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Low-Income Housing Tax Credit (LIHTC) Compliance

Virginia Housing remains open for business, but working remotely. Our mission is to help all Virginians attain a quality affordable home.

The federal Housing Tax Credit Program is sponsored by the U.S. Treasury Department and administered in Virginia through Virginia Housing. The program is authorized under Section 42 of the Internal Revenue Code of 1986 to encourage development of affordable rental housing by providing property owners with federal income tax credit.

Virginia Housing’s Compliance Department monitors properties that have received tax credits by periodically verifying that qualified units provide safe, decent and affordable housing, and that eligible renters occupy these units.

Tax credit qualification is available only for units rented to households with income under 20%, 30%, 40%, 50%, 60%, 70%, or 80% of area median income published annually by HUD.

Rents on qualified Tax Credit units are restricted. Maximum allowable rent is based on the number of bedrooms and AMI as established annually by HUD. If a household pays for utilities, the maximum rent must be adjusted by the applicable utility allowance.

We strongly encourage owners to review Section 42 and Section 142 of the IRS Code and their Extended Use Agreement for specific eligibility requirements.


IRS Notice 2021-12 Extends COVID Relief Until 9/3/2021

On January 15, 2021, the Internal Revenue Service (IRS) issued IRS Notice 2021-12, which extends and expands the relief of certain Tax Credit and Tax Exempt Bond program requirements. The relief covers activities due between April 1, 2020 through September 30, 2021. IRS Notice 2021-12 supersedes IRS Notice 2020-53.

The covered program activities include:

  1. Annual recertifications are waived through September 30, 2021, and must resume October 1, 2021.
  2. Compliance monitoring inspections and reviews are waived until September 30, 2021, and must resume October 1, 2021.
  3. Temporary closure of property amenities and common space in response to COVID-19 is permitted until September 30, 2021.
  4. Casualty Loss restoration extension up to 12/31/2021 is permitted upon approval.
  5. Correction Period extension of audits up to 12/31/2021 is permitted upon approval. 

Although IRS Notice 2021-12 waives annual recertifications with 3rd party income verification between 4/1/2020 and 9/30/2021, verification of household occupancy, full-time student status, and annual updates to tenant rent and utility allowances must be completed in HDS NextGen using the Annual Recertification (AR) function. The AR must be completed by the certification effective date or all low-income units. 

Temporary Emergency Housing 

Temporary Emergency Housing for medical or other essential personnel is permitted until September 30, 2021. The project may rely upon the guidance in Rev. Proc. 2014-49 or Rev. Proc. 2014-50. Approval is required from Virginia Housing before providing temporary emergency housing. Please review the Virginia Disaster Relief Guidance and document the tenant file with the Virginia Displaced Household Certification Form.

Review the IRS notices, and contact your assigned Compliance Officer if you have any questions.

Annual Recertification for 100% Low-Income Properties

Virginia Housing is removing the state requirement for 100% low-income properties to complete the first annual recertification with 3rd party verifications; however, annual verification of household occupancy, full-time student status, confirmation of rent and utility allowances, along with a self- certification of household income must be updated in the HDS NextGen system by the certification effective date for all low-income units in properties with Tax Credits and Tax Credits with Tax Exempt Bonds

Tax Credit and Tax Exempt Bond properties with market units must continue to complete annual recertifications with 3rd party documentation.

Average Income Minimum Set-Aside

October 30, 2020, the IRS published a notice of proposed guidance on the Average Income Test (AIT) minimum set-aside. The proposed regulations affect owners of low-income housing projects, tenants in those projects, and Virginia Housing, as the agency which administers the low-income housing tax credit. Public comments can be reviewed on the Federal eRulemaking Portal (reference IRS and REG-104591-18).

The IRS proposed regulations for the Average Income Test conflicts with Virginia Housing guidance allowing unit designation changes ("floating units"). Virginia Housing is working with the National Council of State Housing Agencies and submitted comments requesting that the final rule allow unit designation changes. Until the final rule is released, Virginia Housing will continue to monitor properties under our current guidance. Once the IRS releases the final Average Income Test, our teams will review and revise our guidance as needed to ensure existing Average Income projects can comply with the final rule as seamlessly as possible.

