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The federal Opportunity Zone program has generated a lot of excitement among investors and the real estate industry since it was created as part of the 2017 Tax Cuts and Jobs Act. The Opportunity Zone program seeks to be a catalyst for development in the neediest communities.
As an owner or manager, you do your best to hold on to most households, especially because qualified tax credit households can be hard to find. But there may be times when, in order to comply with the tax credit program, you may have to ask certain tax credit households to leave. For instance, you may discover at your mixed-income site during recertification that a household is now composed entirely of full-time students who don’t fall under any of the qualifying exceptions, or you may be faced with a household who refuses to recertify.
It’s important for a tax credit site manager to be aware of fair housing laws. In addition to legal troubles, violating fair housing laws can jeopardize an owner’s low-income housing credits. The Department of Housing and Urban Development (HUD) enforces the Fair Housing Act (FHA) and when a fair housing complaint is filed against your site, HUD or a state or local fair housing agency will investigate the complaint.
When certifying and recertifying households, you must first try to verify the items you include in household income with third-party sources. For example, you must ask a resident’s employer to verify her employment income. But third-party sources don’t always cooperate with you by returning verification forms.
Fortunately, HUD gives you alternatives for verifying income when third-party sources don’t cooperate, such as getting documentation from the household itself. But you must document that you couldn’t get the income verified by a third party.
Along with the colder weather comes the risk of carbon monoxide (CO) poisoning. CO is a colorless, odorless gas that’s the second most common cause of non-medicinal poisoning death. According to the Centers for Disease Prevention and Control (CDC), over 10,000 people are poisoned by CO and need medical treatment each year, and more than 438 people in the U.S. die annually from CO poisoning.
As a tax credit manager, you must be aware of households’ composition and how changes in the size of an existing household after the initial tenant income certification may invoke certain LIHTC rules. Generally, changes in family size don’t cause a unit to stop being income-qualified.
Every year site owners submit various IRS tax forms to claim the low-income housing tax credit on their tax return. IRS examiners look at the submitted information along with internal IRS information to determine whether to conduct an audit. If an examiner wants to continue with the audit process, the examiner will send a notice by mail. The letter will include a request for information and list documents to be made available for the audit. The request for information is known as an IDR, which stands for Information Document Request. An IDR is issued on IRS Form 4564.
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 to cooperate with your compliance efforts.
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 $103,000 for rehabilitation projects (about 61 percent of the total development cost).
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