As many tax credit properties age, the option presents itself to plan an acquisition and rehab. The new costs can become the basis for more tax credits. This series addresses some common questions that arise when credits are "resyndicated" in this way.
Part 1: Introduction
Part 2: Qualifying Households
Part 3: Income Limits and Rents
Part 4: Students
Part 5: The Available Unit Rule
Question: Are residents grandfathered in if they are an ineligible student household at the time of the start of new credits?
Answer: No. Although households who qualify at move in are income-eligible, the 8823 Guide does not indicate that they are grandfathered in regardless of student status. This is consistent with the fact that households never lose tax credit eligibility regardless of income increases after move-in, but they always can lose their tax credit status if they become ineligible students.
Important note: states vary on whether student status is an issue after the end of the compliance period. For states that eliminate student rules after the first 15 years, there may be new move-ins or existing residents who are income-eligible, but who are student-ineligible under federal rules. This is a potential major compliance issue for the new credits when credits are resyndicated. Student status will need to be tested at acquisition to establish if households that are grandfathered in for income reasons are also student eligible.
Up Next: How does the Available Unit Rule work differently at resyndications than other project? And more!