Send questions to compliance-assetmanagement@virginiahousing.com.

March 2018, the "Consolidated Appropriations Act of 2018" established a third minimum set-aside election for new federal housing credit allocations and amended Section 42(g)(1) of the IRS Code of 1986 (which defined a "qualified low-income housing project). The Average Income Minimum Set-Aside election includes new [expanded] income limitations permitted for qualified low-income housing projects at 20%, 30%, 40%, 70%, and 80% AMI. Currently, the HUD published MTSP income limits include 50% and 60% and HERA Special 50% and 60% limits for applicable areas.

For additional information on how to implement Average Income for your project in Virginia, review the Virginia Housing Average Income memo and video playlist with a visual description of Average Income.

VHDA's Average Income Memo Average Income Limits Memo - Updated April 2021
Virginia Housing’s “Understanding Average Income” Video Playlist "Understanding Average Income” Video Playlist


Current Tax Credit Compliance forms and documents Tax Credit Forms and Documents


Recognizing the impact that COVID-19 has had across the Commonwealth and on our business partners, Compliance & Asset Management will suspend the collection of Tax Credit monitoring fees for the 2020 reporting year. The collection of fees will resume for the 2021 Compliance Monitoring review period.

The Project Information Report (PIR) and the Owner Certification report will be sent to the primary management and owner contacts the first week of April 2021. The deadline to submit all completed and executed owner reports is June 1, 2021.

Things to Note:

  1. Immediately report all changes in property ownership, management agent, and on-site property contacts to your assigned Compliance Officer so we can update our records before the packets are distributed.
  2. The annual report questionnaire is due for projects where all buildings are placed in service by December 31, 2020.
  3. If all buildings are not placed in service by 12/31/2020, update your project contact information and submit the report.
  4. The annual owner's certification must be completed by the project taxpayer (owner), general partner, or a designated signor authorized by the project taxpayer or general partner.
  5.  **NEW** Properties with Average Income, and all buildings placed in service by 12/31/2020, must also submit a report showing all assigned unit designations as of 12/31/2020. 
     

To ensure you receive important updates, please Sign up for Compliance and Asset Management Updates, and select the "Property Manager" email list.

Annual Tax Credit Reporting Process Annual Tax Credit Reporting Process

Utility Allowance Estimates

Before using any utility allowance schedules posted on Virginia Housing's website, please ensure that your local PHA has adopted Virginia Housing utility allowances for use or that your only local PHA is a Virginia Housing administered program agency.  Detailed information may be found in the documents below.

  
  
  
90DayNoticetoResidents-Sample.doc90 Day Notice to Residents - Sample11/7/2016
IRS-2008-UA-Reg-Update.pdfIRS 2008 Utility Allowance Federal Register Regulation11/4/2016
IRS-2009-UA-Reg-Update.pdfIRS 2009 Utility Allowance Federal Register Regulation11/3/2016
IRS-2016-UA-Reg-Update.pdfIRS 2016 Utility Allowance Federal Register Regulation11/2/2016
IRS-2019-UA-Regulation-Update.pdfIRS 2019 Utility Allowance Federal Register Regulation12/20/2019
Bldg-by-Bldg-UAE-Spreadsheet.xlsxUtility Allowance Estimates by BIN Number Spreadsheet12/20/2019
VHDA-UA-Certification.pdfVirginia Housing Utility Allowance Certification form effective March 1, 202012/20/2019
VHDA-UA-Options-Procedures.pdfVirginia Housing Utility Allowance Options and Procedures effective March 1, 202012/20/2019

Archived 2020 COVID-19 Guidance 

Previous Virginia Housing guidance on tenant compliance and monitoring activities related to COVID-19 below:

VHDA's Average Income MemoCOVID-19 Compliance Monitoring Guidance for Owners and Management Agents

VHDA's Average Income MemoVirginia Housing COVID-19 Compliance Monitoring Activities

VHDA's Average Income MemoCOVID-19 Compliance & Asset Management Email Questions and Answers

 

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