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RD has released a new letter regarding requirements for trash collecting areas. (This is not a state issuance and does not represent a state policy).Click Here to check it out!

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Tax Credit Compliance: 2009 Year in Review
An IHCDA Compliance Update by Matt Rayburn

In October, my colleague Jeff Ivory and I had the pleasure of presenting a three hour tax credit compliance session at the AHAIN Conference.  For those of you who weren’t able to attend, this article is a recap of the most important points from that session.   Rather than attempting to summarize tax credit compliance basics into a brief article, I will instead focus here on the changes and clarifications to IHCDA compliance policy that were released in 2009.

 

100% Recertification Exemption

Per the changes to the tax credit program from the Housing and Economic Recovery Act of 2008 (affectionately known as HERA), 100% tax credit projects do not have to obtain third party verifications of income and assets at recertification.  This does not require an application or IHCDA approval; rather, the 100% Recertification Exemption is automatic for all 100% tax credit properties effective 7/31/08.

A 100% tax credit project is one in which there are no market rate units.  If there is even one market rate unit within a project, then all units in that project must be fully recertified annually.  “Project” is defined on Part II line 8b of Form 8609 which asks if the building is part of a “multi-building project.”  The recertification exemption applies by project, not by building. 

It is important to note that while assets and income do not have to be verified at recertification, management must still check household composition and student status on an annual basis.  Student status (or student status exemptions) may need to be third party verified to prove household eligibility according to the Full-Time Student Rule.  All recertification files must still include a current lease, a TIC (preferably IHCDA’s 100% Recertification Waiver TIC), and student status certifications.   On the TIC, household income at move-in should be listed as the total annual income. 

Also note that 100% tax credit projects with HOME, CDBG, or Trust Fund/Development Fund units are still required to obtain third party verifications for those units receiving the additional sources of funding, as required by those programs.  (See 2009 Compliance Manual Part 4.6 for more information).

 

Extended Use Policy

All developments allocated tax credits by IHCDA after 1989 will have entered into a Declaration of Extended Low-Income Housing Commitment.  According to this commitment, the development must remain in compliance for at least another fifteen years after the initial Compliance Period has ended.  This additional fifteen years of compliance is referred to as the “Extended Use Period.” 

In the 2009 Compliance Manual (Part 5.11), IHCDA announced a new policy to lessen the compliance requirements on projects that have entered their Extended Use Period.   The goal of this policy is to lessen the burden both on the Owners of these projects as well as IHCDA’s compliance department.  Owners who enter Year 16 may apply for the Extended Use Policy if they can demonstrate that their project has been free of noncompliance (i.e. no 8823s were issued) for the past three consecutive years (Years 13-15).  If an 8823 was issued in Year 13, the Owner must wait and apply for the Extended Use Policy in Year 17, showing that there was no noncompliance in years 14-16 (so on and so forth). 

Once the Owner has achieved three consecutive years free of noncompliance, the Extended Use Policy may be approved for that project.  The lessened compliance restrictions include:

• $10 per unit annual monitoring fees (instead of $22 per unit)


• The Full-Time Student Rule, Vacant Unit Rule, and Next Available Unit Rule will not apply


• The 100% Recertification Exemption will apply, even if the project is not 100% Tax Credit


• File monitoring will only occur once every 5 years (physical inspections still every 3 years)


• Units will be income-restricted at the federal set-aside and rent-restricted at the state set-aside

IHCDA did not see much interest in this policy in 2009.  We hope that this pattern will change in 2010.

 

Using the Tenant Income Certification (TIC) Form

On July 9, 2009, IHCDA released Multi-Family Department Notice MFD-09-21 entitled “Using the Tenant Income Certification (TIC) Form.”  This notice clarified that IHCDA expects every tax credit tenant file to have a tax credit TIC, regardless of whether or not that unit/tenant also has an income certification from another program (i.e. HUD 50058/50059 or similar RD certification forms).  The implication here is that a property under multiple funding programs may need to have multiple signed tenant income certifications in each file to demonstrate compliance with each program.  While it is not mandatory to use IHCDA’s specific tax credit TIC, IHCDA strongly recommends using this form.  If another TIC is being used, management must make certain that their form is capturing all of the same information as IHCDA’s sample TIC. 
For more information refer to MFD-09-21.  Additionally, the clarifications from this notice will be inserted throughout the 2010 Compliance Manual.

