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Per the Boston Capital Income Averaging State Guide, we released yesterday, states are developing a variety of policies to implement the Income Average Test. The below questions, however, focus on the federal rule, as distinct from state approaches.
1. Income Averaging is available to projects that had not ______________ prior to the passage of the new law.
C. had its minimum set-aside elected
See the Omnibus Tax Act of 2018 Section 103 (9)(c).
2. Section 42 requires that income designations be evenly distributed among bedroom sizes?
The minimum set-aside does not relate to unit size.
3. Income Averaging is available to both properties that are 100% tax credit and those that have market units.
See the 2018 Section 42(g)(2)(D)
4. Which designation below is NOT available to an Income Averaged property.
See the 2018 Section 42(g)(1)(c)(ii)(III)
5. For income averaging purposes, who designates units at a property.
D. The owner
See the 2018 Section 42(g)(1)(C)(ii)(I)
1. Which agency will not provide rental assistance for zero income households who do not at least have exempt income.
HUD allows zero-income households, but “it is recommended that owners have a policy to re-verify the status of tenants reporting zero income at least quarterly.” See HUD 4350.3 9-11 (D)(1)(a)
“It is the policy of Rural Development not to accept a tenant certification for an applicant or tenant with zero income unless all income is specifically exempted.” See HB-2-3560 6.9 (A)(4).
2. The IRS does not allow zero income households to qualify tax credit units?
The IRS does not specifically forbid zero income households, however, “if the household reports little or zero income, or sporadic income, owners may use estimates based on actual income earned or received during the twelve-month period immediately preceding the certification. Owners should use due diligence by asking follow-up questions when the income certification process reveals unusual circumstances suggesting additional sources of income.” See 8823 Guide 4-33. The IRS LIHC Newsletter #15 (May 2005) provides further due diligence measures that owners can take to deal with households that represent that they have zero income.
Adjusted Income: Part 2
NOTE: the answers to questions 1 - 5 are found in Part 1, below.
Are the following allowable deductions when determining adjusted income for HUD, RD or the HOME programs?
6. $960 in dependent deductions for two dependent children (ages 15 and 16) in a household.
$480 is allowed for each dependent. See HUD 4350.3 5-10 (A)(1).
7. $480 dependent deduction for a foster child.
Foster children are not eligible for dependent deductions. See HUD 4350.3 5-10 (A)(1).
8. $800 in elderly deductions for a household with two members over age 62.
Only $400 is allowed as an elderly household deduction for an entire household. See HUD 4350.3 5-10 (E).
9. Childcare for a 9-year-old foster child that allows a foster mother to work.
Foster children are eligible for childcare deductions. See HUD 4350.3 5-10 (B)(1).
10. Childcare that a father pays for his son that lives with his mother.
Childcare must be for children in a household. See HUD 4350.3 5-10 (B)(3).
Adjusted Income: Part 1
Are the following allowable deductions when determining adjusted income for HUD, RD or the HOME programs?
1. Childcare for a 13-year-old child that allows his mother to go to school.
Childcare is only deductible for children age 12 and other. See HUD 4350.3 5-10 (B)(1).
2. Medical expense for cosmetic surgery.
Costs for cosmetic surgery is not an allowed expense. See HUD 4350.3 Exhibit 5-3 page 2.
3. Childcare for a 16-year-old child with disabilities that allows her mother to work.
This is an allowable disability assistance expense. See HUD 4350.3 5-10 (C)(1).
4. Medical expense for complications arising from cosmetic surgery.
Costs from cosmetic surgery complication is an allowed expense. See HUD 4350.3 Exhibit 5-3 page 2.
5. Child care that allows a father to pursue volunteer work.
Child care must allow an adult to work, looks for work or attend school. See HUD 4350.3 5-10 (B)(1)(a).
Last month, our Blog made available an Updated List of income inclusions and exclusions for affordable housing programs. It is available HERE. This week we test readers' knowledge of the changes.
1. The Job Partnership Training Act programs are gone and JTPA is thus removed from the new list of excluded income.
See that the old Exhibit 5-1's Exclusions (16)(f) has been removed from the Updated List section (17).
Bonus question: how is JTPA still relevant to the tax credit program?
Persons who participate in programs that are SIMILAR to the old JTPA programs meet an exception to the tax credit student rules [per IRC §42 (i)(3)(D)].
