When managing a tax credit site, you may be confused about what you can and can’t do when it comes to creating a lease for your low-income households. For instance, you may be unsure whether you can give households a one-month lease without putting your site owner’s tax credits at risk. Or you may not know the right language to include in your lease before a household signs it, so you’ll be able to collect the maximum rent from the household or get it ...

The LIHTC program is an indirect federal subsidy used to finance the construction and rehabilitation of low-income affordable rental housing. LIHTC sites receive funding either as new construction or acquisition rehab. A recently published U.S. Government Accountability Office report on LIHTC development costs stated that the median per-unit LIHTC equity investment was about $147,000 for new construction projects (about 67 percent of the total development cost) and $103...

Keeping each building’s applicable fraction on target is an essential part of a tax credit manager’s job. The applicable fraction is the percentage of a building’s units rented to low-income households. It comes into play when you calculate the building’s qualified basis, which affects whether the owner can claim all its tax credits. The qualified basis is the eligible basis (which rarely changes but can’t go up) times the applicable fracti...

It’s smart management practice to keep your household files up-to-date and complete all the time. Because LIHTC projects will be reviewed for compliance by the state and may be audited by the IRS, complete, well-organized files are very important.

When someone agrees to rent or lease an apartment, he signs a lease or rental agreement outlining the terms of the agreement. It’s a legally binding contract between the tenant and the owner that details the rights and responsibilities of each party. Unlike a typical market-rate apartment, a tax credit site or unit participates in the federal Low Income Housing Tax Credit (LIHTC) program. This means the provisions of Section 42 of the Internal Revenue Code (IRC) a...

The Consolidated Appropriations Act of 2018 established income averaging as a third minimum set-aside election, and this option happens to be one of the most significant changes to the LIHTC program in recent years. Every tax credit site must meet and maintain a minimum set-aside throughout the 15-year compliance period to qualify for the tax credit program. A minimum set-aside is the federally required minimum level of tax credit units at a site. To meet the set-aside,...

When performing the initial certification for a low-income household at your tax credit site, it’s easy to make mistakes. These mistakes can jeopardize the owner’s tax credits if your state housing agency finds them during an audit.

A private letter ruling (PLR) is a written response issued by the IRS to an owner or taxpayer when the owner asks a question about the tax effects of its acts or transactions. The questions posed by site owners usually entail uncertainty about how to handle a situation and the need for guidance on how to avoid the recapture of tax credits. The IRS-issued PLR interprets and applies the law to a specific set of facts, and the owner or manager who requested the PLR can rel...

Like many tax credit managers, you may have considered setting house rules aimed specifically at children. Your motive may be concern for children’s safety around specific hazards like swimming pools. Or if you’ve been getting noise complaints from residents or have recently found excessive wear and tear due to children, you may want to impose house rules to rein in children and preserve peace and quiet.

As an owner or manager, it’s important to keep your designated low-income units qualified as such under tax credit rules. Unless a site is deep rent skewed, a LIHTC site must have either 20 percent of the units rent-restricted and occupied by a household with income at or below 50 percent of the area median income (AMI), or 40 percent of the units rent-restricted and occupied by a household with income at or below 60 percent of AMI.