1 Low Income Housing Tax Credit Compliance Policies and Procedures Manual Revised annually Check Division website for updates Current version is required to be on-site

2 Lease-up Plan Useful lease-up plan: –Identifies total number of TC units required –Presents a strategy for marketing vacant units to eligible tenants –Describes method of surveying in-place tenants to assess their eligibility (rehab) –Establishes procedures for ensuring ineligible existing tenants are not improperly terminated (rehab) –Includes system for tracking progress of qualifying TC units

3 What is a “Qualified Unit” Income within limits Gross rent within limits Unit suitable for occupancy Non-discrimination in availability Non-transient

4 TC Fundamentals Tax credit units must be rented to households that are income eligible Rents for tax credit units must be restricted to gross maximum rent limits

5 Income Limits Set by HUD annually Available on Division website shortly after issuance NHD also recommends the rent & income calculator at (Novogradac website)

6 Target Low-Income Occupancy Test Can be from 20/50 or 40/60 up to 100% TC occupied Listed on Application and in Declaration Number of units leased by end of lease-up period affects percentage of Tax Credits claimed

7 Placed-In-Service Date PIS date determines the year Tax credits can be claimed For Rehab project – there are two dates –Acquisition Date –Date Rehab completed

8 Placed-In-Service Deadline All projects must be PIS by end of second calendar year from date of allocation of TC PIS date recorded on IRS Form 8609 Project Owner must have documentation of PIS date for every building in project

9 First Year 8609 It is mandatory to submit to the Division a copy of the first year 8609 with bottom section completed to include first year credit determination The year credits are first claimed determines type of audit. First year is file audit only Physical audits begin two years after the last building is place in service.

REALLY Important Failure to provide completed/signed copy of First Year 8609 WILL result in issuance of IRS 8823 IRS is requiring copy of completed first year 8609 be sent to them. Division also requires copy for our records.

11 Minimum Set-aside Test 20/50 set-aside 40/60 set-aside Project Owner selects and reports on First-year 8609 Note: if 20/50 chosen, no TC unit in project can exceed 50% income limit

12 Minimum Set-aside Deadline Minimum set-aside must be met no later than close of first or second year of PIS date First or second year must be determined by the Project Owner Minimum set-aside must be met before any credits can be claimed

13 Tenant Facilities All tenant facilities included in Eligible Basis must be available to all tenants at no additional charge

14 Vacant Unit Rule Vacant units can be counted as TC unit if occupied by TC qualified tenant prior to vacancy Reasonable attempts must be made to market Cannot be held vacant Must be rent-ready

15 Waiting Lists If your property has multiple income/rent restrictions –It is important you develop a waiting list policy to assure fairness

16 Tiered Rents Know your tiered income/rent limits. Have written policy for waiting list

17 Next Available Unit/140% Rule (mixed use) When household income increases to over 140% of applicable income limit = Over-Income Unit Over-Income Unit may continue to be counted as low-income unit if: –Unit must continue to be rent-restricted –Next comparable size unit in building must be rented to eligible low-income tenant

18 NAUR/140% continued Project Owner must continue to rent all comparable units available or subsequently available until Applicable Fraction (excluding Over-income units) is again met If next comparable unit is leased to an ineligible tenant – any over-income unit ceases to count as TC unit

19 NAUR in 100% project Applies only if multiple levels of income limits and only to determine eligibility for specific lower limits Tenants cannot be evicted without proper cause –Cannot be evicted because over-income

20 NAUR in Mixed Income Project Within building transfers allowed and allows status transfers even if over 140% at time of transfer This rule is violated if unit vacated by over- income household is rented to non-qualified tenant –If this occurs, ALL over-income low-income units in same building lose their status as low- income units

21 Non-transient Occupancy Initial lease term 6 months or more Single Room Occupancy and transitional housing for homeless exempt from this requirement

