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Despite your efforts at good site management, your state housing agency may one day cite you for noncompliance with tax credit rules. As a tax credit manager, it’s your job to correct compliance violations, which means you must be familiar with how to request an extension of time to correct noncompliance if you need it and you must be familiar with the procedure that your state housing agency follows to report compliance violations it finds at your site.

In most cases, you need to verify household income with third-party employers because household members usually earn their income through jobs. But you may encounter a household member who works for herself. In this situation, you must follow the HUD Handbook’s requirements for verifying self-employment income. HUD’s preferred method of verifying self-employment income is getting a copy of the household member’s federal tax return, including supporting schedules [Handbook 4350.3, App. 3].

Like many tax credit managers, you might want to set aside a unit for a member of your leasing, management, or maintenance staff. Or you may already be renting to one or more of your employees. The tax credit law doesn’t bar you from renting to employees. In fact, you may have three options for the type of unit you can rent to employees—a market-rate unit, a low-income unit, or a unit that’s considered part of your common area.

By Carolyn E. Zezima, Esq.

The Low-Income Housing Tax Credit (LIHTC) program has been a significant source of new multifamily housing for more than 25 years. Since the program began, state housing agencies have financed over 2.6 million affordable units of rental housing, according to data compiled from the National Council of State Housing Agencies. During the period from 1987, when the program began, to 2012, agencies have allocated nearly $13.4 billion in housing credits from their annual state ceilings.

Meeting your site’s minimum set-aside is the most important goal you have as a tax credit manager. If you meet the set-aside, the owner of your site will be entitled to claim its tax credits. If you don’t meet the set-aside, your site won’t qualify for the tax credit program, which means the owner won’t be able to claim any of the credits it was allocated.

Your residents are entitled to a utility allowance if they are responsible for payment for their gas, electric, water, sewer, or trash service. A unit is out of compliance if you are not crediting the resident with a utility allowance, and the amount you charge them for rent exceeds the tenant rent calculated when subtracting the correct utility allowance from the maximum allowable rent.

If you already manage tax credit sites, you may be asked to help manage the conversion of an existing site to tax credit housing. If so, there are two key challenges you’re likely to face. First, you’ve got to certify the income and eligibility of existing residents to make sure they’ll qualify once the site becomes tax credit housing. Second, you’ll need to ensure that any site rehabilitation work goes smoothly. Many conversions involve significant physical rehabilitation, which may occur while residents continue to occupy the site.

Funds from HUD’s HOME program and LIHTCs are often used together to finance affordable rental housing sites. To establish affordable rents in many markets, a site’s rents may not be enough to pay off a conventional mortgage. As a result, the equity raised from tax credits may not be sufficient to provide all of the additional capital required by the site. Often, HOME funds can be used to finance the remaining gap.

All too often, tax credit owners lose money because they make mistakes in withholding residents’ security deposits. It’s easy to overlook basic rules when you’re mired in the details of complying with security deposit laws. To help you avoid these mistakes at your tax credit site, we’ve compiled the five most common ones and given you cases to illustrate them.