The low-income housing tax credit program is administered at the state level by state housing finance agencies with each state getting a fixed allocation of credits based on its population. The state housing agency has wide discretion in determining which projects to award credits, and applications are considered under the state’s “Qualified Allocation Plan.”
To help the owner of your site determine how many credits it may claim for a building, you must first calculate an “applicable fraction” for each month of the first year of the building’s compliance period. The applicable fraction is the percentage of a building dedicated to low-income residential rental units. Under Internal Revenue Code (IRC) Section (§) 42(c)(1)(B), the applicable fraction is the smaller of the unit fraction or the floor space fraction.
There’s more at stake when you approve applicants for units in tax credit buildings than when you approve applicants for other assisted sites. That’s because a move-in mistake on a tax credit site can result in an immediate loss of tax credit dollars for owners, possibly jeopardizing any management contracts between an owner and a management company.
Creating a resident selection plan is a good idea for any type of site you might manage, including a tax credit site. Although the tax credit program doesn’t require written resident selection plans, creating one can help you process applications more effectively, educate your prospects about your site’s requirements, and show your state housing agency that you treat prospects fairly.
In a proposed rule revealed on Nov. 12, the Department of Housing and Urban Development would require more than 3,100 public housing agencies overseeing 1.2 million units of public housing to go smoke-free within several years. The agencies would have to design policies prohibiting lighted tobacco products in all living units, indoor common areas, administrative offices, and outdoor areas near housing and administrative office buildings.
Each time you manage a new tax credit site, you start with unoccupied units that you must rent to the right mix of households. And when households later vacate their units, some units may stay unoccupied for a while. Having these unoccupied units at your site can raise compliance issues. If you’re unfamiliar with these issues or handle them improperly, you could put the owner’s tax credits at risk. To help you keep unoccupied units in compliance, we’ll give you five Dos & Don’ts to follow to avoid problems and keep the owner’s tax credits safe.
When certifying and recertifying low-income households at your tax credit site, you may encounter situations that require you to use special forms to get more information about household income. Sometimes, you’ll need to get household members to complete and sign these forms. At other times, you’ll need to send the forms to a third party. For example, if you discover that a household member gets disability income, you must get the agency providing benefits to sign a special form to verify this income.
You might think that as long as you’re complying with the tax credit program’s requirements, you’re protecting the owner’s credits. But the owner’s credits aren’t safe unless you can prove your compliance to the IRS and your state housing agency. If you don’t have the right documents to show auditors that you’ve complied, your efforts may be in vain.
The owner of a tax credit site you manage may tell you that the site also participates in the tax-exempt bond program. But you might not be entirely sure as to what this means and what compliance issues to be mindful of when management participates in the bond program.
