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Posted on: June 25th, 2020 by Christa Landram No Comments

LIHTC Post Year-15
Many LIHTC properties are nearing or have already reached completion of the 15th year of their compliance period and are not aware of their role or the Internal Revenue Service’s role. Though the IRS requires LIHTC properties to have an extended use period of an additional 15 years past the 15-year compliance period, noncompliance issues are no longer submitted to them. The State continues to monitor the property and they are bound to the regulations and the requirements as stated in the LURA. As stated in the IRC 42(h)(6), there are several requirements under the extended use agreement, including:

√ The applicable fraction for each building shall never fall below what is stated in the agreement.

√ The owner must not dispose of the building until the affordability period has been completed.

√ The units must remain rent and income restricted.

For a full listing and explanation of the requirements, please visit the Internal Revenue Code Ruling.

Throughout the extended use period the State will continue to conduct file reviews and onsite inspections. If a noncompliance issue is found, Form 8823 is not submitted to the IRS; however, owners are still responsible for the compliance of the property, as not doing so could jeopardize the relationship with the State.

During the entire 15-year extended use period, initial certifications still need to be completed in their entirety, including completed TICs and third-party verifications for income and assets. Some states will also require annual recertification.

It is important to be in constant communication with your state agency or HFA throughout the affordability period, including the extended use period, as they may add on additional requirements and/or relax some of the requirements. Please also note that if there are other programs attached, there may be different monitoring requirements which will need to be adhered to, some of which may be more stringent.

Determining Household Members Under LIHTC Guidelines

Posted on: June 17th, 2020 by Christa Landram No Comments

A question many LIHTC properties have for us is who is and who is not considered a household member. A tenant’s income eligibility is determined by comparing the household’s gross annual anticipated income (per HUD guidelines) to the LIHTC set aside limits that apply to the project (50% AMI, 60% AMI, or Average Income Test). Let us go over a few of the more common situations so that you understand what income limits to use for the applicable household.
• All heads of household. This includes individuals who are absent.
• All co-heads and spouses. This includes individuals who are absent.
• Foster Children
• Foster Adults
• Children temporarily absent due to placement in a foster home
• Children away at school, but who live with the family during school recesses
• A person confined to a hospital or nursing home per family decision
• A son or daughter on active military duty only if this person leaves dependents or a spouse in the unit.
• The IRS considers unborn children and children in the process of being adopted as household members in determining income limits.
Do NOT count the following in determining income limits:
• Live-in Attendants
• Visitors or Guests (the length of time someone can be considered a guest needs to be reviewed with the local and landlord law)
• Guarantors
It is important that there be consistency in the file as to who is considered a household member. Be sure to review all documents prior to certification.
Changes to household composition:
The addition of a new member(s) to an existing household requires initial certification steps for the addition(s). That means their income is third-party verified, assets are documented (in some cases third-party verified), student status is verified, they are put on the lease, etc.
This is regardless of how many people already live in the unit. If it is 100% low income, the income of the new household member is added to the original TIC (or recertification TIC for Florida). If it is a mixed income project, then it is added to the most recent TIC.
Removing a household member generally requires less documentation from a federal standpoint. When a member moves out, it is recommended that the owner have the household member complete a move-out form. A new Tenant Income Certification is not required; however, they will be removed from the composition and all recertification paperwork at their anniversary.
Under IRC 42 regulations, an original household member must always reside in the unit as changes are made to the household composition. If all original household members have vacated the unit, then the entire household must be treated as a new move-in by certifying them under initial certification procedures, including income qualifying them under the current income limit.
An exception to this is if the remaining members were income qualified as of the date they moved into the unit. This may look different depending on how your allocating agency interprets the 8823 Guide; however, many agencies choose one or both of the following guidelines:
• The entire household was income qualified under the income limits in effect at time of move-in based on the household size.
• The added member was independently qualified under the one-person income limit that was in effect at time of move-in.

Determining Income Eligibility Exercise

Posted on: June 10th, 2020 by Christa Landram No Comments

Today’s blog is designed to test your knowledge of various income aspects! Answers and explanations will be posted tomorrow!

While sitting in the clubhouse one day, looking out at your perfect, Affordable Housing community, you notice a kind-looking lady with salt and pepper hair walking toward the leasing office. She reminds you of your grandmother and when she walks in you can almost smell fresh-baked cookies.

“Welcome to Magnolia Sabal Pinewoods! How can I help you today?” you say, giving her your best professional smile.

“Hello, I’m looking for a nice quiet community to live in where my grandchildren can come and visit me!” she says.

“Then the first step is to fill out an application” you reply.

During the application interview you learn the following information:

Her name is Sarah Jones and she’s 62 years old.

Ms. Jones works at Sandalwood Elementary School as a cafeteria worker.  She receives an annual salary of $21,000.

To supplement her income, Ms. Jones, also receives $100 every month from her annuity fund valued at $160,000.

The answers to these previously posted questions are shown below:

Which of the following is not pertinent to the application process in determining her eligibility?

Answer: Do you have any pets? Though it may be important to know about pets, and could affect their occupancy, it does not affect their eligibility

Would it be necessary to inquire if the applicant works during the summer?

Answer: Yes. It is always important to ask applicants about all income for the upcoming certification year; however, it is especially crucial you cover this question when you know a place of employment may not last year-round. An example of this is an educational employee. Though some may work at the school year-round, it is not guaranteed. Many educational employees take off the summers, while many work another job. Another form of income some education employees have is unemployment during the summer months. Please keep that in mind when processing their applications.

Is the annuity included as income or an asset?

