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As the holiday season approaches, we know that audit season isn’t far behind. Taking steps now to review management practices, household files, and preparing annual forms will help ensure a strong start to the upcoming year and an efficient audit process.

The following is a list of year-end items that owners or managers may review now to ensure deadlines are met and to minimize disruptions to day-to-day operations.

On Nov. 2, House Republicans unveiled a sweeping tax reform legislation called the Tax Cuts and Jobs Act (H.R. 1). It was introduced by Ways and Means Committee Chairman Kevin Brady. Although its provisions are generally in line with the House Republican Blueprint for Tax Reform released in June 2016 by House Speaker Paul Ryan (R-WI), and House Ways and Means Committee Chair Kevin Brady (R-TX), and the tax plan released by President Trump on April 26, 2017, it contains several unexpected provisions that are already controversial.

When a qualified low-income household moves out of a unit at your tax credit site, you might not have another qualified household immediately available to move into the unit. And finding qualified households for your site can be difficult and take time. For these reasons, you may have units that have been vacant for a considerable amount of time. Fortunately, the tax credit law lets owners continue to claim credits for units that become vacant, as long as they comply with the vacant unit rule.

At this time of year, as the academic year starts, it may be a good time to review student eligibility restrictions for the LIHTC program. You probably know that, in general, you can’t rent a low-income unit at your tax credit site to a household that’s made up of full-time students.

If you’re like many tax credit managers, you might want to set aside a model unit that you can show to prospects to help “sell” your site. But before you set aside any unit at your tax credit site for this purpose, you must consider what effect your action may have on your compliance efforts. Depending on the type of unit you choose to set aside, you could put the owner’s tax credits at risk.

Generally speaking, if you manage a mixed-income site, you and your staff must recertify all low-income households at the site each year. Failing to meet recertification requirements is a leading cause of noncompliance that can cost the owner its tax credits. But recertification can be a time-consuming and burdensome process.

By Carolyn E. Zezima, Esq.

To calculate and verify household income at tax credit sites, owners and managers are required to follow the rules set out in HUD Handbook 4350.3 (Occupancy Requirements of Subsidized Multifamily Housing Programs). Specifically, sections 1 and 3 of Chapter 5 (Determining Income and Calculating Rent) set out the rules you must follow for calculating and verifying income.

Some tax credit sites may require a household to get a third party to sign a lease guaranty if its ability to pay the rent is questionable. In a guaranty, a third party (known as a guarantor) becomes legally responsible for the rent in case the household doesn’t pay. And sometimes, a household expects the guarantor will pay part of the rent each month.

Before you sign a lease giving a household the right to occupy one of your low-income units at a restricted rent, you’ll want to be sure that the lease and any addenda give you the authority you need to keep the site in compliance. For instance, if your site isn’t 100 percent low-income units or if your state requires it, you’ll want to require the household to give you documentation to prove that it’s still qualified at recertification.