Generally speaking, if you manage a mixed-income site, you and your staff must recertify all low-income households at the site each year. Failing to meet recertification requirements is a leading cause of noncompliance that can cost the owner its tax credits. But recertification can be a time-consuming and burdensome process.
To calculate and verify household income at tax credit sites, owners and managers are required to follow the rules set out in HUD Handbook 4350.3 (Occupancy Requirements of Subsidized Multifamily Housing Programs). Specifically, sections 1 and 3 of Chapter 5 (Determining Income and Calculating Rent) set out the rules you must follow for calculating and verifying income.
Some tax credit sites may require a household to get a third party to sign a lease guaranty if its ability to pay the rent is questionable. In a guaranty, a third party (known as a guarantor) becomes legally responsible for the rent in case the household doesn’t pay. And sometimes, a household expects the guarantor will pay part of the rent each month.
Before you sign a lease giving a household the right to occupy one of your low-income units at a restricted rent, you’ll want to be sure that the lease and any addenda give you the authority you need to keep the site in compliance. For instance, if your site isn’t 100 percent low-income units or if your state requires it, you’ll want to require the household to give you documentation to prove that it’s still qualified at recertification.
A federal judge recently froze the latest iteration of President Trump’s travel ban, claiming that the new order is still essentially a Muslim ban. In the opinion, the U.S. District Judge pointed to President Trump’s own comments and those of his close advisers as evidence that his executive order is meant to discriminate against Muslims and declared there is a “strong likelihood of success” that those suing will prove the directive violates the Constitution.
In 2013, when the Violence Against Women Reauthorization Act (VAWA) was signed by President Obama, the list of covered programs was expanded to include the LIHTC and HOME programs as well as numerous other programs administered by HUD and the Department of Agriculture (USDA) Rural Development program. In November 2016, HUD published the final rule implementing housing provisions under VAWA as it applies to HUD programs.
The Fair Trade Commission (FTC) recently issued new guidance for owners who use background checks to screen tenants to help them comply with the federal Fair Credit Reporting Act (FCRA), which the FTC helps enforce. If part of your applicant screening process involves running a tenant background check through a company that compiles background information, you must take certain steps before using such services and after taking an adverse action based on a report.
State housing agencies incur expenses to monitor your site throughout the 15 years of the compliance period. The IRS allows the agencies to pass some of these expenses on to owners as “compliance monitoring fees.” As the manager of a tax credit site, you’re responsible for making sure the site’s compliance monitoring fees are paid on time. Although the fees may not be very high, the penalty for paying them late can be costly. And by paying late, you may also damage your relationship with your state housing agency.
IRS auditors may flag sites for further review based on state agencies’ noncompliance reports. The owner’s tax returns and IRS Form 8823 noncompliance reports and other information are initially evaluated. If it’s determined that an audit is needed, an IRS auditor will formally notify the owner by mail that an audit has been scheduled.
