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Q&A | Does HOTMA Make the "Under $5,000" IRS Guidance Obsolete?

assets hotma lihtc verifications Jan 17, 2024

Question from a Blog Reader

"Your series on the three HOTMA $50,000" rules really helped me. I had not realized that I had been confusing the non-necessary personal property rule with the imputed asset rule and that the $50,000 in each case was for a different asset total. Thanks for sorting that out. My question now relates to the OTHER $50,000 rule - the one that allows for self-certification of total net assets if they do not exceed $50,000. Has this rule made the Revenue Procedure obsolete that allows self-certification if assets do not exceed $5,000?


Summary answer: No. However, we believe that HOTMA automatically UPDATED the Rev. Proc. and that $50,000 asset self-certification is acceptable for all LIHTC certifications and recertifications,  

States are granted wide authority on how income and assets are verified for the LIHTC program. In all cases of LIHTC verification rules, we would encourage a person to check with their state LIHTC agency. However, we have observed that many state agencies, after careful consideration, have adopted the following position. Others are still formulating their post-HOTMA policies. Either way, we concur with the below approach and feel it provides a reasonable model in keeping with the IRS and HUD guidance.

Revenue Procedure 94-65 introduced the LIHTC concept of self-certification if assets do not exceed $5,000. In building the requirements of the $5,000 asset rule, the Rev. Proc. refers to the HUD 24 CFR regulations. The only asset rule that involved $5,000 when the Rev. Proc. was written was the HUD imputed asset rule. The effect of the rule is that self-certification of assets is acceptable when the additional step of imputing asset income is not required. HUD did not allow for self-certification at all for assets at that time, so asset self-certification was unique to the LIHTC and had nothing to do with HUD verification rules. HOTMA changed the $5,000 imputed asset income threshold to $50,000, as adjusted annually for inflation. As this was the basis for the original LIHTC self-certification rule, we believe that this provides a basis for adjusting the $5,000 number to $50,000 when HUD changed the imputed asset income threshold. 

Why does this matter? HOTMA also created a $50,000 asset self-certification verification rule, but if we are using that as our basis for a self-certification rule for the LIHTC, it requires full verification of all assets at least every 3rd year. Simply adjusting the $5,000 number in the original Rev. Proc. based on the imputed asset income threshold (the original basis for the $5,000 number) would not require that we adopt the "every 3rd year" full verification standard for less than 100% LIHTC projects that are subject to annual income recertification. This seems more in keeping with the original intent of the IRS guidance and continues to reduce the burden on owners/agents and households being certified when the step of imputing asset income is not necessary. 

Bonus! We are working on an LIHTC Asset Certification form for some of our clients. It addresses asset self-certification and non-necessary personal property issues. What do you think? Check it out HERE

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