2. For section 8 recipients, all student financial assistance from the Higher Education Act of 1965 is excluded as income.
Only amounts in excess of tuition are excluded for section 8 recipients. See Updated List, Exclusions (17)(h)
3. Of the following, which is excluded by the new regulations:
C. Reduced-price lunches under several specific programs.
See Updated List (17)(s). Note that items A and B represent income that is counted. D is no longer a federal program (see also question 1).
$480 | $0 | Unlimited
From the options above, select the correct answer for the described household member.
1. The maximum earned income counted for minor dependents.
2. Student financial assistance counted for adult dependents.
3. The maximum unearned and asset income counted for minor dependents.
4. The maximum earned income counted for adult dependents.
5. Student financial assistance counted for minor dependents.
6. The maximum unearned and asset income counted for adult dependents.
HOME: Part 2
We recently updated our Multiple-Programs Guide and training courses to include provisions for the Housing Trust Fund (HTF). HTF shares many provisions with HOME, but also has some key differences. This quiz explores these. Note: Questions 1 - 4 were in Part 1.
5. HTF and HOME are both monitored by HUD-CPD
6. HTF requires source documentation every year, unlike HOME, which allows self-certification other years than each sixth year of the affordability period.
The HTF allows for self-cert except for every sixth year, the same as HOME. See 24 CFR 93.151 (d) and 93.302 (e).
7. If tenancy is terminated for good cause, 30 days' notice must always be given for HTF units, like HOME. Also like HOME, the only exception is when an eviction is because of an imminent physically dangerous situation.
HTF termination of tenancy simply must be for cause and in a timeframe "dictated by local law." HOME's 30-day requirements do not apply. See 24 CFR 93.303 (a) - (c)
8. Over-income HTF units are handled similarly to HOME, depending on if the project has fixed or floating HTF units, except HTF does not charge rent based on adjusted income.
See 24 CFR 93.302 (f)
HOME: Part 1
We recently updated our Multiple-Programs Guide and training courses to include provisions for the Housing Trust Fund (HTF). HTF shares many provisions with HOME, but also has some key differences. This quiz explores these.
1. The HTF has low and high HTF units, similar to low and high HOME.
The HTF only has one set of income and rent limits, based on HUD's extremely-low income (ELI) limits. See 24 CFR 93.302 (a) & (b).
2. HTF units can be fixed or floating, like HOME.
See 24 CFR 93.302 (f).
3. Like HOME, the HTF carries an affordability period that is most often 20 years.
The HTF period is 30 years. See 24 CFR 93.302 (d)(1).
4. HTF lease terms are generally for 12 months, as are HOME leases.
See 24 CFR 93.303 (a) - (c).
v. Minimum Set-Aside
Match the word or words on the left below that apply to the items on the left (more than one may apply).
1. Applicable Fraction | ...is calculated for a building
| ...involves unit size
2. Minimum set-aside | ...is calculated for a project
| ...does not involve unit size
| ...is an irrevocable election
Project or Building Rules
Tax credit rules are often designated project rules (they affect all buildings in a project) or building rules (the rule is specific to a building). For each of the below provisions, which type of rule is it?
1. The Minimum Set-Aside
The minimum set-aside is a project rule, and applies across multiple buildings in a multi-building project. IRC §42(g)(1) explains that the minimum set-aside defines a "qualified low-income housing project."
2. Utility Allowances
Treas. Reg. §1.42-10 repeatedly applies utility allowance calculation rules to a building.
3. Income limits holding harmless upon placing in service
IRC §142(d)(2)(E)(i) [made applicable to the tax credit by reference in §42(g)(4)] establishes that holding harmless applies "with respect to any project." HUD's instructions to the MTSP income limits each year clarify that a project holds harmless when the first building in a multi-building project places in service.
4. Available Unit Rule
The Available Unit Rule at IRC §42(g)(2)(D) applies the rule when renting "any residential rental unit in the building."
5. Exemption from income recertification when 100% tax credit
The language in IRC §142(d)(3)(A) [made applicable to the tax credit by reference in §42(g)(4)] establishes that the exemption from income recertification applies to "any project" that is 100% affordable. Interesting note: This means that one market unit anywhere in a multi-building project eliminates the exemption for all buildings.
Assistance and Rural Development
1. For RD properties, student financial assistance that a household receives is only counted as income for properties with Section 8 financing.
