1. HOUSING TAX CREDITS COMPLIANCE MATTERS RICHARD S
HOUSING TAX CREDITS COMPLIANCE MATTERS RICHARD S. GOLDSTEIN MAY 10, 2007

2. “Low Income Units” Threshold of Election of:
20% of Units at 50% of Area Median Income (“AMI”), or
40% of Units at 60% of AMI
Election Upon Placement in Service
Must Meet Minimum by End of 1st Credit Year
HUD Publishes Area Income Figures Annually

3. Low Income Units (cont’d)
Adjustments for Family Size like Section 8
Family of 4 Qualifies at 60% (50%) AMI
Family of 3 Qualifies at 54% (45%) AMI
Family of 2 Qualifies at 48% (40%) AMI
Single Household Qualifies at 42% (35%) AMI

4. “Rent Restricted”
Rent (including utilities) Cannot Exceed 30% of Qualifying Income for Assumed Family Size; Based on Bedrooms Per Unit
Occupancy Assumptions:
One Person for Studio
1.5 Persons per Bedroom

5. Rent Calculation Example
Median Income = $60,000
Two Bedroom Unit
3 Person (2BR x 1.5) Income Limit = $32,400
30% of Income Limit = $9,720
Monthly Rent (1/12) = $810

6. Additional Rent Rules
Rent Limits Change Annually with Publication of New Area Median Incomes
Rent Will Not Decrease Below Original Floor
Gross Rent Does Not Include Section 8 (or Similar Rental Subsidies)
Gross Rent Must Include Utility Allowance for Tenant-Paid Utilities (i.e., Deduct from Rent to Owner)

7. Continued Compliance 15-Year “Compliance Period”
Continued Tenant Qualification:
40% Increase Above Eligibility OK
Vacant Units/Over-Income Units OK if “Next Available Unit Rule” Followed

8. Recapture Recapture on Non-Compliance:
Accelerated Portion of Credit Recaptured (1/3 of Credit 1st 10 years, Decreasing Through Year 15)
If Minimum Set-Aside Fails, All Accelerated Credits Recaptured
Otherwise, Unit-by-Unit (Extent of Decrease in Qualified Basis)

9. Recapture (cont’d)
Recapture on Change of More Than 1/3 in Ownership of Sale of Project
Bond Posting Procedure
New Owner Steps into Seller’s Shoes Upon Sale of Project

10. Extended Use Recorded “Extended Use Commitment” “Extended Use Period”:
At Least 30 Years, May be Longer to Gain Points
Termination (with three-year vacancy de-control)
Upon Foreclosure
“Qualified Contract”

11. “Qualified Contract”
State to Find Buyer If Requested by Owner After 14th Year Pursuant to “Qualified Contract”
Contract =
Outstanding Debt +
“Adjusted Investor Equity” +
Other Capital Contributions, Less
Cash Available for Distribution

12. Qualified Contract (cont’d)
“Adjusted Investor Equity” = Initial Investor Equity to Project Inflated by COLA (up to 5% per year)
If No Buyer Found Within One Year, Property May Be Sold or Converted to Non-Low-Income Housing, Subject to 3-Year Vacancy Decontrol

13. Compliance Monitoring
State Credit Agencies Monitor Projects
Owners’ Recordkeeping Requirements:
Number of Low-Income & Total Units
Income Certifications/Annual Re-Certifications & Backup Verifications
Qualified Basis & Eligible Basis Amounts
Rent Amounts
Owner Annual Compliance Certifications

14. “Qualified Allocation Plans”
State Must Adopt QAP to Allocate Credits
QAP Must Set Forth Allocation Priorities
QAP Must Give Preference to:
Lowest Incomes
Longest Period of Low-Income Use
QCT Projects Contributing to a Concerted Revitalization Plan

15. Additional QAP Rules
QAP Must Provide Procedure for Notifying IRS of Non-Compliance
Bond Financed Projects Must “Satisfy” QAP