that you’re complying with the rule if your initial leases with households are for a term of at least six months. If one of your households vacates its unit before six months have passed, you won’t be automatically charged with a violation.
To calculate household income at tax credit sites, you’re required to follow the rules set out in HUD Handbook 4350.3 (Occupancy Requirements of Subsidized Multifamily Housing Programs). But because the Handbook was written for assisted sites, applying it to a tax credit site can be a challenge. The tax credit law doesn’t say which rules apply, and it’s not always clear how to follow them. The Handbook also uses certain terms that don’t make as much sense in the tax credit context as they do in the assisted housing context.
When you take over a site, there’s a good chance you’ll find paperwork mistakes made by prior managers. Missing income certifications, spotty income documentation, and utility allowance errors are common. Even though you didn’t make them, you mustn’t ignore these household file mistakes. Uncorrected mistakes can jeopardize the owner’s tax credits if a housing agency auditor later uncovers them.
In the past few years the Justice Department has brought increased scrutiny to the issue of accessibility. For example, in September 2010, the Justice Department published revised regulations for Titles II and III of the Americans with Disabilities Act of 1990 (ADA) in the Federal Register. The new rules took full effect on March 15, 2012.
As site owners and managers increasingly direct more of their marketing focus online in an effort to attract new prospects, engage current residents to encourage renewals and generate referrals, and recruit potential employees, there are fair housing considerations they need to be mindful of.Often new media marketing is driven by tech-savvy professionals, but—regardless of the bells and whistles on your Web site or Facebook page—it's up to you to ensure compliance with old-school fair housing principles.
According to U.S. Census data released in June 2011, more than half—51.6 percent—of all the country's businesses that responded to the 2007 Survey of Business Owners were operated primarily within homes or other noncommercial spaces. And because the data was compiled before the recession began in 2008, it may be safe to assume that there has been a sharp increase in home-based businesses since then.
Every tax credit building you manage is either a “mixed-income building” or a “100 percent building.” If it's a mixed-income building, you can rent units to both low-income and market-rate households. However, if your building is a 100 percent building—or, in other words, your first-year fraction is 100 percent—you must rent all the units in your building to qualified low-income households.
If you're managing a tax credit site in the first year of its credit period, it's important to know that the owner may not be able to claim all the credits it expects to for that year. According to IRC Section 42(f)(2), an owner isn't allowed to take the entire credit a building is expected to produce each year in the tax credit program on his tax return for the first year of the tax credit period.
Many tax credit sites permit a resident manager, superintendent, or similar site-level employee to occupy a unit. This arrangement may raise a red flag to state auditors if the unit is not being used as permitted in the original allocation agreement with the state. Operating in the dark with regard to an employee unit can cause the owner to lose the tax credits on the unit and possibly result in tax credit recapture as far back as the first year of the compliance period.