Answer: Income. An annuity is a contract sold by an insurance company designed to provide payments, at specified times. Many annuities will be paid for the life of the recipient.

Once a holder starts receiving regular payments, they can no longer convert it to a lump sum of cash. In this situation, Ms. Jones will receive regular payments from the annuity and it will be treated as regular income, not asset income and no calculation of income from assets will be made. In addition, the balance from the annuity will not be counted as an asset.

Since you discover that Ms. Jones is eligible under the income guidelines, is it necessary to determine if Ms. Jones will have any roommates?

Answer: Yes. Just like you should ask all applicants about income, you should ask all applicants about additional household members. You must ask if they anticipate ANY changes to the household within the upcoming certification year.

Should you inquire about how long and often the grandchildren will be visiting?

Answer: Yes. Anyone who is in the household at least 50% of the time should be considered a household member. So, if she is planning on her grandchildren being in the unit more than 50% of the time, you must include them as household members for income eligibility purposes.

Advanced Income Examples

Posted on: June 3rd, 2020 by Christa Landram No Comments

At recent affordable housing meetings there has been much discussion regarding the challenges that owners are faced with when it comes to different forms of income. Below are some common income challenges that have surfaced recently. In many cases, states have collectively come up with best practices and I have shared them below.

A common asset mistake deals with Debit Cards. The IRS has provided guidance to treat these like savings accounts, though many state agencies have decided to treat them as checking accounts. Debit Cards include everything paid with a debit card, e.g., paychecks, SS, and child support. Again, the IRS has given guidance, but your state agency may treat it differently. You also want to ask how your state agency wants it verified, as some mention verification such as ATM receipts as being sufficient, while others disagree.

Sporadic and seasonal work is very common in states such as Florida and California. A hot topic right now is how many weeks or months of pay do you verify? Currently, there is no regulation addressing the number; however, the trend among the different state agencies is to obtain 12 months’ worth, in order to obtain an accurate picture of each season. This is a matter of interpretation and it is important that however you decide to verify it, you are consistent.

One of the more challenging forms of seasonal pay verification comes into play with migrant farmworkers. It is understood that there are some day duty workers who only receive cash. If you come across this, know that there is The Migrant and Seasonal Agricultural Worker Protection Act (MSPA), which protects migrant and seasonal agricultural workers by establishing employment standards related to wages, housing, transportation, disclosures and record-keeping. Farm labor contractors are required to register through the Department of Labor. If they do not, they are heavily fined. The first preference is third-party verification. If you are unable to obtain that, you can try to get paystubs. Next, you can try for receipts that show how many berries, for instance, they picked. If the form of verification is receipts, you should get as many of those as you can. Finally, have them sign a self-affidavit.

There are many forms of income that can present challenges, much like the ones listed above. When you are faced with a difficult form of income, it is best to contact your state monitor or state agency, for best practices.

Child Support

Posted on: June 2nd, 2020 by Christa Landram No Comments

How to handle child support has been a common area of concern for property owners everywhere. HUD states in the 4350, Chapter 5 that:

Owners must count alimony or child support amounts awarded by the court unless the applicant certifies that payments are not being made and that he or she has taken all reasonable legal actions to collect amounts due, including filing with the appropriate courts or agencies responsible for enforcing payment.

The owner may accept printouts from the court or agency responsible for enforcing support payments, or other evidence indicating the frequency and amount of support payments actually received.

Child support paid to the custodial parent through a state child support enforcement or welfare agency may be included in the family’s monthly welfare check and may be designated in different ways. In some states these payments are not identified as separate from the welfare grant. In these states, it is important to determine which portion is child support and not to count it twice. In other states, the payment may be listed as child support or as “pass-through” payments. These amounts must be counted as annual income.

When no documentation of child support, divorce, or separation is available, either because there was no marriage or for another reason, the owner may require the family to sign a certification stating the amount of child support received.”

There are many approaches to handling child support. If it falls in line with HUD’s guidance, an owner may choose their own approach, at their State Agency’s discretion and direction.

Let’s look at an example of what falls within HUD’s guidance. If an owner has a court order and a printout from the enforcement agency, an owner may use the average payment from the printout, in lieu of the amount on the court order.

What does using the average payment mean? An owner will take the average number of payments listed on the printout and annualize to determine the amount of child support to be listed in the annual income for the upcoming certification year.

Looking at an example:
On September 7, Stacey Jones verifies she has been court ordered child support for her daughter, Evie, in the amount of $500 a month. She certifies that she does not receive it and receives varying amounts. She supplies her printout from the enforcer which shows a history of 6 months.

Since we have at least three months of history and the printout from the enforcer, we will be able to use the average of actual payments instead of the court ordered amount.

March: $225
April: $300
May: $150
June: $400
July: $300
August: $200

We start by adding the totals ($1,575), then divide that by the number of months shown ($1,575/ 6 = $262.50) and use that amount as the monthly amount versus the court ordered amount of $500.

The annualized child support income will be $3,150.

As a reminder, the following steps should always be taken:

Every household should be asked if there is child support or if child support is due, even if children are not present in the household.
Note: A child support affidavit is not required by HUD but may be by your state agency. An owner shall inquire about child support for every household and properly document the file with the applicant’s third-party documentation or self-certification of non-receipt.

The questions should be:
a. Do you receive child support?
b. At what frequency?
c. In what amount?
d. Have you been awarded child support by court order?

The questions should cover ALL children.

The court order in its entirety is recommended; however, if not present it will not be a discrepancy when the printout from the enforcement agency clearly shows the amount due to them, the frequency of pay, the payer, and the children(s) names.

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