 

Tenant Income Certification Effective Dates

The 2009 Compliance Manual (Part 4.5) clarified that the effective date of a certification is based off of the original move-in date and never changes.  The effective date of a move-in certification is the date the tenant actually moves into the unit.  The effective date of a recertification is the anniversary date of the original move-in.

For example, a tenant moves into a unit on October 15, 2008.  The initial certification has an effective date of 10/15/08.  The first annual tax credit recertification is due with an effective date 10/15/09.  The date is not moved up to 10/1/09 or moved back to 11/1/09 as may be the case with RD or HUD.

Additionally, the tax credit program does not require interim certifications if household income changes between annual certifications. For example, on 1/5/09 a tenant moves into a unit in a HUD + Tax Credit project.  On 4/15/09 the tenant gets a substantial raise, so the income is recalculated for HUD purposes and an interim certification is completed.  The next tax credit recertification is still due on 1/5/10, the anniversary date of the move-in event.  (For more examples, refer to Part 4.5 of the 2009 Compliance Manual).

Remember that verifications are valid up to 120 days prior the effective date of the certification.  Tenants may sign all verification forms, as well as the TIC, up to 120 days prior to the effective date.

 

Submitting Tenant Files for an IHCDA Audit

On July 9, 2009 (a day that will live in compliance infamy?), IHCDA released another MFD Notice, MFD-09-20, entitled “Submitting files for an in-house audit- Amendment to 2009 Compliance Manual.”  This notice retracted IHCDA’s statement in the 2009 Manual that files should be submitted in PDF format.  While we wanted to “go green” and save our partners the cost of copying and shipping files, this simply did not work out due to issues with the quality and compatibility of the electronic documents we received.  All files submitted for in-house audits should be submitted as hard copies.  Remember to send copies, never originals, because all documents will be shredded upon completion of the audit.

Additionally, this MFD Notice clearly stated that IHCDA monitors will refuse to review files if they are not submitted in an orderly and complete fashion.  Attached to this notice was a checklist listing all of the documents that are necessary for a tenant file in the approximate order in which they should be placed in the file.  This checklist will be included as part of the 2010 Compliance Manual.

 

Important Reminders

1. 2009 Owner Certifications are due by January 31, 2010.  All tenant events must be submitted using IHCDA’s online reporting system.  Remember that you should be entering all events (move-ins, move-outs, recertifications, transfers, etc.) into the system within thirty days of the event date.


2. Please keep your contact information up-to-date.  Changes in ownership or management should be reported to IHCDA immediately via the “Property Ownership Change Form” or “Property Management Change Form.”


3. Casualty loss (i.e. fire or natural disaster damage) to any tax credit building must be reported to IHCDA’s inspector Doug Newport within ten days of the event. Failure to do so is noncompliance.

2010 Sneak Peek!

IHCDA will be releasing the 2010 Compliance Manual, which for the first time ever will include a “Physical Inspection Guide” written by our inspector Doug Newport.  Also in 2010, expect to see a separate IHCDA compliance guide for HOME, CDBG, and Trust Fund/Development Fund properties.

IHCDA will once again be offering a number of compliance trainings taught by the staff of Compliance Solutions.  These trainings were highly successful in 2009, with excellent feedback and most trainings selling out quickly.  Be sure to keep your eyes peeled on IHCDA’s website for the dates for 2010 trainings so that you can sign up early and often!  Besides offering the same class as last year, there will be “Compliance Part 2” classes for those who already attended a training session in 2009.

I hope you found this whirlwind tour of IHCDA’s 2009 compliance updates to be informative and useful.  More changes are bound to come in 2010.  To stay up-to-date on IHCDA compliance, please read the 2010 Compliance Manual, attend a 2010 training session, and make sure to check IHCDA’s website frequently, especially the MFD Notices.

Happy holidays to you and your families! See you in 2010. -Matt

Matt Rayburn is a Multi-Family Housing Monitor for IHCDA.  He may be reached at mrayburn@ihcda.in.gov

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