Hccp Exam - Set 2

Front 1

What is Placed in Service date of a project that is considered New Construction?

Back 1

When the Certificate of Occupancy (CO) is received

Front 2

What is the Placed in Service date of a project that is considered to be an Acquisition?

Back 2

Date of purchase

Front 3

What is the Placed in Service date of a project that is considered to be a Rehab?

Back 3

• It is based on expenditures cost: when at least the greater of 20% of the adjusted basis or $6,000 (2013) and/or $6,500(2014) per unit is spent.
• Adjusted basis - the cost basis of a building adjusted for capital improvements minus allowable depreciation; term used by CPAs

Front 4

When should the minimum set-aside be met?

Back 4

Must be met by the end of the first year of the tax credit period

Front 5

When can an owner place the building in service?

Back 5

Building can be placed in service the first year of the tax credit year or the following year

Front 6

Quarterly Owners Certification

Back 6

• Due after the first full calendar quarter following the quarter the last building was placed in service
• Due every quarter for the next 3 quarters

Front 7

Compliance Monitoring (Onsite Inspection)

Back 7

• Must be done by the end of second calendar year following the year the last building is placed in service
• After initial compliance monitoring, it will take place at least every 3 years
• State agency can delegate/assign another party to monitor the property (i.e. Seltzer, First Housing, Amerinational)

Front 8

Owners Certification of Compliance

Back 8

Due every year during the compliance period

Front 9

How long does an owner have to correct Non-Compliance issues?

Back 9

State agencies usually give 30-90 days to correct non-compliance issues.

The time period can be extended by the state agency in some cases - not commen

Front 10

How long does the State Agency have to report Non-Compliance to the IRS?

Back 10

• State agencies have 45 days after the end of the 30-90 day time period given to the property to correct the non-compliance issue.
• Only the state agency can report non-compliance to the IRS and to an owner

Front 11

What form is non-compliance reported to the IRS and owner on?

Back 11

• Form 8823
• Can only be done by the state agency
• If state agency contracts the work to other monitoring agencies, the other monitoring agencies cannot report the non-compliance to the owner or IRS

Front 12

How long does an owner have to certify/qualify residents in an acquisition/rehab property?

Back 12

Existing residents must be certified within 120 days of the date of acquisition using the income limits that are in effect on the date of acquisition

Front 13

When an existing tax credit property is acquired in an acquisition/rehab, what income limits are used for existing households?

Back 13

Existing tax credit households are certified at the income limit that was applicable when the household was last certified.

Front 14

For an acquisition/rehab property, what income limits are used for new move ins? What is the certification effective date?

Back 14

• Use the limits applicable at the time of certification
• Certification effective date is the date of acquisition

Front 15

Form 8586 - Low Income Housing Credit

Back 15

Form used when the LIHTC credits are claimed

Front 16

Form 8609 -- Low Income Housing Credit Allocation and Certification

Back 16

• Form used on a per building basis
• Submitted to the state agency confirming the owner has met all development requirements of the Qualified Allocation Plan (QAP)

Front 17

Form 8610 - Annual Low Income Housing Credit Agency Report

Back 17

• Form used to transmit the 8609's from the State Agency to the IRS
• Used to indicate the amount of LITHC credits the state agency allocated throughout the year

Front 18

Form 8823 - Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition

Back 18

• Form issued by the State Agencies to the IRS and issued on building by building basis
• Indicates what non-compliance was found
• When received by the IRS, the IRS can then recapture credits that were previously issued to the owner

Front 19

Form 8611 - Recapture of Low Income Housing Credit

Back 19

Form used by owners to recapture tax credits they have previously claimed in past years to the qualified basis of the community being reduced and/or a building being disposed of

Front 20

Form 8693 - Low Income Housing Credit Disposition Bond

Back 20

Owners use this form to post bond under Section 42 to avoid recapture of tax credits when they dispose of the building or interest in one

Front 21

Which rule do you follow if you have a property that has several different programs (mixed property)?

Back 21

• Must follow the rules of the most stringent program
• Must comply with the rules of all programs where they do not overlap

Front 22

Who administers the HOME program?

Back 22

Home is administered by HUD

Tax Credit is administered by IRS

Front 23

Are federal grants included in eligible basis?

Back 23

NO - eligible basis is actually reduced by the amount of the federal grant

Generally get grants to pay for things that are not project expenses such as daycare, library

Front 24

Can a property claim tax credits if they have Tax Exempt bonds?

