Jill King

1. Jill King Senior Compliance Specialist The Woda Group

2. Discussion Topics • HUD Handbook 4350.3 CHG 4 • Income/Assets • Student Status – IRS Clarification • Acquisition/Rehabilitation

3. HUD Handbook 4350.3 CHG 4 CHAPTER 5 Determining Income And Calculating Tenant Rent Added clarification for existing text.

4. Paragraph 5-3 Added the Mandate for Use of HUD’s Enterprise Income Verification (EIV) System Does not apply to LIHTC

5. Paragraph 5-6.A.3.d • Dependents • CHG 3: Include Earned and Unearned Income for Foster Adults The earned income of a full-time student 18 years old or older who is a dependent is excluded to the extent that it exceeds $480. The paragraph clarifies how earned income of a full-time student relates to the exclusion of income exceeding $480 annually.

6. Paragraph 5-7.G.4.b and d • Balances held in retirement accounts. b. IRA, Keogh, and similar retirement savings accounts are counted as assets, even though withdrawal would result in a penalty, *unless benefits are being received through periodic payments.* d. Include in annual income any retirement benefits received through period payments. *Do not count any remaining amounts in the account as an asset.*

7. Retirement Accounts • Receiving Periodic Payments • Count as Income and disregard account balance • Not Receiving Periodic Payments • Count as an Asset

8. Paragraph 5-13.A • Updated the order of acceptable methods of verification. • Upfront-Income Verification (UIV) • Third-party verification from source (written) • Third-party verification from source (oral) • Family Certification

9. Paragraph 5-13.B • Added detail for the types of third-party verification in the order of their acceptability. • An original or authentic document generated by a third party source that is dated within 120 days from the date of receipt by the owner. Such documentation may be in possession of the tenant (or applicant), and commonly referred to as tenant-provided documents. These documents are considered third-party verification because they originated from a third-party source.

10. The Waiting Game *Removed two paragraphs titled 5-13 Review of Documents and Family Certification. • Provision for waiting two weeks for a third-party to return a request for verification – GONE! • IRS 8823 Guide – Page 4-7 Footer Reference 16: Third party contact are considered impossible if an employer does not respond, third party charges a fee, or no third party is available. Generally a third party contact is considered delayed if a response will not be received within two weeks, but can be less if it is determined that the third party will not respond. • CHG 4 still references the section Review of Documents in Sec 5-13.B.1.c.2.c Internet Verification

11. Paragraph 16.B.1 and 2 • Clarified valid verification dates • Verifications are valid for 120 days from the date of receipt by the owner, *not the effective date of the 50059.* • If verifications are more than 120 days old *from the date of receipt by the owner*, the owner must obtain new verifications. • IRS 8823 Guide – Page 4-31 The preferred verification method is through third-parties, and such verifications must be no older than 120 days before the effective date of the Tenant Income Certification.

12. Appendix 3(Acceptable Forms of Verification) • Added Chapter References to all factors • Changed the required number of check stubs from 6-8 to: • Require most recent *4-6* consecutive pay stubs; do not use check without stub.

13. Income/Assets • Interviewing the Family • Effect March 1, 2013 SSA Fully Electronic • Direct Express Debit Card • Not associated with bank account • Current balance is considered to be an asset (Savings Acct) The balance can be obtained form an ATM, through the online account service, or a paper statement. The verification document must identify the account and the account holder. The verification must not be more than 120 days old at the time of recertification. • Assets Disposed of for Less than FMV • Two Year Period

14. Student Households • Exceptions – There are now 5 • All members must meet the exception: • Married and entitled to file a joint tax return • A single parent with at least one dependent child. This parent is not the dependent of another individual and the child(ren) is/are not dependent(s) of someone other than the parents

15. One member qualifies a household: • At lease one member of the household is receiving assistance under Title IV of the Social Security Act (e.g. TANF) • At lease one member of the household was previously under the care and placement responsibility of the state agency responsible for administering a plan under Part B or Pare E of Title IV of the Social Security Act (Foster Care) • At lease one member of the household participates in a program receiving assistance under the Job Training Partnership Act, Workforce Investment Act, or under other similar federal, state or local laws

16. Married and Entitledto file a joint income tax return • LIHC Newsletter #52 – Issued August 27, 2013 • Rev Ruling 2013-17 – Released August 30, 2013 • Updated Email – Released August 30. 2013

17. AcquisitionandRehabilitation

18. Acquisition • PIS Date: Date purchased • Form 8609: Receives a separate Form 8609 from the Rehab • Credit Period: Cannot begin until the Rehab Credit Period begins • Resident Certifications: 120 days before or after Acquisition PIS date

19. Rehabilitation • PIS Date: Owners have 24 months to complete rehab and include those costs as eligible for tax credits Building rehab (if there are multiple buildings) is typically completed building by building. Credit flows by building; therefore, management must know credit delivery timeframes in order to manage credit flow effectively.

20. Credit Period Begin Date In what year will credits begin? Year project is acquired OR The year after project is acquired This can also change – Timing is Everything!

21. Qualifying Existing Households “…initial tenant income certification is completed within 120 days after the date of acquisition using the income limits in effect on the day of acquisition.” “Alternatively, if the new owner has access to the property before the acquisition date, tenant income certifications may be completed before the acquisition using the current income limits. The effective date is the date of acquisition.”

22. Rev Proc 2003-82 (Safe Harbor) “…, a unit occupied before the beginning of the credit period will be considered a low-income unit at the beginning of the credit period, even if the household’s income exceeds the income limit t the beginning of the first year of the credit period, if two conditions related to income qualifications are met, and the unit must be rent restricted.”

23. First Condition “…the household must have been income qualified at the time the owner acquired the building or the date the household started occupying the unit, whichever is later.” • Families in place at time of acquisition • New families who move in after acquisition

24. Second Condition “The income of the individuals occupying the unit are first tested for purposes of the available unit rule … at the beginning of the first taxable year of the building’s credit period.” “Pencil Test”

25. Q & A Thank you for your attention and participation!