CONTACT INFO Erik Whitton 207-838-6932 - - PDF document

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2017 LIHTC COMPLIANCE TRAINING

CONTACT INFO

Erik Whitton 207-838-6932 erik@qualifiedcompliance.com www.qualifiedcompliance.com LinkedIn – Compliance Group for Updates “LIHTC Compliance Q&A”

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LPA COMPLIANCE

Developments must adhere to rules set forth by HUD, the IRS, and the state agency Avoid 8823 reports, lost credits, credit recapture Additional oversight and penalty comes from the investor (aka bank, syndicator, limited partner) Timing adjustors, 2/3 units, costly to owners Communication & planning is critical

HFA COMPLIANCE

No recent rule changes from HUD & IRS HFA’s continue to refine compliance requirements Anyone with a portfolio that spans multiple states needs to reference different agency rules My LinkedIn page will soon have a “wiki” style matrix for all states

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HFA COMPLIANCE

What to track for each HFA: – Link to compliance website, manual, forms, income limits – Include contact name, number, email, and when the state last updated their compliance documents – List all required forms and recommended forms – Scan compliance manual for state specific guidance on grey area issues – Are pay stubs allowed? Preferred? How many? – YTD guidance – Required Minimum Distribution for retirement accounts

HFA COMPLIANCE

What to track for each HFA: – How to treat unemployed applicants seeking work – What is state minimum wage? – Recert requirements for 100% affordable developments – End of year or quarterly reporting requirements – What else?

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RETIREMENT ACCOUNTS

Novogradac Article: https://www.novoco.com/periodicals/articles/inco me-certifications-personal-retirement-accounts-top- bottom

“Tenant B has a personal retirement account with a cash value of $15,000 and receives $2,400 once a year from this account. Tenant B would then have an asset of $15,000, because once a year is not frequent enough to be considered regular and periodic (as demonstrated in the example under Exhibit 5-2(5) in the HUD Handbook 4350.3) and no amounts should be listed under the gross annual income portion of the Tenant Income Certification. Income from this asset will need to be considered and calculated.”

RETIREMENT ACCOUNTS

Check with your state Check with your investor Check with your compliance consultant/trainer

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PAYSTUB VERIFICATION

See LinkedIn page for simple Excel document Use to calculate average pay from stubs or Work Number Easy YTD conversion You may copy the formulas and create your own worksheet Can also use to count number of weeks before/after a raise

PAYSTUB VERIFICATION

• Google “Create Fake Pay Stubs”
• Users can create any business, salary, etc.
• Results look very convincing

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PAYSTUB VERIFICATION

• Here is an example from a real file
• Auditor noticed the YTD pay was not correct

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PAYSTUB VERIFICATION

• After the report went out, the site sent the following

affidavit:

PAYSTUB VERIFICATION

• I am worried we will see more instances of

applicants creating fake pay stubs to get approved for housing – Due to many employers no longer filling out EV forms – And state agencies allowing pay stubs as verification – And the increased number of websites

• ffering inexpensive and convincing fake

pay stubs

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PAYSTUB VERIFICATION

• Suggest contacting employers to document:

– Is the individual still employed? – Is a raise/bonus scheduled? – Are recent paystubs reliable for an income determination or has something changed? – LinkedIn will soon have a clarification form that can be used

INCOME & RENT LIMITS

• HUD provides income limits each year
• 2017 Limits Effective 04/14/2017
• 45 Day Period To Implement
• Placed in service date determines which income limits

to use

• PISD = certificate of occupancy for new construction

deals

• PISD = chosen by owner in rehab deals
• Here is the HUD website:

http://www.huduser.gov/portal/datasets/mtsp.html

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INCOME & RENT LIMITS

• In some areas you could manage multiple

deals in the same neighborhood all with different sets of income & rent limits (depending on when each site opened)

• Managers must know PIS
• Find this on the 8609 forms
• Use Spreadsheet to compute rents - LinkedIn

INCOME & RENT LIMITS

• Gross rent floor
• The date of initial credit allocation determines the

gross rent floor unless owner has requested written permission to use the PIS date instead

• Compare rent limits in place when credits were

allocated and use these if higher

• Managers must know date of initial credit allocation
• Many sites miss out on additional revenue
• RENT ONLY! CAN’T USE INCOME LIMITS FROM

ALLOCATION

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INCOME & RENT LIMITS

• For HOME funding use this website:
• http://bit.ly/1HGwN6y
• 2017 HOME limits not out yet
• Final note: always remember to update your

utility allowances when updating the income/rent limits

ACQUISITION REHAB

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ACQUISITION REHAB

5 Jobs From Last Week:

• NY property closed 12/15/2015. TICS signed

04/15/2016. 122 days.

