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Article | Review of updated HOTMA implementation guidance

adjusted income calculations article hotma hud income calculations lihtc Feb 17, 2024

As announced in this blog, HUD has adjusted HOTMA Implementation guidance by releasing a revised version of the joint MFH/PIH Notice originally released last September. The updated Notice can be downloaded HERE. Here we will summarize most of the changes. Most of the refinements change policies for HUD properties.

Items that will affect LIHTC properties are indicated as such by being separated from the other items with lines above and below (as illustrated with this paragraph). LIHTC-specific points are IN BLUE. A version of this article with just the LIHTC issues can be downloaded HERE

Attachment A | Attachment A replaced a placeholder with completely new material. HOTMA introduced limitations on assets that assisted families can own. This includes real property suitable for occupancy and when total net family assets exceed $100,000, as adjusted. When HUD issued the original Notice, it deferred guidance on the asset limitations to a future date. The new guidance is found in significant additions to Appendix A. Our summary of this portion of the Notice is found HERE.

202/162 Project Assistance Contract | Throughout the updated implementation notice, HUD has added references to the 202/162 PAC programs and the programs' regulations. The HOTMA-conforming changes were issued through a recent Federal Register notice HERE. This final rule in this Federal Register notice amends regulations governing Section 202 Direct Loans for Housing for the Elderly and Persons with Disabilities (“Section 202 Direct Loan”), including the Section 202 Projects for the Elderly or Handicapped—Section 8 Assistance (“202/8”) and the Section 202 Assistance for Nonelderly Handicapped Families and Individuals—Section 162 Assistance (“202/162”) programs. The amendments were necessary to conform the Section 202 Direct Loan program regulations with HUD's final rule implementing sections 102, 103, and 104 of HOTMA. The final rule also corrected outdated cross-references in the Section 202 Direct Loan program regulations and updated the list of protected classes applicable to affirmative marketing requirements for the Section 202/8 and Section 202/162 programs.

Public Housing Plans | HUD removed a sentence that incorrectly stated that PHAs must pick a compliance date that falls before the deadline for their PHA Plan submission. HUD also added Moving To Work Plans (MTW) to the list of documents requiring updates due to HOTMA. [Joint Implementation Notice 6.1]

Attachment B | In B.2 of the Implementation Notice, language is added to Step 2 of the three-step process for calculating income. Specifically, the PHA/MFH Owner may use the verification obtained during an interim certification for an annual recertification if there have been no other changes to annual income since the interim certification. In Step 3, HUD replaced the word “paycheck” with “pay stub.” Paychecks do not provide needed information and are not acceptable as verification, while paystubs provide the necessary details. The following examples were also changed.

Example B1: The SSA COLA amount was changed to the actual 2024 COLA amount of 3.2%.

Example B3:  “Four current and consecutive paystubs” was changed to “two current and consecutive paystubs" to conform with other provisions of the Implementation Notice. 

Example B4:  The COLA amount was changed to 3.2% and the calculations were adjusted.

Attachment C |  In C.2, of the Implementation Notice, it is clarified that while the elderly/disabled family deduction is effective on January 1, 2024, PHAs/MFH Owners will apply the new deduction amount to the sooner of a family’s next annual or interim certification, following the date on which the PHA/MFH Owner implements the new elderly/disabled family deduction.

In C.4.a, it is explained that the phased-in relief for the health and medical care expense deduction will not start until after the PHA/MFH Owner implements the phased-in relief. Likewise, in Table C1 (the Phased-in Relief Timing), the date of January 1, 2024, is replaced with the date on which the PHA/MFH Owner implements the phased-in relief.

In C.5, the phrase “age 12 and younger” is changed to “under 13 years of age.” Although these are the same age, the new language aligns with HUD’s definition of “child-care expenses” in 24 CFR 5.603. HUD also clarified in this section that the amount of child-care expenses (not the expenses incurred to enable a family member to work) deducted from annual income must not exceed the amount of employment income that is included in annual income.

In C.6.b, the date by which PHAs/MFH Owners are encouraged to communicate the new hardship exemptions to applicants and families replaces January 1, 2024, with the date on which the PHA/MFH Owner begins to comply with HOTMA.

In C.7, HUD added another example of a permissive deduction that PHAs may choose to adopt. This is the amount paid from a family’s annual income, and not another source such as Medicaid or a child welfare agency, for unreimbursed health or medical expenses of a foster child or a foster adult. 

