It is becoming increasingly common for LIHTC properties that have reached the end of their initial 15-year compliance period to receive a subsequent allocation of low-income housing tax credits, which is known as undergoing resyndication. Sometimes this occurs with the original owner of the property; in other instances, it is a new owner who decides to go through resyndication to provide rehabilitation dollars to the site as well as an extension to its affordability.
The good news for management is that, according to the IRS, existing households at LIHTC properties continue to qualify for LIHTC under resyndication as long as they were initially income-qualified during the original 15-year compliance period. This makes the process fairly seamless as long as the tenants have been properly qualified. But it is critical to note that, with the subsequent allocation of credits, the clock restarts for a new credit period and a new compliance period and additional years are usually added to the extended-use period. This means that the record retention requirements start over as well, which should be highlighted on every good LIHTC manager’s radar.
LIHTC recordkeeping rules require that first-year records, to include initial tenant income certification, be kept for six years beyond the last year of the initial compliance period to equal 21 years. This means that with resyndication, the previously low-income households’ initial certifications become part of the first-year records for the new allocation and must be maintained accordingly. It is important that there is a good, original Tenant Income Certification (TIC) in the tenant file to prove the eligibility of the tenant household which also qualifies the unit for tax credits, but what if this documentation is absent or of poor quality?
Other factors to consider under these circumstances are whether student eligibility has been properly tracked since the household was initially certified; what happens if they are now considered over-income; and whether the state agency’s documentation requirements have changed in the meantime. These issues were all raised recently at the National Council of State Housing Agency’s Housing Credit Connect conference during a panel discussion between industry professionals and state housing agencies, and it appears that there are two schools of thought as to how this issue should be handled.
Most state agencies argued that using the most recent comprehensive certification proving eligibility for the tenant household is good enough for their record retention requirements going into a new credit allocation. By contrast, many syndicators prefer to have all tenant households requalified in order to have clean records for the new credit allocation and then back-track into older certifications to deal with those tenants who are now over-income. Since owners/managers working with LIHTC have to answer to both state agencies and their property’s investors, it’s important to know what they both require in order to start off the new allocation in everyone’s good graces. Our recommendation is to gain clarity with both from the start to make sure this challenging task is accomplished. And remember going forward that you should always attempt to create and maintain tenant files that tell a complete story with regard to tenant eligibility.