New Income Limit Provisions for LIHTC
In a break from their traditional publication of annual income limits, HUD has added a new set of limits specifically for the Low-Income Housing Tax Credit (LIHTC) program. These were issued in conjunction with the Section 8 income limits, both having a March 19, 2009 effective date. For tax credit properties, this means the new limits should have been put into use by May 3rd, which is 45 days from publication and a long-standing program requirement. These Multifamily Tax Subsidy Projects (MTSP) Income Limits, as HUD has dubbed them, can be found at www.huduser.org/datasets/mtsp.html.
Tax credit managers may be wondering why HUD has chosen to begin publishing a separate set of income limits, since the Section 42 regulations defer to the HUD regulations, specifically those governing the Section 8 program, for income and asset determination and calculations, and accordingly tax credit properties have been using the Section 8 income limits since the inception of the Housing Credit program. The answer lies in the passage of the H.R. 3221, the Housing and Economic Recovery Act of 2008, which was signed into law last summer.
As part of its efforts to provide financial relief to owners of LIHTC properties, Congress included two provisions in H.R. 3221 that have relevance to the Section 42 program. One addresses rural tax credit properties and allows their owners/managers to use the greater of the actual income limits for the area or the national non-metro income limits. The other deals with tax credit properties that received HUD Hold Harmless status in 2007 when HUD changed its methodology for calculating Area Median Gross Income (AMGI), leaving many areas of the country with lower AMGI which would have negatively impacted those who would qualify for admission to tax credit properties as well as the amount of rent they could be charged. It is this particular provision that prompted HUD to publish separate MTSP limits.
In addition to the 50 percent AMGI limits and 60 percent AMGI limits that HUD is now publishing for tax credit properties, they are also publishing income limits for HERA Special properties, or those with HUD Hold Harmless Status. Those properties were allowed to retain their income limits at the 2006 level for 2007, since HUD’s new methodology reduced their AMGI, with the allowance of incremental changes thereafter reflecting the same dollar amount increases in the actual AMGI. In a move to help alleviate the confusion surrounding this issue, HUD stepped in with its new set of limits which gives owners these limits rather than leaving them to their own devices to figure them out. Publication of the specific LIHTC income-targeting set-asides is also new and helpful to owners/managers of these properties since they often had to convert the Section 8 limits in the past.
To learn more about this issue, look for NCHM’s upcoming “Spotlight On” webinar series with a special segment on tax credit income limits.