Attachment E | In E.2, HUD clarified that PHAs may establish a permissive deduction to allow the unreimbursed health and medical expenses paid by the family on behalf of foster children and adults to be deducted from annual income. Permissive deductions, including this one and the provision immediately above, only apply to Public Housing. 

Attachment F |  In F.1, clarifying language is added to address how PHAs/MFH owners must consider certain amounts that are taken out of a person's wages or benefits before the family receives them. When a family member’s wages or benefits are garnished, levied, or withheld to pay restitution, child support, tax debt, student loan debt, or other applicable debts, PHAs/MFH Owners must use the gross amount of the income, before the reduction, to determine a family’s annual income. This is in contrast to child support or alimony, where only income received is counted as income. This applies to LIHTC properties.

F.4.e, the method for subtracting federal tax refunds and refundable tax credits from assets is changed to accurately reflect HOTMA's statutory and regulatory requirements. The notice originally stated that the tax refund was to be subtracted from the asset account into which the tax refund amount was deposited. To align with HOTMA, the tax refund must instead be subtracted from the total value of net family assets. HUD deleted the reference to a tax refund or refundable tax credit that is deposited into an excluded asset, as this is incorrect. The tax refund/credit amount must be subtracted from total net family assets, regardless of where the amount is deposited. This applies to LIHTC properties.

In Example F2, it is clarified that the Rodriguez family owns a total of $10,000 of net family assets.

In F.5, regarding the start date for using the HUD's passbook rate, HUD updated the date of January 1, 2024, with the date on which the PHA/MFH Owner implements the new passbook rate. Also added is clarifying language on PHA flexibility around passbook rates up until they implement the new passbook rate. Depending on the state LIHTC agency's HOTMA implementation policy, this may apply to LIHTC properties. 

In F.6.b, HUD added clarifying language on how PHAs/MFH Owners are to impute asset income using the HUD-published passbook rate.

Attachment G | G.1.f, HUD clarified that non-recurring, non-monetary in-kind donations from friends and family may be excluded as non-recurring income. Be careful to note that these must be truly nonrecurring and will be counted if they will recur, even if they are sporadic. This applies to LIHTC properties.

G.6, clarifies that workers’ compensation payments, regardless of the length or frequency of the payments, are always excluded from annual income. This changes the former guidance that counted worker's compensation if it was going to last a full 12 months after the effective date of a certification. This applies to LIHTC properties. 

Example G6 was updated to reflect the above clarification.

In G.16.d, HUD corrected the example reference to Example G13, (from Example G1) and reversed the wording on the process for calculating the excess amount of student financial assistance included in annual income. The previous one-step process was described incorrectly and it said that student financial assistance was subtracted from student expenses. It is the opposite. This error was also corrected in Chart G2This applies to LIHTC properties.

Attachment I | In I.2, it is clarified in the PHA/MFH Owner discretion section that PHAs/MFH Owners have discretion on whether to process earned income increases only if there has been a previous interim decrease since the last annual reexamination.

Attachment J |  In J.1, HUD added footnote J1 to reduce confusion about the Form HUD–9886/HUD–9887 release of information requirements for family members who become a head of household, co-head, or spouse. These must sign the release forms regardless of age.

In Table J1, HUD added instructions on the use of EIV for new admissions in the row on Income Information for PIH Programs and Income Report for MFH Programs. HUD also added a footnote reminding PHAs/MFH Owners that they must rely on other documents to verify families’ reported income before admission.

Table J2, Level 6, HUD clarified that PHAs/MFH Owners must pull the EIV Income Report for each family at every Annual certification unless using Safe Harbor documentation to verify the family’s income. HUD also added to the Level 1 row that self-certification may be used as the highest form of verification when the family reports zero income.

J.5.a, clarified that PHAs/MFH Owners are required to obtain a minimum of two current and consecutive pay stubs for determining projected annual income from wages when they are relying on pay stubs for Level 4 documentation. The word projected has been added in this version. This applies to LIHTC properties.

J.8 is renamed “Zero Income Procedures” and updated this section to include guidance to PHAs/MFH Owners on accepting families’ self-certifications of zero income at admission and reexamination without taking further steps to verify the zero reported income.

Appendix: Sample Net Family Assets Self-Certification Form | This new Appendix has been added. This form covers many items related to asset limitations that do not apply to LIHTC properties. Alternate forms will likely serve non-HUD properties better. 

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