The current RD student financial assistance rule was revised with an unnumbered letter from November of 2011. It was put into the February 2013 revision of the HB-2-3560, as below. According to the RD Handbook HB-2-3560, Attachment 6-A (c)(6), the following is excluded: “The full amount of student financial assistance paid directly to the student or to the educational institution.” The introduction to this subsection tells us that the only exception to this rule is: “Subject to Paragraph (c)(16)(viii) of this attachment which applies only to Section 515 with project-based Section 8 programs.” [underlined emphasis ours]
Paragraph (c)(16)(viii) tells us that we exclude: “Amounts of scholarships funded under Title IV of the Higher Education Act of 1965, including awards under Federal work-study programs or under the Bureau of Indian Affairs student assistance programs (20 U.S.C. 1087uu). The exception found in § 237 of Public Law 109–249 applies and requires that the amount of financial assistance in excess of tuition shall be considered income in accordance with the provisions codified at 24 CFR 5.609(b)(9), except for those persons with disabilities as defined by 42 U.S.C. 1437a(b)(3)(E) (Pub. L. 109– 247). This applies to Section 515 with project based Section 8 only.” [underlined emphasis ours]
1. In order to be a dependent for HUD purposes, a child must be a tax dependent.
The definition of a HUD dependent does not include a requirement for tax dependency. See HUD 4350.3 Glossary "Dependent"and 5-6 A (2)&(3).
2. Students of any age could trigger an ineligible HUD student household.
In almost all cases, minors are classified as dependents, and thus do not trigger the student rules. Also, students age 24 and over do not trigger the HUD student rules. See HUD 4350.3 5-6 A (2)&(3) and 3-13 A (2)(b).
3. An 18 year old high school student will not trigger an ineligible HUD student household.
Only students at institutes of higher education trigger the HUD student rule. See HUD HUD 4350.3 3-13 A (2)(a).
4. When a HUD property is also funded by Tax Credits, BOTH program student rules must be applied.
The tax credit and HUD student rules are totally different, and must BOTH be applied. One rule is not more conservative than the other.
1. The minimum set aside is based on the lesser of a percentage of square footage or number of units.
A unit of any size is counted as one unit toward the percentage of total units needed to meet a project's minimum set-aside. Square footage only is a factor when calculating a building's applicable fraction.
3. For a project with a 20-50 minimum set-aside, what percentage of units can be at or below the 60% tax credit income limit but above the 50% and be counted as tax credit?
The 50 in 20-50 indicates the highest income limit that ANY unit at the project can have and retain it's status as a tax credit unit.
2. After the 2018 Omnibus Tax Law change, which of the following is NOT a minimum set aside option?
B. 20-50 (average)
New average versions of the 25-60 and 40-60 minimum set-asides were enacted with the new law. The 20-50 rule does not have an average version.
Limits: Part 2
1. A project placed in service in the year 2009 is eligible for the HERA Special tax credit limits, if these limits are listed as an option for the property's county.
HERA Special limits are available to projects with at least one building placed in service in 2008 or earlier. A 2009 project does not qualify.
2. What type of financing at a tax credit property makes it ineligible for the Rural National Non-metropolitan limit?
D. Tax exempt bonds
3. Which government agency defines "rural" areas potentially eligible for the rural National Non-metropolitan limits?
Limits: Part 1
1. Once a tax credit property is placed in service, it will not use lower income and gross rent limits, even if limits go down in the property's area.
Starting with the Housing and Economic Recovery Act (HERA) in 2008, tax credit income limits hold harmless. That is, once a project places in service, the income limits used will never go below the limits used in a prior year.
2. MTSP income limits are used for which programs:
B. Tax credit and tax exempt bonds
3. Once HUD releases the HUD and MTSP income limits, these must be implemented for HOME units.
HOME limits are different than other HUD program (AMI) or the tax credit limits. They are generally published months later and are implemented then.
1. The value of which type of insurance account is counted as an asset to the person owning the insurance?
Term life is excluded as an asset. See 4350.3 Exhibit 5-2 (A)(7).
2. Just prior to moving in, an applicant's husband died. The applicant received $250,000 from his term life policy. This money is not counted because it was the proceeds from a term, not whole, life policy.
While term life cannot be cashed in and is not an asset to a person while they are alive, once life insurance is paid, the lump sum amount received by a beneficiary is considered an asset. See 4350.3 5-6 Q.
