1. How Tax Credit Strategies can Improve your Bottom Line
Stacy Day, HCCP
Vice President of Compliance
Gateway Management Company
This Photo by Unknown Author is licensed under CC BY

2. Who is the front line of defense?
Community Staff!
Controls the application process – first point of contact
Pre-Qualifying - Be sure all applicants are qualified (don’t waste time on unqualified applicants)
Discuss documentation needed – let them know what is needed with each application (birth certificates/social security cards/etc)
Set appointments for applications so staff is ready with application paperwork

3. Who is the front line of defense?
Application Processing:
Begin processing applications immediately
Start with credit/criminal
Process Daily! Contact the applicant if sources are not cooperating for alternate documentation, if needed
Are files submitted as soon as the last document is received? Don’t wait until the applicant is ready to move in to submit for approval!
Are corrections addressed quickly and re-submitted?

4. Who is the front line of defense?
Self Auditing – are files looked at prior to submitting for approval?
Are you making the process easy on your applicants and residents?
Explain the full application process
Set reasonable expectations
Don’t “pass the buck” to the compliance department!
Have hours that make applications/recerts feasible

5. Compliance Policies Why do we do what we do? Is it required?
Is it reasonable?
It is in writing?
Are there unintended fair housing issues?

6. Compliance Policies Internal Training Classroom style/Webinars
How soon for new hires?
Tools for staff to self audit?
Compliance Set Up:
Self approval
Central processing
Central approvals

7. Compliance Policies Conditional Approvals: Technical issues
Follow up after move in
Improves vacancy loss!
Example: Monthly rent $600 ($20 per day)
Delayed move in by only 3 days = $60
Average MIs per month: 3-5 ($180-$300)
Total Annual Vacancy Loss: $ $3600

8. Compliance Policies Recert Exemptions Improves Resident Retention
Reduces Administrative burden on site staff AND compliance
Know state policies/consider company policies
Layered financing

9. Renewals Are renewals being done on time? State Non Compliance
Federal Non Compliance
Financial Impact:
Missed rent increases
Who is monitoring increases are actually being implemented?
Mid year rent changes:
Higher revenue
Poor customer service
Often prohibited by HFA or Landlord Tenant Law

10. Utility Allowances Using Consumption Model or HUD Model?
Cost vs benefits
Cherry-pick from sources if needed
Are you at max?
Compliance risk associated with updates - is this really needed?

11. Credit Loss/Recapture
What is the real value of the credit? What are we actually protecting?
Credit Loss vs Recapture
Credit Loss: Loss of credits for the specific year
Recapture: Loss of credits for the specific year AND accelerated credits
How does recapture occur?
When there is a reduction in qualified basis
Reduction in applicable fraction
Reduction in eligible basis

12. Credit Loss/Recapture
How is Qualified Basis Reduced?
Disposition:
Sale of community and NOT maintained as an LIHTC community
Prior to HERA (2008) – owners required to post a surety bond to avoid recapture
After HERA, no longer required and no recapture as long as it is operated as an LIHTC community

13. Credit Loss/Recapture
Non-Compliance:
Failure to maintain applicable fraction (8823)
Gross Rents exceed maximum
Full Time Students not meeting an exception
Non Compliance for other qualification Issues
Applicable Fraction determined as of 12/31 (except for first year of credit period)
Exception: if the owner corrects non-compliance in a reasonable time after the non compliance is discovered or should have been discovered, the owner is not subject to recapture – CORRECT NON- COMPLIANCE ASAP!

14. Credit Loss/Recapture
Casualty Loss:
IRS Definition: Damage, destruction, or loss of property from any sudden, unexpected or unusual event such as a flood, hurricane, typhoon, tornado, fire, earthquake or even volcanic eruption.
In these cases, recapture does not apply if unit is brought back into service in a reasonable period. IRS has stated reasonable period is generally 24 months from the close of the tax year in which the casualty loss occurred (but not necessarily limited to this period)

15. Credit Loss/Recapture
Casualty Loss:
Credit Loss DOES occur, regardless of casualty loss unless unit is brought back on line during the same calendar year it occurs. **Exception: if the community is in a presidentially declared disaster area
What are your internal processes for casualty loss (is compliance on s)? Must be reported to HFA!

