Low Income Housing Tax Credit Compliance Policies and Procedures Manual

1. Low Income Housing Tax Credit Compliance Policies and Procedures Manual • Revised annually • Check Division website for updates • Current version is required to be on-site www.housing.nv.gov

2. Lease-up Plan • Useful lease-up plan: • Identifies total number of TC units required • Presents a strategy for marketing vacant units to eligible tenants • Describes method of surveying in-place tenants to assess their eligibility (rehab) • Establishes procedures for ensuring ineligible existing tenants are not improperly terminated (rehab) • Includes system for tracking progress of qualifying TC units www.housing.nv.gov

3. What is a “Qualified Unit” • Income within limits • Gross rent within limits • Unit suitable for occupancy • Non-discrimination in availability • Non-transient www.housing.nv.gov

4. TC Fundamentals • Tax credit units must be rented to households that are income eligible • Rents for tax credit units must be restricted to gross maximum rent limits www.housing.nv.gov

5. Income Limits • Set by HUD annually • Available on Division website shortly after issuance • NHD also recommends the rent & income calculator at www.novoco.com (Novogradac website) www.housing.nv.gov

6. Target Low-Income Occupancy Test • Can be from 20/50 or 40/60 up to 100% TC occupied • Listed on Application and in Declaration • Number of units leased by end of lease-up period affects percentage of Tax Credits claimed www.housing.nv.gov

7. Placed-In-Service Date • PIS date determines the year Tax credits can be claimed • For Rehab project – there are two dates • Acquisition Date • Date Rehab completed www.housing.nv.gov

8. Placed-In-Service Deadline • All projects must be PIS by end of second calendar year from date of allocation of TC • PIS date recorded on IRS Form 8609 • Project Owner must have documentation of PIS date for every building in project www.housing.nv.gov

9. First Year 8609 • It is mandatory to submit to the Division a copy of the first year 8609 with bottom section completed to include first year credit determination • The year credits are first claimed determines type of audit. First year is file audit only • Physical audits begin two years after the last building is place in service. www.housing.nv.gov

10. 8609 REALLY Important • Failure to provide completed/signed copy of First Year 8609 WILL result in issuance of IRS 8823 • IRS is requiring copy of completed first year 8609 be sent to them. Division also requires copy for our records. www.housing.nv.gov

11. Minimum Set-aside Test • 20/50 set-aside • 40/60 set-aside • Project Owner selects and reports on First-year 8609 • Note: if 20/50 chosen , no TC unit in project can exceed 50% income limit www.housing.nv.gov

12. Minimum Set-aside Deadline • Minimum set-aside must be met no later than close of first or second year of PIS date • First or second year must be determined by the Project Owner • Minimum set-aside must be met before any credits can be claimed www.housing.nv.gov

13. Tenant Facilities • All tenant facilities included in Eligible Basis must be available to all tenants at no additional charge www.housing.nv.gov

14. Vacant Unit Rule • Vacant units can be counted as TC unit if occupied by TC qualified tenant prior to vacancy • Reasonable attempts must be made to market • Cannot be held vacant • Must be rent-ready www.housing.nv.gov

15. Waiting Lists • If your property has multiple income/rent restrictions • It is important you develop a waiting list policy to assure fairness www.housing.nv.gov

16. Tiered Rents • Know your tiered income/rent limits. • Have written policy for waiting list www.housing.nv.gov

17. Next Available Unit/140% Rule (mixed use) • When household income increases to over 140% of applicable income limit = Over-Income Unit • Over-Income Unit may continue to be counted as low-income unit if: • Unit must continue to be rent-restricted • Next comparable size unit in building must be rented to eligible low-income tenant www.housing.nv.gov

18. NAUR/140% continued • Project Owner must continue to rent all comparable units available or subsequently available until Applicable Fraction (excluding Over-income units) is again met • If next comparable unit is leased to an ineligible tenant – any over-income unit ceases to count as TC unit www.housing.nv.gov

19. NAUR in 100% project • Applies only if multiple levels of income limits and only to determine eligibility for specific lower limits • Tenants cannot be evicted without proper cause • Cannot be evicted because over-income www.housing.nv.gov

20. NAUR in Mixed Income Project • Within building transfers allowed and allows status transfers even if over 140% at time of transfer • This rule is violated if unit vacated by over-income household is rented to non-qualified tenant • If this occurs, ALL over-income low-income units in same building lose their status as low-income units www.housing.nv.gov

21. Non-transient Occupancy • Initial lease term 6 months or more Single Room Occupancy and transitional housing for homeless exempt from this requirement www.housing.nv.gov

