Q & A | Why Certify a New Person's Income When Adding Them to a Unit at a 100% LIHTC Project

Question from a Blog Reader

"An auditor has completed a tenant file review and has issued a finding on a file that had an added household member years after the household initially moved into a unit at a 100% LIHTC project. The auditor requested an application, verification of income, and student status for the person who was added. The auditor referred to pages 4-4 & 4-5 of the 8823 guide for this issue. It states, “If the project is a 100% LIHC project, then the new tenant’s income is added to the income disclosed on the existing household’s original income certification.” Our question is, why? We are unsure why the income needs to be verified and then added to the move-in income when it has no bearing on anything. Once the household income qualifies, they remain income qualified. Also, as the project is 100% LIHTC, the Available Unit Rule does not appear to be an issue. Why are we required to do an income verification, and what does it mean when it states that we are supposed to add that income to the move-in income?

Answer

Summary: Persons who are added to the household have their income calculated to prepare for a possible future that may include other changes of household members.

Adding the household income to the most recent income certification at a project that is less than 100% LIHTC is an interim step to determine if the Available Unit Rule has been invoked until the household is fully recertified at their next annual income examination. In this case, however, the project is 100% and an annual income examination is not required. so that is not a factor. 

Still, certifying the new member's income is an important step to take. Before we explain why we suggest a change to the  statement “once the household income qualifies, they remain income qualified.” This is true if it is the original household. The 8823 Guide clarifies that it is the original household if at least one member of the original household remains (8823 Guide 4-5 & 6).

The reason that the 8823 Guide requires members who are added after move-in to have their income verified and certified even at a 100% project appears to be that the household qualification is based on the ORIGINAL household’s move-in eligibility. The IRS is flexible in that they allow us to consider this the same household if one member remains from the original household (8823 Guide 4-5 “Original Household No Longer Occupies Unit” (2)). However, in the future, if the person that is added later is ever left in the unit and all of the original household members have moved out, then the person who remains will have to have either qualified the day they moved in or qualify when they are they are left in the unit with no original household members. Capturing their income at move-in significantly increases their chances of qualifying at the time they are no longer enjoying the benefit of living with members of the original household. It is also a safe harbor that prevents an owner/agent from having to certify entire households every time there is an addition.

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