Revised 8823 Guidebook Issued (Part II)
Adding New Household Members After Initial Certification
The Guide to Completing Form 8823, originally issued by the IRS in January 2007, was reissued last month with numerous revisions. Among the more significant changes is the addition of guidance for adding new household members after initial certification, which is detailed for both 100% and mixed-income LIHTC properties.
The basic rule is that, in order for an existing family living in a qualified tax credit unit to add a new household member during the certification year, an additional Tenant Income Certification (TIC) must be completed and the new member’s income must be verified using the same methods used for annual certification. The IRS has clarified that this may be done as long as at least one member of the original low-income household remains in the unit. The new income will then be added to the household’s most recently certified income–and that’s where it can get tricky.
With the passage of H.R. 3221 (HERA) in the summer of 2008, tenants at 100% LIHTC properties are no longer required to have their income annually recertified. So, the IRS says that at these properties the income of the new household member(s) should be added to the household’s income at initial certification–regardless of when they are added to the household …
For mixed-income LIHTC properties, who do not qualify for the annual recertification waiver granted by HERA, the income of the new household member should be added to the most recent (re)certification. If the household’s new income is above 140% of the current limit at mixed-income properties, then the Next Available Unit Rule will have to be followed in order to stay in compliance.
The most consistent glitch that we have encountered from our students on this is where their tax credit syndicators or management companies have chosen to continue annual recertifications at 100% LIHTC properties, despite the regulatory changes that no longer require them. They are asking what they should do in terms of adding the income of new household members when they have a TIC which is more recent than the original certification. The short regulatory answer to this question is that it should be added to the income at initial certification as instructed in the 8823 Guidebook. The longer answer should come from the state housing agency providing regulatory oversight for the tax credit property. Since some state agencies have decided that a first annual recertification should still be conducted at tax credit properties in their states, then they could possibly have a different take on how they would like this issue to be handled.
One other point that is clarified in the revised Guidebook and should be heeded at all tax credit properties is that annual student certification is still required and should be completed within 120 days of the original student certification. So even if you are managing a 100% LIHTC site that does not conduct annual income recertifications, do not forget that this requirement is still mandated by the IRS. A sample certification form for this purpose can be found in the 8823 Guidebook.