5/22/2017 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” 1
5/22/2017 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 2
5/22/2017 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? 3
5/22/2017 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 4
5/22/2017 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 5
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5/22/2017 PAYSTUB VERIFICATION • Here is an example from a real file • Auditor noticed the YTD pay was not correct 7
5/22/2017 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 offering inexpensive and convincing fake pay stubs 8
5/22/2017 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 9
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5/22/2017 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 12
5/22/2017 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 13
5/22/2017 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 of” acquisition. • Connecticut property closed October 2016. As of 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. 14
5/22/2017 EFFECTIVE COMMUNICATION – Plan to have scheduled conference calls at different intervals to make sure all parties are clear on their role, key deadlines and expectations – Goal: avoiding timing adjusters; HFA non compliance; 2/3 units – Develop a 1 st 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 1 st 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!) 15
5/22/2017 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. 16
5/22/2017 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 17
5/22/2017 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* 18
5/22/2017 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 19
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