www.housing.nv.gov 1 low income housing tax credit compliance policies and procedures manual revised...

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Low Income Housing Tax Credit Low Income Housing Tax Credit Compliance Policies and Compliance Policies and

Procedures ManualProcedures Manual• Revised annually • Check Division website for updates• Current version is required to be on-site


Lease-up PlanLease-up Plan• Useful lease-up plan:

– Identifies total number of TC units required– Presents a strategy for marketing vacant units

to eligible tenants– Describes method of surveying in-place

tenants to assess their eligibility (rehab)– Establishes procedures for ensuring ineligible

existing tenants are not improperly terminated (rehab)

– Includes system for tracking progress of qualifying TC units


What is a “Qualified Unit”What is a “Qualified Unit”• Income within limits• Gross rent within limits• Unit suitable for occupancy• Non-discrimination in availability• Non-transient


TC FundamentalsTC Fundamentals

• Tax credit units must be rented to households that are income eligible

• Rents for tax credit units must be restricted to gross maximum rent limits


Income LimitsIncome Limits

• Set by HUD annually• Available on Division website shortly

after issuance• NHD also recommends the rent &

income calculator at www.novoco.com (Novogradac website)


Target Low-Income Target Low-Income Occupancy TestOccupancy Test

• Can be from 20/50 or 40/60 up to 100% TC occupied

• Listed on Application and in Declaration

• Number of units leased by end of lease-up period affects percentage of Tax Credits claimed


Placed-In-Service DatePlaced-In-Service Date

• PIS date determines the year Tax credits can be claimed

• For Rehab project – there are two dates– Acquisition Date– Date Rehab completed


Placed-In-Service DeadlinePlaced-In-Service Deadline

• All projects must be PIS by end of second calendar year from date of allocation of TC

• PIS date recorded on IRS Form 8609 • Project Owner must have

documentation of PIS date for every building in project


First Year 8609First Year 8609

• It is mandatory to submit to the Division a copy of the first year 8609 with bottom section completed to include first year credit determination

• The year credits are first claimed determines type of audit. First year is file audit only

• Physical audits begin two years after the last building is place in service.


8609 REALLY Important8609 REALLY Important

• Failure to provide completed/signed copy of First Year 8609 WILL result in issuance of IRS 8823

• IRS is requiring copy of completed first year 8609 be sent to them. Division also requires copy for our records.


Minimum Set-aside TestMinimum Set-aside Test• 20/50 set-aside• 40/60 set-aside• Project Owner selects and reports on First-

year 8609

• Note: if 20/50 chosen , no TC unit in project can exceed 50% income limit


Minimum Set-aside Minimum Set-aside DeadlineDeadline

• Minimum set-aside must be met no later than close of first or second year of PIS date

• First or second year must be determined by the Project Owner

• Minimum set-aside must be met before any credits can be claimed


Tenant FacilitiesTenant Facilities

• All tenant facilities included in Eligible Basis must be available to all tenants at no additional charge


Vacant Unit RuleVacant Unit Rule

• Vacant units can be counted as TC unit if occupied by TC qualified tenant prior to vacancy

• Reasonable attempts must be made to market

• Cannot be held vacant• Must be rent-ready


Waiting ListsWaiting Lists

• If your property has multiple income/rent restrictions

– It is important you develop a waiting list policy to assure fairness


Tiered RentsTiered Rents

• Know your tiered income/rent limits. • Have written policy for waiting list


Next Available Unit/140% Next Available Unit/140% Rule (mixed use)Rule (mixed use)

• When household income increases to over 140% of applicable income limit = Over-Income Unit

• Over-Income Unit may continue to be counted as low-income unit if:– Unit must continue to be rent-restricted– Next comparable size unit in building must

be rented to eligible low-income tenant


NAUR/140% continuedNAUR/140% continued

• Project Owner must continue to rent all comparable units available or subsequently available until Applicable Fraction (excluding Over-income units) is again met

• If next comparable unit is leased to an ineligible tenant – any over-income unit ceases to count as TC unit


NAUR in 100% projectNAUR in 100% project

• Applies only if multiple levels of income limits and only to determine eligibility for specific lower limits

• Tenants cannot be evicted without proper cause– Cannot be evicted because over-income


NAUR in Mixed Income NAUR in Mixed Income ProjectProject

• Within building transfers allowed and allows status transfers even if over 140% at time of transfer

• This rule is violated if unit vacated by over-income household is rented to non-qualified tenant – If this occurs, ALL over-income low-income

units in same building lose their status as low-income units


Non-transient OccupancyNon-transient Occupancy

• Initial lease term 6 months or more

Single Room Occupancy and transitional housing for homeless exempt from this requirement


