1. Tax Credit Compliance Pitfalls
Overcoming the
TOP 10(+/-)
Most Troubling
Tax Credit Compliance Pitfalls

2. Top “10” Compliance Challenges
Survey of over 200 Individuals
Top “10” Compliance Challenges

3. What is your toughest compliance challenge?
But First
What is your toughest compliance challenge?

5. #1: Does Your Management Team Know Section 42?

6. Minimum 30-year compliance
This is a TAX program
Minimum 30-year compliance
Tax benefits at risk based on UNIT, BUILDING, & PROJECT compliance.

7. TheoPRO has 12 “ready” courses! TheoPRO conducts on-going web casts!
Service Available!
TheoPRO has 12 “ready” courses!
TheoPRO conducts on-going web casts!
TheoPRO tests for BASIC COMPLIANCE COMPETENCE: BACE-42!

8. #2: Does Your Management Team Know The PROJECT? PROJECT Definition?
Minimum Set-aside Election?
State-specific Set-asides?

9. #2: Building or Project
Unit Transfers

10. #2: Building or Project 100% vs. Mixed Use Projects
Applicable Fraction
Available Unit Rule
Unit Vacancy Rule

11. #3: Is there a pre-approval process prior to move-in?
Service Available!
#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?

12. #4: Thorough and Up-to-date Forms?
TheoPRO ‘X-ACT Forms
#4: Thorough and Up-to-date Forms?
Application
Verifications
Certification

13. The Tenant Income Certification

14. The Tenant Income Certification

15. #5: Student Rules 5-Month Rule
Calendar Year

16. 5 Full-time Student Exceptions
#5: Student Rules
5 Full-time Student Exceptions

17. 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 :

18. : 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

19. : 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

20. 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.”

21. The Tenant Income Certification

22. #6 Does Your Management Team Know How to Calculate?
8823 Line 11a:
“Over-income at move-in”:

23. TheoPRO’s Employment Calculation Worksheet!
Product for Sale
TheoPRO’s Employment Calculation Worksheet!
Because how you calculate makes all the difference!

24. A: Child Support Issues

25. Court-ordered or actual:
Which one do I use?

26. 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

27. What if Inconsistent Payments are being received?

28. Check State Agency policy
otherwise
Average payments

29. Example Month Child Support January $50.00 February $40.00
March $ 0.00
April $50.00
Total $140.00

30. Example $140 / 4 months = $35 / month x 12 months=$420 Or
$140 for 4 months x 3 = $420

31. Arrearages

32. 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)

33. If arrearages are currently being received include as part of
annual income

34. Example Month Child Support Arrearage January $50.00 $50.00
February $ $0.00
March $ $0.00
April $ $50.00
Total $ $100.00

35. Example
Total $ $ =
$240 / 4 months = $60 / month x 12 months=$720 Or
$240 for 4 months x 3 = $720

36. The Tenant Income Certification

37. #7: Calculating Complex Assets

38. Pensions/Annuities: Periodic vs. Lump Sum

39. How to calculate value vs. earnings
Market Value
Cash Value
Earnings

40. 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

41. 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

42. 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.

43. The Tenant Income Certification

44. #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?

45. The Tenant Income Certification

46. Certification Calculator
Available for Sale
TheoPRO X-CEL
Certification Calculator

47. #9 Which RENT Limits Do We Use?
A Word About Utility Allowances
8823 Line 11g

48. #10: Does Your Management Team Know Important Timing Issues?
Verification, Certification, and Recertification
8823 Line 11b

49. Confusing Effective Dates C. Do we have to recertify annually? When?
B.120-day rule
C. Do we have to recertify annually? When?

50. D. The Importance of the First Year of the Credit Period!

51. 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.

52. (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

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

54. 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 %
February %
March %
April %
May %
June %
July %
August %
September %
October %
November %
December %

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

56.
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.

57. #11: Does Your Management Team Know if there are Other Housing Programs Involved?

58. TheoPRO’s ADVANCED CHART
Available for Sale
TheoPRO’s ADVANCED CHART
40 categories
LIHTC
BOND
Section 8
HOME RD

59. 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

60. 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%

61. 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)

62. The Cost of Non-Compliance
Not worth the risk!

63. E-mail pbogan@theopro.com or go to www.theopro.com/products
Code: spring15
Offer ends MIDNIGHT May 31st
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66. Questions & Answers

67. What a Difference YOU Make!