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 a number of requirements under the extended use agreement, including:
1. The applicable fraction for each building shall never fall below what is stated in the agreement.
2. The owner must not dispose of the building until the affordability period has been completed.
3. 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 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.