Back 24

Yes if at least 50% of the property and land cost are financed with tax exempt bonds.

Front 25

Tax Exempt Bonds

Back 25

Bonds issued by a municipal, county or state government whose interest payments are not subject to federal income tax and sometimes also state or local income tax

Front 26

Who is responsible for monitoring the files for Tax Exempt bonds?

Back 26

Bond Issuer - State Agency and/or monitoring agencies do not monitor tax exempt bonds

Front 27

How is it determined how many tax credits can be allocated by each state?

Back 27

Greater of --

$$ multiplied by state population

or

Given dollar amount

Front 28

Qualified Allocation Plan (QAP)

Back 28

• state indicates their criteria via this document which is used during the competitive bid process
• outlines the point system the state agencies will use
• describes how developers will be selected
• opens the competition for credits

Front 29

Applicable Fraction

Back 29

Lesser of:

% of units = Number of LIHTC Units/Total Number of units

or

% of Square Footage = Square Footage of LIHTC Units/Total Square Footage of all units in the project

Front 30

Eligible Basis

Back 30

the cost to construct or rehabilitate the Tax Credit units and the common areas

Front 31

What is included in Eligible Basis?

Back 31

• Majority of all Construction Cost
• Allowable Developer Fees
• Construction loan interest
• Construction cost of amenities that the residents can use at no cost

Front 32

What is excluded from Eligible Basis?

Back 32

• Land Cost
• Interest on Permanent Loan
• Construction cost of amenities that the residents have to pay a fee to use

Front 33

What is Qualified Basis?

Back 33

• Refers to the dollar amount that is eligible for housing tax credits
• It is the base that is multiplied by the credit percentage to determine the annual credit
• Eligible Basis * Applicable Fraction = Qualified Basis

Front 34

First Year of Credit Period

Back 34

Either the year the building is placed in service or the following year

If it is not the year the building is placed in service, owner must elect to defer the credits which is done on the Form 8609

Front 35

Unit is considered to be qualified when ____________________.

Back 35

Occupied by a qualified income eligible household

Front 36

Safe Harbor Rule

Back 36

• Applies to any building that defers receiving credits until the following year
• Certifications can be completed when the building is acquired so that if the residents' income exceeds the income limit at the start of the deferred year, the households do not have to relocate

Front 37

Can an owner claim acquisition credits without rehab credits?

Can an owner claim rehab credits without acquisition credits?

Back 37

No - Owner cannot claim acquisition credits without rehab credits

Yes - Owner can claim rehab credits without claiming acquisition credits

Front 38

Tax Credit Recapture

Back 38

• When this happens, the owner is not able to take the tax deduction for the Tax credits or sell the Tax Credits to the investors
• If they have already been taken or sold to investors, the owner must repay the amount that has been received plus any penalties, fees and interest

Front 39

3 things that trigger tax credit recapture

Back 39

• Disposition of the property
• Noncompliance
• Casualty Loss

Front 40

Disposition of Property

Back 40

• Sale of a LIHTC property to a new owner can elicit recapture of the credits that were previously claimed by the original owner
• State agencies must be notified of the sale of the property
• New owner assumes all liability for the remaining compliance and extended use period

Front 41

Noncompliance

Back 41

• Noncompliance can happen when the Extended Use Agreement (EUA), Land Use Restriction Agreement (LURA) is violated or any terms are not fulfilled
• Compliance rules for eligibility or income calculation not followed resulting in an OI household

Front 42

Casualty Loss

Back 42

Generally causes a decrease in the eligible basis

Caused by damage to a unit or building that makes the unit not suitable for occupancy

Front 43

2 types of Casualty Loss

Back 43

Localized - this is damage inside the unit; this can result in Reduction or Recapture

Widespread - this type of loss is generally on a large scale caused by an act of nature; is not considered widespread loss unless it is in a Presidentially Declared Disaster area

Front 44

Localized Casualty Loss

Back 44

Reduction - there is not recapture if the unit is restored in a reasonable period of time; if it is restored by the end of the taxable year there is not reduction; if it is not restored until sometime in the next taxable year, there is a reduction of tax credits for the months that the unit is being repaired; If the unit is not restored by the end of the 2nd year, this will result in the recapture of tax credits.

Front 45

Widespread Casualty Loss

Back 45

• The owner receives temporary relief from reduction and recapture
• The owner has 2 years from the end of the year in which the president declares it a major disaster.
• During these two years, the owner can continue to claim credits.