Scenario

An income-qualified family occupies an LIHTC unit. Every family member is a full-time student. The family receives federal Title IV-E adoption assistance for one child. A compliance reviewer concludes that the unit is disqualified because every family member is a full-time student; they do not meet another exception, and they do not receive TANF.

What color is the compliance stoplight?

🟢 Green Light – Tax credits are safe
🟡 Yellow Light – Proceed with caution
🔴 Red Light – Tax credit loss is imminent

Food for thought: The LIHTC student rule contains several exceptions. Does adoption assistance fit one of them?

Stoplight Reveal

🟢 Green Light – Tax credits are safe

The all-student rule does not disqualify this unit. Title IV-E adoption assistance qualifies under the “Title IV” student exception.

More Details

Generally, a unit occupied entirely by full-time students does not qualify as a low-income unit unless one of the statutory student exceptions applies. IRC §42(i)(3)(D)(i)(I) provides an exception when a student is receiving assistance under Title IV of the Social Security Act. Because TANF is authorized under Title IV-A, this exception is often referred to as the “TANF” exception. However, Title IV also includes federal adoption and foster care assistance under Title IV-E. In this scenario, one of the full-time students is receiving Title IV-E adoption assistance. Therefore, the Title IV student exception applies even though every family member is a full-time student.

Compliance Insight

When every family member is a full-time student, do not stop at the general prohibition. Test each statutory exception and document the facts supporting any exception used. For adoption assistance, verify that the assistance is provided under Title IV of the Social Security Act.

References

• IRC §42(i)(3)(D)(i)(I)
• Social Security Act, Title IV-E; 42 U.S.C. §673 – Adoption Assistance
• IRS Publication 5913 (Rev. Jan. 2024), Chapter XVII, Category 11l, A.2 – Units Comprised Entirely of Full-Time Students

Did the result surprise you? Watch for next week’s Compliance Stoplight Test.