Members in the Military
1. If a military household member receives hazardous duty pay, this pay is included as income.
HUD Handbook 4350.3 Exhibit 5-1 tells us that we count "all regular pay, special pay, and allowances of a member of the Armed Forces, except...the special pay to a family member serving in the Armed Forces who is exposed to hostile fire (e.g., in the past, special pay included Operation Desert Storm)" (compare "Inclusions" (8) and "Exclusions" (7)). Hazardous duty pay is not hostile fire pay, and is therefore included.
2. What document should be requested to verify income for persons in the military?
Persons in the military receive a Leave and Earnings Statement (LES). These statements act essentially as pay stubs and provide income information for all military pay and allowances received.
3. A grandparent living in a unit moves in their grandchild because the parent of the child is stationed out of the country on active military duty. Both the absent adult and their child must be counted as household members, and their income added to the grandparent's income.
4350.3 5-6 (B)(3)(a) says that normally "if the spouse or a dependent of the person on active military duty resides in the unit, that person’s income must be counted in full, even if the military member is not the head, or spouse of the head of the family." However this section of the handbook goes on to clarify that Owners are encouraged to be as lenient as responsibly possible to support affected households in situations where persons are called to active duty in the Armed Forces." This includes allowing "a tenant living in an assisted unit to provide care for any dependents of persons called to active duty in the Armed Forces on a temporary basis, as long as the head and/or co-head of household continues to serve in active duty. Income of the child (e.g., SSI benefits, military benefits) is not counted as income of the person providing the care." In the described case, the children and absent parent would likely to be considered part of a temporary arrangement and not household members whose income must be counted (4350.3 5-6 C 2). The IRS endorses the same approach for tax credit properties in the 8823 Guide, Chapter 4.
4. Veteran members of a household who are students are an allowed exception to the HUD/RD/HOME student rule.
See 4350.3 3-13 (A)(2)(d).
5. Veteran members of a household who are students are an allowed exception to the tax credit/tax exempt bond student rule.
Unlike the HUD rule, the tax credit/bond student rule does not make any exception specifically because someone is a veteran.
Disability and Religion
1. To ensure consistency, when a resident or applicant requests a reasonable accommodation, verification of the requester's disability must always be obtained.
Disabilities that are obvious or otherwise know to an owner/agent are not required to be verified. See Joint Statement of HUD and the DOJ on Reasonable Accommodations Under the Fair Housing Act, question 17.
2. How does a property owned by an entity whose legal name contains a religious reference (for example: St. Martin Lutheran Housing) avoid discrimination when advertising?
By ensuring that all advertising is accompanied by a disclaimer that the housing is open to all without discrimination. See FHEO Guidance Regarding Advertisements under Section 804(c) of the Fair Housing Act, Jan. 9, 1995, page 1.
3. Affordable housing federal income limits apply to a disabled person even if they make a reasonable accommodation request to the limits.
Reasonable accommodation "is a change, exception, or adjustment to a rule, policy, practice, or service that may be necessary for a person with a disability to have an equal opportunity to use and enjoy a dwelling, including public and common use spaces." (Joint Statement of HUD and the DOJ on Reasonable Accommodations Under the Fair Housing Act, question 6).
Income limits and other provisions based on federal law, are not subject to accommodation.
1. Use the following list of federal agencies:
HUD-CPD | HUD-MF | HUD-PIH | Rural Development | IRS
A) The tax credit program | IRS
B) The HOME Funds program | HUD-CPD (Community Planning Development)
C) Section 515 housing | Rural Development
D) Section 8 multi-family housing | HUD-MF (Multi-family)
E) Public housing | HUD-PIH - Public and Indian Housing
2. Which of the above programs explicitly use the handbook HUD 4350.3 for guidance?
The tax credit program uses the section 8 program rules to determine household income calculations. The IRS refers to the 4350.3 as the HUD authority to be used. See IRS Notice 88-80 and the 8823 Guide 1-2.
The 4350.3 is the official guidebook to the Section 8 multi-family program.
3. For which of the above programs might the handbook HUD 4350.3 provide some explanation of certain rules that may be helpful?
Although the handbook HB-2-3560 is the official 515 handbook, the RD program uses the section 8 regulation to determine household annual and adjusted income calculations. As the 4350.3 is HUD's most thorough explanation of the HUD regulation, it provides details that are not included in the HB-2. See 7 CFR 3560.153 and 24 CFR 5.609 and 611.