Declaration (DRC)Declaration (DRC)

• Declaration of Restrictive Covenants for Low-Income Housing Tax Credits– Details provisions and commitments of

Project Sponsor regarding Tax Credit Project

ALL PROPERTIES SHOULD HAVE COPY ON-SITE


Employee UnitsEmployee Units• May be counted as low-income unit or common area

unit– Counted if staff member is qualified like any other

resident. (If receiving free rent the amt is counted towards income)

– Not counted if staff would not qualify unit, then becomes part of project’s common area

(Recommend all units be qualified first)PLEASE UTILIZE THE NEW E.1

“Request for Manager/Employee/Exempt Unit” form


Employee Unit cont.Employee Unit cont.

• If unit changes, notify Division immediately

• Failure to notify of change could cause non-compliance at year-end transmission


Relocating/Transfer of Initial Relocating/Transfer of Initial Qualifying TenantsQualifying Tenants

• During Initial Lease-up period, existing tenants CANNOT be relocated for purposes of qualifying more than one tax credit unit

• Within the same building units just swap status

• It is a new move-in when a resident moves to another building (There could be exceptions to this rule in an acquisition rehab property)


Section 8 Certificates and Section 8 Certificates and VouchersVouchers

• Project Owner may not discriminate against Section 8 certificate or voucher holders

• Project Owner must certify annually they have not refused to lease

• Project Owner must also certify no findings of discriminations under Fair Housing have occurred

• Project Owner must document reasons for refusal to lease to any Section 8 applicant


Price of Non-CompliancePrice of Non-Compliance

• Any period of non-compliance may result in loss of Tax Credits for the Owner

• File and Physical Inspection findings both cause non-compliance

• Reputation – possible loss of ability to participate in future TC & Bond programs in Nevada


Price of Non-Compliance Price of Non-Compliance Cont.Cont.

• Division may conduct additional audits and charge additional fees for staff time

• Division may impose additional requirements


IRS has final wordIRS has final word

• The IRS makes the final decision regarding how or when to recapture tax credits

• Division only reports non-compliance on IRS Form 8823


Keeping TrackKeeping Track

• Maintain records by BIN # and unit #

• Three types of records:– Tenant Files– Monthly unit/rent occupancy tracking data– Project records (eligible basis records and

original health, safety & building code reports/notices)


Project RecordsProject Records

• Utility allowance data• Fair Housing Compliance Records• Tenant selection criteria and procedures• Project maintenance information• Project security information


Inspection RecordsInspection Records

• Project Owner must retain original local health, safety, and building code violation reports or notices

• For projects with other funding sources such as HUD or USDA, records of the most recent compliance audit performed by these agencies must be kept and made available to the Division staff if requested


Recommended File FormatRecommended File Format

• Part 1 – Lease and Addendum

• Part 2 – TIC and verifications

• Part 3 - Application

• Part 4 – Section 8 Documents

• Part 5 – Misc. documents


FILE FORMAT CONT.FILE FORMAT CONT.

• Although the preceding is recommended by the Division, any format that is easy to follow and consistent throughout all files will be acceptable


Annual Reporting Annual Reporting RequirementsRequirements

• Exhibit C completed and transmitted via internet COL system

• Signed and hard-copy mailed to Division• For BOND projects – Certificate of Continuing

Program Compliance – Refer to Regulatory Agreement

• Exhibit C.1 – submit when any mgt changes occur• Exhibit C.2 Utility Allowance Certification

(revised)


Contact Information FormContact Information Form(Form C.1)(Form C.1)

• The division requires Project Owners to submit updated project, ownership and management information - At time property is placed in service- Whenever there is a change- Annually with year end reports


LIHTC Record Retention LIHTC Record Retention RequirementsRequirements

• Compliance period plus 6 years for initial qualifying files

• 6 years past end of tax year of tenancy for other files

• Fire proof safes recommended• Duplicates kept off-site recommended• Electronic storage of records is allowed as long as

the electronic storage system satisfies the requirements in Revenue Procedure 97-22


Monitoring FeesMonitoring Fees

• Project Owners are billed annually for monitoring fees due. Cost is per unit

• Division reserves right to change monitoring fees on a program or project basis to cover cost of compliance monitoring


Additional Fees ifAdditional Fees if Non-compliant Non-compliant

• If the Division discovers excessive non-compliance, there may be additional fees assessed


On-Site Compliance ReviewOn-Site Compliance Review

• NHD notifies Project Owner and Management Company in writing

• Notice will NOT specify which records will be examined

• PO/Mgmt Co to give advance notice to all tenants of possible inspection a minimum of 24 hours prior to scheduled inspection date