16. Single Unit Risk Recapture 40 unit project with an annual credit allocation of $400,000
POTENTIAL
CUMULATIVE REPACTURE
POTENTIAL
CUMULATIVE INTEREST
OF REPACTURE
POTENTIAL
CUMULATIVE RECAPTURE
WITH INTEREST
CUMULATIVE
CREDITS EARNED
YEAR
CREDITS TAKEN
CREDITS EARNED
CUMULATIVE
CREDITS TAKEN 1
$10,000
$6,667
$10,000
$6,667
$3,333
$267
$3,600 2
$10,000
$6,667
$20,000
$13,333
$6,667
$821
$7,488 3
$10,000
$6,667
$30,000
$20,000
$10,000
$1,687
$11,687 4
$10,000
$6,667
$40,000
$26,667
$13,333
$2,889
$16,222 5
$10,000
$6,667
$50,000
$33,333
$16,667
$4,453
$21,120 6
$10,000
$6,667
$60,000
$40,000
$20,000
$6,409
$26,409 7
$10,000
$6,667
$70,000
$46,667
$23,333
$8,789
$32,112 8
$10,000
$6,667
$80,000
$53,333
$26,667
$11,625
$38,292 9
$10,000
$6,667
$90,000
$60,000
$30,000
$14,995
$44,955 10
$10,000
$6,667
$100,000
$66,667
$33,333
$18,818
$52,152 11
$6,667
$100,000
$73,333
$26,667
$18,392
$45,059 12
$6,667
$100,000
$80,000
$20,000
$13,794
$33,794 13
$6,667
$100,000
$86,667
$13,333
$9,196
$22,530 14
$6,667
$100,000
$93,333
$6,667
$4,598
$11,265 15
$6,667
$10,0000
$100,000
$100,000
$100,000

17. Housing Choice Vouchers
Rent increases – know when you need to ask for these!
Charge highest rent, regardless of the unit set aside
Careful! Some HFAs say no! Know your QAP!
Not permissible with HOME funds

18. Additional Set-Asides
Do units float or are they fixed?
Move % percentages to maximize rent
Hard to maintain counts
Makes leasing difficult
Other funding – know how they are layered and when various requirements end

19. Additional Set-Asides
Talk to your HFA – may be able to ease restrictions
Post year 15 – discuss strategies available:
How can we preserve this housing?
Add MR units?
Income Averaging?

20. Technology
Calculation worksheets/property software (incorrect calculations are one of the top file corrections)
Make it easy! Can people apply on line?
Electronic signatures? Pen and Paper = Rock and Chisel!
Being an affordable resident doesn’t mean you live in the stone age!!

21. Rents Discuss plans for evaluating rents within your company
Who controls the process
How are increases evaluated and determined
Who communicates increases
Site staff is not always eager to increase rents, but need to communicate where there is room for increases regularly to upper management

22. Budget Preparation Compliance Involvement!
Discuss sites with known audits in the upcoming year – need to budget for costs associated with preparation and repairs
Provide maximum rents when discussing rent potential
Required amenities/services

23. New Development/New Business
Poor audits = point deductions for new apps (1 point can make the difference between a new project getting awarded)
Poor reputation
Syndicator review issues for new lease ups can cause delays in distributions – have calls early to know what is expected!
Syndicator relationships: Multisite Involvement

24. Being the Best! Regularly evaluate policies
Read (and re-read) source materials!
Join HFA groups/coalitions/just make friends at this conference and start a group text!!
Need to question/dispute:
Use facts – state the reason why this is prohibiting us from meeting our intended goals of providing affordable housing to those in need
Don’t be afraid to question why – keep it reasonable, but showing a different perspective can lead to change!