LIHTC and HUD Handbook 4350.3 REV-1 Change 4… Not Much Change
Most everyone probably knows by now that the long-awaited Change 4 to HUD Handbook 4350.3 REV-1 was finally published on August 22, 2013 with a transmittal date of August 7 of this year. That means that the updates and changes are retroactive to this date for HUD programs. Every practitioner of the Low-Income Housing Tax Credit (LIHTC) Program should know that Chapter 5 of this Handbook has applicability for tax credit properties in that we borrow from HUD guidance found here to determine assets and income for applicant households and those we are recertifying. Given all of that, we should be wondering how Change 4 affects LIHTC and the answer is really not much.
From what I discern, there are only two places in Chapter 5 where there may be changes of interest to LIHTC. The first is an addition found in Paragraph 5-6Q3, page 5-20 which states that for Section 8 only, delayed payments received in a lump sum or prospective monthly amounts from the Department of Veterans Affairs are excluded from annual income. The rub here is that technically LIHTC is supposed to follow HUD guidance specific to the Section 8 Program in determining annual income. The glitch is that with Change 2 to the Handbook, which added a specific formula for calculating student financial assistance as income for Section 8, the IRS clarified that this provision only applied to LIHTC when the student was also receiving Section 8 assistance. So, given that precedent, I am wondering whether they will consider the new provision for income from the VA applicable for LIHTC or not. I will keep you posted on that one.
The second item from Change 4 that does apply for LIHTC is more of a clarification than an addition or change and can be found in Paragraph 5-7G4b on page 5-36. It simply says that IRA, Keogh and other retirement savings accounts are considered to be assets even though a penalty may be assessed unless periodic payments are being received from them. This statement ties in with Paragraph 5-6P, page 5-19 that already tells us that “if benefits are received through periodic payments, do not count any remaining amounts in the account as assets”. There is further clarification from Change 4 given in Paragraph 5-7G4d on page 5-37, which basically says the same thing. I guess it was added in Change 4 to reinforce this idea.
The remainder of the updates from Change 4 found in Chapter 5 either deals with the Enterprise Income Verification (EIV) system or determining Adjusted Income, neither of which are applicable to LIHTC. Those who are managing housing credit properties that are blended with HUD project-based programs should spend some more time with the Change 4 items in the Handbook, however. Most of the substantive changes have appeared in notices from HUD’s Office of Housing prior to publication of Change 4, but they should know where to find them in the Handbook for reference. If you plan to take COS or BOS anytime soon, then you can learn more about the specifics of Change 4 in both of those NCHM certification courses.