LIHTC (Low Income Housing Tax Credit) Program & Compliance Trainer: Greg Gunn

Summary This session will focus on the unique requirements of the LIHTC subsidy. Emphasis will be placed on maintaining compliance with the many different tax credit requirements. Come see how Winten2+ can help keep your program in good standing with your State Finance Agency and investors.

Agenda Tax Credit Program Timeline Dual Subsidies and RA Compliance with Tax Credit Rules (Student, 140%, Next Available Unit) Winten2+ LIHTC Functionality Questions

Tax Credit Overview Called LIHTC; Acronym for “Low Income Housing Tax Credit” Also called “Section 42”(from IRS Code) Can be a stand alone program Often layered with other programs (such as Multi-Family/TRACS) creating a Dual-Subsidy situation

Agencies Involved Tax Credits created by the IRS Allocated to State Housing Finance Agencies Review Plans and make awards Issues Form 8609: Allocates Tax Credit Monitor Compliance Issues Form 8823: Compliance Form 50 States / 50 Sets of Rules

Timing for Credits & Compliance Clock begins when development is first placed in service First 10 Years = Tax Credit Period First 15 Years = Compliance Period Extra 15 Years = Extended Use Period Total = 30 years

Similarities between LIHTC & HUD Provide Affordable Housing Options Income Based Eligibility Use HUD Handbook 4350.3 for income/asset rules & verification guidance Require Income Certification Penalties for Non-Compliance

Differences between LIHTC & HUD Affordable -vs- Actual Rental Subsidy HUD Income Adjusted (expenses) HUD Requires Full Annual Re-Certifications Eligible Citizen Rule (section 214) LIHTC Student Rule LIHTC 140% Rule LIHTC Next Available Units (NAU) Rule

Dual Subsidy Compliance Rule When the two or more programs differ on terms of eligibility, the rule of thumb is to follow the MOST restrictive regulation. Learn the particulars of EACH to satisfy the requirements of BOTH LIHTC HUD

LIHTC Student Rule 100% Full Time Student Households INELIGIBLE unless one of the following applies: ALL members Married (eligible to file jointly) Single Parent (non-dependent) with Dependent children Receiving Title IV Assistance (TANF) Full time Job Training Program Former Foster Care

LIHTC 140% Rule Below Applicable Limit From Applicable Unit up to 140% of that Limit Over 140% of the Applicable Limit Over-Income

LIHTC Next Available Unit Rule Triggered by Over-Income Household (140%) Next Available Unit of comparable or smaller size must be rented to a qualified household Rent must remain restricted Household CANNOT transfer to another building Continues until 1st Year Applicable Fraction is restored

Applicable Fraction Determined in First Year using the LESSER of these 2 calculations: # of LIHTC Qualified Units/Total # of Units Sq. Ft of LIHTC Qualified Units/Total Sq. Ft of All units

Minimum Set Asides 20% of units/50% of AMI or below Initially selected on 8609 (part II) and CANNOT be changed

Penalties Penalties: Sanctions issued by the State Housing Finance Agency Disallowance: Credits that are not allowed to be taken for the current year (all or part) Recapture: Recovery of previously awarded tax credits PLUS interest

Penalties continued… If a LIHTC development falls below its First Year Applicable Fraction then it will result in a percentage reduction of the tax credit that may be claimed for that year. If a LIHTC development falls below its Minimum Set-Aside then no tax credit may be claimed for that year.

Document Retention Keep EVERYTHING at least 6 Years Keep 1st Year Records 6 Years beyond final year of compliance (21 years)

Penalties continued… If a LIHTC development falls below its First Year Applicable Fraction then it will result in a percentage reduction of the tax credit that may be claimed for that year. If a LIHTC development falls below its Minimum Set-Aside then no tax credit may be claimed for that year.

Penalties continued… If a LIHTC development falls below its First Year Applicable Fraction then it will result in a percentage reduction of the tax credit that may be claimed for that year. If a LIHTC development falls below its Minimum Set-Aside then no tax credit may be claimed for that year.

Penalties continued… If a LIHTC development falls below its First Year Applicable Fraction then it will result in a percentage reduction of the tax credit that may be claimed for that year. If a LIHTC development falls below its Minimum Set-Aside then no tax credit may be claimed for that year.

Penalties continued… If a LIHTC development falls below its First Year Applicable Fraction then it will result in a percentage reduction of the tax credit that may be claimed for that year. If a LIHTC development falls below its Minimum Set-Aside then no tax credit may be claimed for that year.

Penalties continued… If a LIHTC development falls below its First Year Applicable Fraction then it will result in a percentage reduction of the tax credit that may be claimed for that year. If a LIHTC development falls below its Minimum Set-Aside then no tax credit may be claimed for that year.

Penalties continued… If a LIHTC development falls below its First Year Applicable Fraction then it will result in a percentage reduction of the tax credit that may be claimed for that year. If a LIHTC development falls below its Minimum Set-Aside then no tax credit may be claimed for that year.

Penalties continued… If a LIHTC development falls below its First Year Applicable Fraction then it will result in a percentage reduction of the tax credit that may be claimed for that year. If a LIHTC development falls below its Minimum Set-Aside then no tax credit may be claimed for that year.

Penalties continued… If a LIHTC development falls below its First Year Applicable Fraction then it will result in a percentage reduction of the tax credit that may be claimed for that year. If a LIHTC development falls below its Minimum Set-Aside then no tax credit may be claimed for that year.

Let’s take a Closer Look From Slides to Winten2+

Questions?

Trainer Information Greg Gunn 877.359.5492 x 1351 ggunn@tenmast.com

Thank You for Your Time & Attention Trainer: Greg Gunn