When a PJ selects to define income based on HUD "Part 5" income, the guidance provided in the HUD handbook is useful. It also provides the most thorough explanation of the HUD student regulations adopted by the HOME regulation in 2013.
1. Four people apply for a unit. Two of them are foster children and one is a foster adult. Which income limit is used?
Starting with Change 4 of the HUD Handbook, foster members of the household are counted as household members when determining income limits. See HUD 4350.3 3-6 (E)(3).
2. The foster children get social security benefits. These are income to the family.
Starting with Change 3 of the HUD Handbook, foster members of the household have their income counted as other household members. All unearned income is counted for minors. See 4350.3 Figure 5-2 and 24 CFR 5.609.
3. Now that fosters are counted for income limits (see question 1) and the earned income exclusion (question 2), they are eligible for the $480 dependent deduction for HUD and RD rent calculation purposes.
See references for questions 1 and 2 above, but contrast HUD 4350.3 5-10 (A)(1)
4. The head of the household receives foster care assistance payments in return for providing foster care to the three foster members. What is the amount of these payments that is counted as income annually?
See 4350.3 5-6 (A)(3)(g) and Exhibit 5-1, Exclusions, (2). Compare Exhibit 5-1, Exclusions, (12) and note that adoption assistance payments are limited to $480 per adopted child, while foster payments are entirely excluded.
1. We are not ever allowed to subtract amounts off of periodic payment sources to use net income when calculating gross annual income for a household.
False. There are times when we take off certain amounts before calculating gross annual income for households.
2. If the above is False, create a list of exceptions.
NOTE: this does not represent all excluded income (per HUD 4350.3 Exhibit 5-1), but rather times when we commonly must calculate a lower amount from available information.
1. Self-employment: "When calculating annual income, owners must include the net income from operation of a business or profession including self-employment income. Net income is gross income less business expenses, interest on loans, and
depreciation computed on a straight-line basis." HUD 4350.3 5-6 H
2. Benefit adjusted for prior overpayment: "If an agency is reducing a family's benefits to adjust for a prior overpayment (e.g.,social security, SSI, TANF, or unemployment benefits), count the amount that is actually provided after the adjustment." HUD 4350.3 5-6 J [calculation: gross social security less adjustment for prior overpayment]
3. Social Security delayed benefits: Excluded as income are the parts of payments that represent "deferred periodic amounts from supplemental security income and social security benefits that are received in a lump-sum amount or in prospective monthly amounts." HUD 4350.3 Exhibit 5-1 Income Exclusions (13). [calculation: gross social security less amounts for delayed benefits]
4. VA deferred benefits for section 8 residents: "For Section 8 tenants only, any deferred Department of Veterans Affairs
(VA) disability benefits that are received in a lump sum or in prospective monthly amounts are excluded from annual income." HUD 4350.3 5-6 Q 3 [calculation: gross VA benefit less amounts for delayed benefits]
5. Earned income for adult dependent full-time students: Income is excluded that is for "earnings in excess of $480 for each full-time student 18 years or older (excluding the head of household and spouse)." HUD 4350.3 Exhibit 5-1 Income Exclusions (11) [calculation: gross earned income less everything but $480]
6. Adoption assistance payments: "Adoption assistance payments in excess of $480 per adopted child" are excluded." HUD 4350.3 Exhibit 5-1 Income Exclusions (12) [calculation: gross adoption assistance payments less everything but $480]
1. Generally, tenants cannot be evicted from HOME units without 30 day's notice.
The HOME statute, SEC. 225, under the heading TERMINATION OF TENANCY, says “an owner shall not terminate the tenancy or refuse to renew the lease of a tenant of rental housing assisted under this title except for serious or repeated violation of the terms and conditions of the lease, for violation of applicable Federal, State, or local law, or for other good cause. Any termination or refusal to renew must be preceded by not less than 30 days by the owner's service upon the tenant of a written notice specifying the grounds for the action.”
2. There are no exceptions to the above.
Appropriations bills since 2014, most recently 2016's HR 2029, SEC. 235. (amending HOME statute Subsection (b) of section 225), have included an exception. It says that the "30-day waiting period is not required if the grounds for the termination or refusal to renew involve a direct threat to the safety of the tenants or employees of the housing, or an imminent and serious threat to the property (and the termination or refusal to renew is in accordance with the requirements of State or local law)."
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