22 Declaration (DRC) Declaration of Restrictive Covenants for Low- Income Housing Tax Credits –Details provisions and commitments of Project Sponsor regarding Tax Credit Project ALL PROPERTIES SHOULD HAVE COPY ON-SITE

23 Employee Units May be counted as low-income unit or common area unit –Counted if staff member is qualified like any other resident. (If receiving free rent the amt is counted towards income) –Not counted if staff would not qualify unit, then becomes part of project’s common area (Recommend all units be qualified first) PLEASE UTILIZE THE NEW E.1 “Request for Manager/Employee/Exempt Unit” form

24 Employee Unit cont. If unit changes, notify Division immediately Failure to notify of change could cause non- compliance at year-end transmission

25 Relocating/Transfer of Initial Qualifying Tenants During Initial Lease-up period, existing tenants CANNOT be relocated for purposes of qualifying more than one tax credit unit Within the same building units just swap status It is a new move-in when a resident moves to another building (There could be exceptions to this rule in an acquisition rehab property)

26 Section 8 Certificates and Vouchers Project Owner may not discriminate against Section 8 certificate or voucher holders Project Owner must certify annually they have not refused to lease Project Owner must also certify no findings of discriminations under Fair Housing have occurred Project Owner must document reasons for refusal to lease to any Section 8 applicant

27 Price of Non-Compliance Any period of non-compliance may result in loss of Tax Credits for the Owner File and Physical Inspection findings both cause non-compliance Reputation – possible loss of ability to participate in future TC & Bond programs in Nevada

28 Price of Non-Compliance Cont. Division may conduct additional audits and charge additional fees for staff time Division may impose additional requirements

29 IRS has final word The IRS makes the final decision regarding how or when to recapture tax credits Division only reports non-compliance on IRS Form 8823

30 Keeping Track Maintain records by BIN # and unit # Three types of records: –Tenant Files –Monthly unit/rent occupancy tracking data –Project records (eligible basis records and original health, safety & building code reports/notices)

31 Project Records Utility allowance data Fair Housing Compliance Records Tenant selection criteria and procedures Project maintenance information Project security information

32 Inspection Records Project Owner must retain original local health, safety, and building code violation reports or notices For projects with other funding sources such as HUD or USDA, records of the most recent compliance audit performed by these agencies must be kept and made available to the Division staff if requested

33 Recommended File Format Part 1 – Lease and Addendum Part 2 – TIC and verifications Part 3 - Application Part 4 – Section 8 Documents Part 5 – Misc. documents

34 FILE FORMAT CONT. Although the preceding is recommended by the Division, any format that is easy to follow and consistent throughout all files will be acceptable

35 Annual Reporting Requirements Exhibit C completed and transmitted via internet COL system Signed and hard-copy mailed to Division For BOND projects – Certificate of Continuing Program Compliance – Refer to Regulatory Agreement Exhibit C.1 – submit when any mgt changes occur Exhibit C.2 Utility Allowance Certification (revised)

36 Contact Information Form (Form C.1) The division requires Project Owners to submit updated project, ownership and management information - At time property is placed in service - Whenever there is a change - Annually with year end reports

37 LIHTC Record Retention Requirements Compliance period plus 6 years for initial qualifying files 6 years past end of tax year of tenancy for other files Fire proof safes recommended Duplicates kept off-site recommended Electronic storage of records is allowed as long as the electronic storage system satisfies the requirements in Revenue Procedure 97-22

38 Monitoring Fees Project Owners are billed annually for monitoring fees due. Cost is per unit Division reserves right to change monitoring fees on a program or project basis to cover cost of compliance monitoring

39 Additional Fees if Non-compliant If the Division discovers excessive non- compliance, there may be additional fees assessed

40 On-Site Compliance Review NHD notifies Project Owner and Management Company in writing Notice will NOT specify which records will be examined PO/Mgmt Co to give advance notice to all tenants of possible inspection a minimum of 24 hours prior to scheduled inspection date