22. Declaration (DRC) • Declaration of Restrictive Covenants for Low-Income Housing Tax Credits • Details provisions and commitments of Project Sponsor regarding Tax Credit Project ALL PROPERTIES SHOULD HAVE COPY ON-SITE www.housing.nv.gov

23. Employee Units • May be counted as low-income unit or common area unit • Counted if staff member is qualified like any other resident. (If receiving free rent the amt is counted towards income) • Not counted if staff would not qualify unit, then becomes part of project’s common area (Recommend all units be qualified first) PLEASE UTILIZE THE NEW E.1 “Request for Manager/Employee/Exempt Unit” form www.housing.nv.gov

24. Employee Unit cont. • If unit changes, notify Division immediately • Failure to notify of change could cause non-compliance at year-end transmission www.housing.nv.gov

25. Relocating/Transfer of Initial Qualifying Tenants • During Initial Lease-up period, existing tenants CANNOT be relocated for purposes of qualifying more than one tax credit unit • Within the same building units just swap status • It is a new move-in when a resident moves to another building (There could be exceptions to this rule in an acquisition rehab property) www.housing.nv.gov

26. Section 8 Certificates and Vouchers • Project Owner may not discriminate against Section 8 certificate or voucher holders • Project Owner must certify annually they have not refused to lease • Project Owner must also certify no findings of discriminations under Fair Housing have occurred • Project Owner must document reasons for refusal to lease to any Section 8 applicant www.housing.nv.gov

27. Price of Non-Compliance • Any period of non-compliance may result in loss of Tax Credits for the Owner • File and Physical Inspection findings both cause non-compliance • Reputation – possible loss of ability to participate in future TC & Bond programs in Nevada www.housing.nv.gov

28. Price of Non-Compliance Cont. • Division may conduct additional audits and charge additional fees for staff time • Division may impose additional requirements www.housing.nv.gov

29. IRS has final word • The IRS makes the final decision regarding how or when to recapture tax credits • Division only reports non-compliance on IRS Form 8823 www.housing.nv.gov

30. Keeping Track • Maintain records by BIN # and unit # • Three types of records: • Tenant Files • Monthly unit/rent occupancy tracking data • Project records (eligible basis records and original health, safety & building code reports/notices) www.housing.nv.gov

31. Project Records • Utility allowance data • Fair Housing Compliance Records • Tenant selection criteria and procedures • Project maintenance information • Project security information www.housing.nv.gov

32. Inspection Records • Project Owner must retain original local health, safety, and building code violation reports or notices • For projects with other funding sources such as HUD or USDA, records of the most recent compliance audit performed by these agencies must be kept and made available to the Division staff if requested www.housing.nv.gov

33. Part 1 – Lease and Addendum Part 2 – TIC and verifications Part 3 - Application Part 4 – Section 8 Documents Part 5 – Misc. documents Recommended File Format www.housing.nv.gov

34. FILE FORMAT CONT. • Although the preceding is recommended by the Division, any format that is easy to follow and consistent throughout all files will be acceptable www.housing.nv.gov

35. Annual Reporting Requirements • Exhibit C completed and transmitted via internet COL system • Signed and hard-copy mailed to Division • For BOND projects – Certificate of Continuing Program Compliance – Refer to Regulatory Agreement • Exhibit C.1 – submit when any mgt changes occur • Exhibit C.2 Utility Allowance Certification (revised) www.housing.nv.gov

36. Contact Information Form(Form C.1) • The division requires Project Owners to submit updated project, ownership and management information - At time property is placed in service - Whenever there is a change - Annually with year end reports www.housing.nv.gov

37. LIHTC Record Retention Requirements • Compliance period plus 6 years for initial qualifying files • 6 years past end of tax year of tenancy for other files • Fire proof safes recommended • Duplicates kept off-site recommended • Electronic storage of records is allowed as long as the electronic storage system satisfies the requirements in Revenue Procedure 97-22 www.housing.nv.gov

38. Monitoring Fees • Project Owners are billed annually for monitoring fees due. Cost is per unit • Division reserves right to change monitoring fees on a program or project basis to cover cost of compliance monitoring www.housing.nv.gov

39. Additional Fees if Non-compliant • If the Division discovers excessive non-compliance, there may be additional fees assessed www.housing.nv.gov

40. On-Site Compliance Review • NHD notifies Project Owner and Management Company in writing • Notice will NOT specify which records will be examined • PO/Mgmt Co to give advance notice to all tenants of possible inspection a minimum of 24 hours prior to scheduled inspection date www.housing.nv.gov