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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.

By Carolyn E. Zezima, Esq.

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.

You might not realize that whether the tax credit site you manage is a single- or multi-building project site has a significant effect on what you and your staff must do to keep the site in compliance. Yet many tax credit rules and requirements apply differently to sites in which the owner groups buildings as a single project. For example, the owner of a multi-building tax credit site has more options when it comes to meeting the minimum set-aside.

Correctly determining the size of each low-income household at your site is essential because the income limits you must use to check household eligibility are organized by household size. If you use the wrong limits to certify a household, you’ll make mistakes that will put the owner’s tax credits at risk.

When you start managing a tax credit site, you must meet certain occupancy requirements in the first year of the site’s compliance period. If you don’t meet these requirements, you’ll run into big problems. For example, the site owner may have to forfeit some or even all of the tax credits it was allocated for your site.

Claims for sexual harassment, which is considered a form of housing discrimination based on sex, can cost thousands—if not millions—in settlements or court awards, civil penalties, and attorney’s fees—not to mention lasting damage to the reputation of the site, management, and individuals involved.

When charging restricted rents for low-income units at your tax credit site, it’s important to calculate the amount of each household’s rent properly. Managers too often make mistakes in their calculations and this can lead to big problems.

Charging more than the maximum rent for a low-income unit could put the owner’s tax credits in jeopardy. And although charging less than the maximum won’t lead to noncompliance, it will cost the owner rent revenue and leave you with some explaining to do.

Despite your efforts at good site management, your state housing agency may one day cite you for noncompliance with tax credit rules. As a tax credit manager, it’s your job to correct compliance violations, which means you must be familiar with how to request an extension of time to correct noncompliance if you need it and you must be familiar with the procedure that your state housing agency follows to report compliance violations it finds at your site.

In most cases, you need to verify household income with third-party employers because household members usually earn their income through jobs. But you may encounter a household member who works for herself. In this situation, you must follow the HUD Handbook’s requirements for verifying self-employment income. HUD’s preferred method of verifying self-employment income is getting a copy of the household member’s federal tax return, including supporting schedules [Handbook 4350.3, App. 3].