In January 2014, the IRS released a draft version of the Section 42 Audit Technique Guide. The audit technique guide was prepared to assist IRS examiners audit owners of tax credit sites. The audit technique guide consists of 20 chapters, in nine parts, plus 10 appendices that include case law to illustrate examples of litigation concerning tax credit issues such as eligible basis, credit recapture, and nonprofit participation. The guide will be published in its final form later this year.

The “first-year fraction” is the “applicable fraction” for the first year of the compliance period. The applicable fraction is the percentage of a building that’s treated as low-income use and generally eligible for the tax credits as of the close of that year of the compliance period. Once you’ve calculated your first-year fraction, you must maintain this figure as your applicable fraction for each year of the compliance period.

The “net rent” is the amount a low-income household is charged to live in its unit. The “gross rent” is the net rent plus the utility allowance for the unit plus any non-optional fees.