Compliance

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When you take over a site, there’s a good chance you’ll find paperwork mistakes made by prior managers. Missing income certifications, spotty income documentation, and utility allowance errors are common. Even though you didn’t make them, you mustn’t ignore these household file mistakes. Uncorrected mistakes can jeopardize the owner’s tax credits if a housing agency auditor later uncovers them.

In the past few years the Justice Department has brought increased scrutiny to the issue of accessibility. For example, in September 2010, the Justice Department published revised regulations for Titles II and III of the Americans with Disabilities Act of 1990 (ADA) in the Federal Register. The new rules took full effect on March 15, 2012.

As site owners and managers increasingly direct more of their marketing focus online in an effort to attract new prospects, engage current residents to encourage renewals and generate referrals, and recruit potential employees, there are fair housing considerations they need to be mindful of.

Often new media marketing is driven by tech-savvy professionals, but—regardless of the bells and whistles on your Web site or Facebook page—it's up to you to ensure compliance with old-school fair housing principles.

According to U.S. Census data released in June 2011, more than half—51.6 percent—of all the country's businesses that responded to the 2007 Survey of Business Owners were operated primarily within homes or other noncommercial spaces. And because the data was compiled before the recession began in 2008, it may be safe to assume that there has been a sharp increase in home-based businesses since then.

Every tax credit building you manage is either a “mixed-income building” or a “100 percent building.” If it's a mixed-income building, you can rent units to both low-income and market-rate households. However, if your building is a 100 percent building—or, in other words, your first-year fraction is 100 percent—you must rent all the units in your building to qualified low-income households.

If you're managing a tax credit site in the first year of its credit period, it's important to know that the owner may not be able to claim all the credits it expects to for that year. According to IRC Section 42(f)(2), an owner isn't allowed to take the entire credit a building is expected to produce each year in the tax credit program on his tax return for the first year of the tax credit period.

Many tax credit sites permit a resident manager, superintendent, or similar site-level employee to occupy a unit. This arrangement may raise a red flag to state auditors if the unit is not being used as permitted in the original allocation agreement with the state. Operating in the dark with regard to an employee unit can cause the owner to lose the tax credits on the unit and possibly result in tax credit recapture as far back as the first year of the compliance period.

For a building or site to qualify for the tax credit program, an owner must rent at least a certain percentage of the units to qualified low-income households. These households can earn no more than a specified amount of income. This requirement is called the “minimum set-aside,” and every tax credit site must meet and maintain this requirement throughout the 15-year compliance period to continue earning tax credits.

In late March, the IRS released an updated version of its Guide for Completing Form 8823: Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition. State housing agencies use Form 8823 to notify the IRS of a site's noncompliance with tax credit requirements. Your state housing agency must also use this form to inform the IRS if you correct noncompliance by the agency's deadline.