While the IRS Guide for Completing Form 8823 hasn’t seen an update since 2011, don’t take that to mean that no important new guidance for the LIHTC program has been issued since then. For example, Change 4 to HUD Handbook 4350.3 – probably the most significant update to the LIHTC program and published three years ago – is not yet reflected in the 8823 guide. The IRS has stated, however, that the Change 4 requirements should prevail over applicable guidance currently found in the guide. Hopefully all LIHTC managers are aware of this and keep a current version of the HUD Handbook on hand for reference.
But Change 4 is only the most obvious example of critical guidance that has not yet found its way into the 8823 guide. Since the Section 42 regulations borrow from HUD guidance when it comes to properly identifying and calculating income for applicants and tenants, several recent HUD notices bear directly on LIHTC managers. For example, a notice issued in January of 2015 addresses tenant protections for owners who have both HUD assistance and LIHTC at their sites. This can be a significant issue when HUD properties undergo acquisition/rehab using tax credits. Developers often operate under the misconception that all existing tenants will automatically qualify for LIHTC since they are already living in subsidized units. In reality, about 10% (on average) will not meet the housing credit eligibility requirements, which leaves owners in a bind since HUD tenants still retain the right to occupy their units — even when they no longer qualify for subsidy. HUD states in its memo that owners may offer incentives for tenants who do not qualify to move but it must be made clear that doing so is voluntary.
In addition, there have been a couple of IRS publications since the first of this year that update compliance monitoring practices and Section 42 provisions for utility allowances. These examples illustrate that our regulatory landscape is constantly changing and they help emphasize the need for LIHTC managers to have regular regulatory check-ups to ensure they are fully aware of their responsibilities. Where do you stand with regard to your compliance health?
If you’re in need of a regulatory refresher, then consider joining me next Tuesday, May 17, for our LIHTC 2016 Regulatory Update webinar. I will explain the background for each issue of consequence and provide a summary of the updates themselves and how they should be applied. Get more information and register by clicking the link below.