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To calculate the rent for your low-income units, you use HUD income limits. These are the same limits you use to determine whether households are qualified. The limits you use depend on the geographic location of your building and the percentage of area median gross income (AMGI) the owner and your state housing agency agreed to apply.
When certifying or recertifying households, you may encounter household members who get alimony or child support from ex-spouses or their children’s parents. Or it may be the case that a household member pays alimony or child support to someone else. Or a household member receives none or only a portion of what a court has awarded her for alimony or child support.
How you calculate the income of a low-income household member depends on whether that member is an “adult” or a “dependent,” as defined by HUD. But the difference between the two isn’t as obvious as you might think. The HUD Handbook specifically defines these terms, and you must follow those definitions.
The IRS requires your state or local housing credit agency to perform physical inspections of sites awarded LIHTCs. The agencies want to ensure the sites are in a safe, decent, sanitary condition and in good repair. Specifically, Section 42 of the IRS code requires state housing agencies to conduct on-site inspections of all buildings by the end of the second calendar year following the year the last building in the project is placed in service.
Taking over the management of a tax credit site in the middle of its compliance period can be tricky. That’s because the owner or former manager has important information you need to know to manage the site effectively, and you must ask the owner or former manager the right questions to make sure you know how to keep the site in compliance once you take over. And you must double-check to make sure the information you’re given is current.
To comply with tax credit rules, you must verify the student status of each household member who says he or she is a student. That’s because tax credit rules bar households composed entirely of full-time students. And if the student is a member of a household that’s not barred for this reason, the household may get a break in its income calculation if that student has employment income.
Each year, if you manage a mixed-income site, you have the time-consuming job of recertifying tax credit households. But some households make the process more burdensome for you by failing to show up for a recertification meeting. If household members don’t report to a meeting until shortly before the recertification must be done, you have to scramble to verify income and complete the paperwork. And if household members don’t report at all, you won’t get the information you need to recertify them and you’ll risk noncompliance with tax credit rules.
The federal Opportunity Zone program has generated a lot of excitement among investors and the real estate industry since it was created as part of the 2017 Tax Cuts and Jobs Act. The Opportunity Zone program seeks to be a catalyst for development in the neediest communities.
As an owner or manager, you do your best to hold on to most households, especially because qualified tax credit households can be hard to find. But there may be times when, in order to comply with the tax credit program, you may have to ask certain tax credit households to leave. For instance, you may discover at your mixed-income site during recertification that a household is now composed entirely of full-time students who don’t fall under any of the qualifying exceptions, or you may be faced with a household who refuses to recertify.
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