Q & A | PHA Verifications for LIHTC Purposes Post HOTMAAug 09, 2023
Question from a Blog Reader
We know that HOTMA has now introduced PHA verifications to HOME and NHTF requirements. HOTMA says that for rental-assisted households, the owner must obtain a written statement from the PHA, and "the statement must indicate the tenant’s family size and state the amount of the family’s annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant’s annual income does not exceed this limit.” When using the PHA determination of income, do we just accept the statement without reviewing the resident file to determine if the PHA determination was calculated correctly?
Summary: The state LIHTC agency, HOME PJ, or NHTF grantee is not required to examine the accuracy of the PHA determination, any more than they do any other 3rd-party verification. Interestingly, they do not even necessarily need the specific income amount that the PHA determined. Notice above that a statement that the household is below the applicable limits is sufficient in HOTMA.
This provision is new to HOTMA for HUD, HOME, and NHTF properties, but has existed in LIHTC regulations for decades at Treas. Reg. 1.42-5(b)(vii). This says “in the case of a tenant receiving housing assistance payments under Section 8, the documentation requirement of this paragraph (b)(1)(vii) is satisfied if the public housing authority provides a statement to the building owner declaring that the tenant's income does not exceed the applicable income limit.” (underlined emphasis ours) The owner/agent technically don’t need income dollar amounts to follow this rule. However, some state LIHTC agencies add a state requirement that the PHA provide numbers (on the verification or through the 50058 certification form) to complete the TIC. However, not having the numbers would be noncompliance with state policy, and probably not reportable to the IRS as long as the information required in the regulation above was provided. Not all states require this, however. Some allow something like the phrase “PHA-determined eligibility” on the TIC and leave it at that (supported of course, by the PHA verification stating that the household is below the applicable LIHTC limit).
Historically, there have been some state HFAs that were uncomfortable with relying on the PHA numbers and prohibited this IRS allowance. They may be uncomfortable with perceived or real errors on the part of PHAs that they have heard of or are directly aware of. However, we are at the mercy of the accuracy of any third-party verification source and some of these states are reexamining their policies. Using PHA verification as a third-party verification would stand up to IRS scrutiny, so this is again a matter of state rules, not the IRS. Considering current staffing challenges at sites and other levels of property management (and state HFAs), it is a good idea to ensure that a very good justification exists to preclude this type of verification from a knowledgeable 3rd party PHA that is acceptable to the IRS.
Also relevant in the HOTMA era, is that a policy prohibiting PHA verification for LIHTC properties will require two income certifications for units that are LIHTC and also HOME or NHTF. HOTMA requires that HOME and the NHTF MUST use the PHA determination of income for households that receive project-based PHA assistance and also MUST use the PHA determination for tenant-based assistance for NHTF. This will also apply to HOME if the PJ adopts a policy requiring it. HUD did this to meet HOTMA statutory requirements but reportedly used the LIHTC regulation as a model to start with in an effort to align programs. HOTMA is catching up with what LIHTC has allowed for decades. At this point, state HFA LIHTC policy is the only barrier in some states to the simplified process that benefits LIHTC/HOME/NHTF and PHAs. We are confident that those state HFAs that continue to prohibit PHA verification after HOTMA takes effect will have carefully examined the matter and will have a well-reasoned rationale justifying the extra cost to the properties, applicants, residents, and themselves. These arguments will not relate to risk to the tax credits, as the IRS has long directly authorized the use of PHA verifications.
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