Tax Credit Compliance Pitfalls Overcoming the TOP 10(+/-) Most Troubling Tax Credit Compliance Pitfalls 1-877-783-1133 www.theopro.com

Top “10” Compliance Challenges Survey of over 200 Individuals Top “10” Compliance Challenges 1-877-783-1133 www.theopro.com

What is your toughest compliance challenge? But First What is your toughest compliance challenge? 1-877-783-1133 www.theopro.com

1-877-783-1133 www.theopro.com

#1: Does Your Management Team Know Section 42? 1-877-783-1133 www.theopro.com

Minimum 30-year compliance This is a TAX program Minimum 30-year compliance Tax benefits at risk based on UNIT, BUILDING, & PROJECT compliance. 1-877-783-1133 www.theopro.com

TheoPRO has 12 “ready” courses! TheoPRO conducts on-going web casts! Service Available! www.theopro.com TheoPRO has 12 “ready” courses! TheoPRO conducts on-going web casts! TheoPRO tests for BASIC COMPLIANCE COMPETENCE: BACE-42! 1-877-783-1133 www.theopro.com

#2: Does Your Management Team Know The PROJECT? PROJECT Definition? Minimum Set-aside Election? State-specific Set-asides? 1-877-783-1133 www.theopro.com

#2: Building or Project Unit Transfers 1-877-783-1133 www.theopro.com

#2: Building or Project 100% vs. Mixed Use Projects Applicable Fraction Available Unit Rule Unit Vacancy Rule 1-877-783-1133 www.theopro.com

#3: Is there a pre-approval process prior to move-in? Service Available! www.theopro.com #3: Is there a pre-approval process prior to move-in? How much is it worth to know that families are qualified at move-in? 1-877-783-1133 www.theopro.com

#4: Thorough and Up-to-date Forms? TheoPRO ‘X-ACT Forms www.theopro.com #4: Thorough and Up-to-date Forms? Application Verifications Certification 1-877-783-1133 www.theopro.com

The Tenant Income Certification

The Tenant Income Certification

#5: Student Rules 5-Month Rule Calendar Year 1-877-783-1133 www.theopro.com

5 Full-time Student Exceptions #5: Student Rules 5 Full-time Student Exceptions 1-877-783-1133 www.theopro.com

Students Exemptions “Single parents and their CHILDREN…” “Students who are married and entitled to file a JOINT income tax with spouse.” “Receiving assistance under TITLE IV of the Social Security Act; Title IV includes AFDC and TANF :

: Compliance Basics & Fundamentals Student Exemptions “Enrolled in a job training program receiving assistance under the Job Training Partnership Act or other SIMILAR programs funded by a state or local government agency.” “Previously receiving foster care”. : Compliance Basics & Fundamentals PROGRAM RESTRICTIONS

: Compliance Basics & Fundamentals Student Exemptions If anyone in the household is NOT a full-time student, the household student qualified for a low-income unit. : Compliance Basics & Fundamentals PROGRAM RESTRICTIONS

On-line Education IRC 170(b)(1)(A)(ii): Educational Institution: “One that normally maintains a REGULAR faculty and curriculum, and NORMALLY has an enrolled body of pupils or students in attendance at the place where its educational activities are REGULARLY carried on.” 1-877-783-1133 www.theopro.com

The Tenant Income Certification

#6 Does Your Management Team Know How to Calculate? 8823 Line 11a: “Over-income at move-in”: 1-877-783-1133 www.theopro.com

TheoPRO’s Employment Calculation Worksheet! Product for Sale www.theopro.com TheoPRO’s Employment Calculation Worksheet! Because how you calculate makes all the difference! 1-877-783-1133 www.theopro.com

A: Child Support Issues 1-877-783-1133 www.theopro.com

Court-ordered or actual: Which one do I use? 1-877-783-1133 www.theopro.com

Unless two conditions are met: Court-ordered Unless two conditions are met: Certify that the full amount is not being received; Applicant can prove reasonable attempts to collect amount due 1-877-783-1133 www.theopro.com

What if Inconsistent Payments are being received? 1-877-783-1133 www.theopro.com

Check State Agency policy otherwise Average payments 1-877-783-1133 www.theopro.com

Example Month Child Support January $50.00 February $40.00 March $ 0.00 April $50.00 Total $140.00 1-877-783-1133 www.theopro.com

Example $140 / 4 months = $35 / month x 12 months=$420 Or $140 for 4 months x 3 = $420 1-877-783-1133 www.theopro.com

Arrearages 1-877-783-1133 www.theopro.com

Arrearages If no arrearages are currently being received, count only the full amount of child support due as income; (actual amount if conditions are met) 1-877-783-1133 www.theopro.com

If arrearages are currently being received include as part of annual income 1-877-783-1133 www.theopro.com

Example Month Child Support Arrearage January $50.00 $50.00 February $40.00 $0.00 March $ 0.00 $0.00 April $50.00 $50.00 Total $140.00 $100.00 1-877-783-1133 www.theopro.com

Example Total $140.00 + $100.00 = $240 / 4 months = $60 / month x 12 months=$720 Or $240 for 4 months x 3 = $720 1-877-783-1133 www.theopro.com

The Tenant Income Certification

#7: Calculating Complex Assets 1-877-783-1133 www.theopro.com

Pensions/Annuities: Periodic vs. Lump Sum 1-877-783-1133 www.theopro.com

How to calculate value vs. earnings Market Value Cash Value Earnings 1-877-783-1133 www.theopro.com