• Kentucky property closed 04/13/2016. TICS

signed in September 2016 “True and correct as

• f” acquisition.
• Connecticut property closed October 2016. As
• f last week they are just starting to certify the

residents.

ACQUISITION REHAB

5 Jobs From Last Week:

• California property closed November 2015.

Dated all of their TICS 01/01/2016 and used that as day 1 of the 120 day count.

• Ohio property with 8 buildings. Tenants

moving from building to building for

• construction. Manager unaware of multiple

building election; need to fully recertify; etc.

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EFFECTIVE COMMUNICATION

– Plan to have scheduled conference calls at different intervals to make sure all parties are clear

• n their role, key deadlines and expectations

– Goal: avoiding timing adjusters; HFA non compliance; 2/3 units – Develop a 1st year applicable fraction model in early stages of project management; continue updating this as variables change; share with others – As things change make sure to notify all parties

PLANNING

Key questions to be asked ahead of closing:

• Projected Date of Acquisition (income/rent limits and TIC timing)
• Construction start & end dates
• Tenant relocation strategy
• What is 1st credit year
• Minimum set aside
• How many units pledged to HFA as LIHTC
• Different set asides
• Credit delivery deadline for investor
• Definition of “project” for multiple buildings
• How many tenants won’t qualify (not just income – also student

status!)

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TENANT QUALIFICATION

• Household Income Certification

– 240 day window – Safe Harbor – “Test” for Available Unit Rule – Ongoing rent compliance – Ref IRS Newsletters & Audit Guide

SAFE HARBOR

• Where credits won’t be taken for a period of

time after purchase,

• And – tenant income increases over the limit
• The tenant can qualify the unit ONLY IF

certified at time of purchase (240 day period)

• Continued compliance with student status and

rent also needed

• Safe Harbor is an option. Not a requirement.

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TENANT QUALIFICATION

In Place Acq/Rehab (existing tenants)

• Date of acquisition = TIC effective date
• 120 days to fully complete the TIC package
• 120 days before and after DOA
• Use income limits in place on DOA
• OK for verifications & signatures to be dated

AFTER TIC eff date

TENANT QUALIFICATION

If files are not completed within 120 days:

• Treat as a new move in
• TIC eff date = the date all paperwork &

signatures were obtained

• Use income limits for that date

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TENANT QUALIFICATION

For existing households fully certified within 120 days:

• Owner gets “Safe Harbor” protection
• Credits can roll back to purchase date
• If tenant is not certified with 120 days owner

does not get safe harbor protection and cannot claim credits back to purchase date

TENANT QUALIFICATION

What if Existing Tenant does not qualify?

• Could be income or student status
• Unit would be treated as MARKET (no credits)
• Household can *voluntarily* leave
• Owner cannot force tenant to leave
• Re-rent to qualified tenant to begin credits

*Refer to HUD Memo*

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TENANT QUALIFICATION

What if Existing Tenant does not qualify?

• Discuss home ownership
• Host First Time Homebuyer class on site
• Offer moving services, truck rentals, packing

boxes

• Cash incentives to leave
• No manipulation of income to qualify

TENANT RELOCATION

Relocation Scenarios:

• Offsite: owner must pay moving expenses.

Tenants cannot pay more than LIHTC rent. Relocation should not exceed 6 months.

• Onsite Temporary – no need to fully certify the

household

• Onsite Permanent – TIC and lease status

follows tenant. Units swap status. No need to fully certify the household but a new TIC should be printed. Be aware of “project” definition

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TENANT RELOCATION

• Discussion of Transfer Activity

– Temporary or permanent? – Units Swap Status – Same building or different? – Over income or not? – How is “Project” defined? – *safest approach is to assume each building will be a separate project* until 8609s are executed by owner – This means a full cert will be completed to make sure tenant qualifies when moving between buildings – All relocation & transfer activity should be logged for later review – Same tenant cannot qualify multiple units – Rev Proc 2004-82

TENANT RELOCATION

• Managers must carefully track all transfers
• Critical for determining 1st year applicable

fraction

• Manager must be aware of *project* definition

where site has multiple buildings

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RESYNDICATION

Resyndication Tips

• Review history of management changes
• Review HFA and LPA Compliance reports from

1st allocation

– If not clean, Spectrum can look at corrections & improved procedures

• Spot check recent income certs
• Are move in files pre approved?
• Look into possible student issues
• Look into possible rent reductions

RESYNDICATION

Resyndication Tips

• Is owner/manager willing to fully certify all

tenants?

• If no – assemble file to include:

– Current rent, UA, student, HH Comp info – Income docs from move in – Compare original HH members with current

• After initial 15 year compliance period-

what changed?