Here’s what you really want to know: Market Value: What is the current full value of this asset? Cash Value: How much of the current full value can this individual withdraw from this account, net of any penalties 1-877-783-1133 www.theopro.com

Earnings: How much is this asset anticipated to earning in interest, dividends, or other cash benefits during the next 12 months? If unable to project, please provide YTD or most recent quarter earnings 1-877-783-1133 www.theopro.com

Do not count the remaining funds in the account as an ASSET. PENSIONS (Since Change 4) C H A N G E 4 C H A N G E 4 If the applicant is receiving PERIODIC PAYMENTS from a pension fund, treat these payments as regular INCOME. Do not count the remaining funds in the account as an ASSET. 1-877-783-1133 www.theopro.com

The Tenant Income Certification

#8 Which INCOME Limits Do We Use? To “HERA” or not to “HERA”? 1st Building in Project’s PISD To “HERA” or not to “HERA”? What if income limits decrease? 1-877-783-1133 www.theopro.com

The Tenant Income Certification

Certification Calculator Available for Sale www.theopro.com TheoPRO X-CEL Certification Calculator 1-877-783-1133 www.theopro.com

#9 Which RENT Limits Do We Use? A Word About Utility Allowances 8823 Line 11g 1-877-783-1133 www.theopro.com

#10: Does Your Management Team Know Important Timing Issues? Verification, Certification, and Recertification 8823 Line 11b 1-877-783-1133 www.theopro.com

Confusing Effective Dates C. Do we have to recertify annually? When? B.120-day rule C. Do we have to recertify annually? When? 1-877-783-1133 www.theopro.com

D. The Importance of the First Year of the Credit Period! 1-877-783-1133 www.theopro.com

Placing A BIN In Service (New Construction) PLACED IN SERVICE DATE The date the first unit in a building is certified as available for occupancy.

(Meeting initial project set-aside requirements) Meeting the Minimums (Meeting initial project set-aside requirements) The first year of the credit period is the most critical. Failure to meet minimum requirements DISQUALIFIES the project as a Housing Credit project…forever! ! 8823 Line 11f

First Year Goals In order for a unit to count as tax credit qualified, it must have been first OCCUPIED by a qualified household.

The Sooner Units are Leased… EXAMPLE A: A Building is placed in service March 1st. It is part of a project with a 40/60 set-aside; it has an applicable fraction of 100%. Over the course of the year, units become occupied as follows: Month Total Units Total Occupied LIHTC Units Qualified % January 8 0 0.00% February 8 0 0.00% March 8 1 12.50% April 8 2 25.00% May 8 3 37.50% June 8 4 50.00% July 8 5 62.50% August 8 6 75.00% September 8 7 87.50% October 8 8 100.00% November 8 8 100.00% December 8 8 100.00%

Other Considerations in The First Year Can a Household qualify more than one unit in the first year of the credit period? !

www.theopro.com Service Available Auditing 1st Year Files! What if it is discovered that a household did not qualify in the first year? If discovered before the end of the first year, CORRECT IT! If discovered after the end of the first year, the unit is subject to the 2/3 penalty.

#11: Does Your Management Team Know if there are Other Housing Programs Involved? 1-877-783-1133 www.theopro.com

TheoPRO’s ADVANCED CHART Available for Sale www.theopro.com TheoPRO’s ADVANCED CHART 40 categories LIHTC BOND Section 8 HOME RD 1-877-783-1133 www.theopro.com

Annual Effective Dates LIHTC/TE Bond Rules   Section 8 Rules HOME Rules RD Move-in date; anniversary of move-in date thereafter. ACQ/REHAB date of acquisition if in-place families are certified within 120 days after date of acquisition. Move-in date; anniversary date is first of month of move-in thereafter. Move-in date; recertification dates governed by participating jurisdiction (PJ). Should be annually with full 3rd party every 6th year. Effective date of move-in is beginning of first full month after move-in occurs if not on first of month. Effective year can change based on income/household changes. TheoPRO’s Advanced Chart: A SAMPLE

The Cost of Compliance X-ACT Forms (full portfolio use) $300 Employment Calculation Worksheet $200 TheoPRO Advanced Chart $200 Regular Price: $700 TODAY: Save 25% 1-877-783-1133 www.theopro.com

or Schedule a service with TheoPRO of $1,500 or more and receive these 3 products FREE!!! 1-day training $267/person min. 15 people 1.5 day training $333/person min. 15 people File Review Service $25 each (minimum 60 files) File Pre-approval Service $25 each (minimum 60 files) 1-877-783-1133 www.theopro.com

The Cost of Non-Compliance Not worth the risk! 1-877-783-1133 www.theopro.com

E-mail pbogan@theopro.com or go to www.theopro.com/products Code: spring15 Offer ends MIDNIGHT May 31st PLUS!!! Look at this! 1-877-783-1133 www.theopro.com

Watch for Ruth’s novel, DEATH BY ROSES Publication date: Oct. 14th! www.probstprose.com Publisher: SelectBooks/New York City

First 15 orders only! Register your TheoPRO order by midnight 05/26/14 and you will receive a FREE copy of Ruth’s novel!

Questions & Answers 1-877-783-1133 www.theopro.com

What a Difference YOU Make! www.theopro.com 1-877-783-1133 www.theopro.com