States Ask: When and How Can New Tax Credit Inspections be Conducted?

Question from a Blog Reader

"I work for a state tax credit agency. I read your Blog post about the new final tax credit compliance monitoring regulations. We are in a state where properties tend to be a lot less than 100 units, so we are working hard to figure out how to conduct over 41% more unit inspections overall, starting this week. As we adjust the schedule and consider staffing needed, I have a couple of questions.

1) Can we do the file and physical inspections at different times?

2) If the reviews are at different times, can we select the same unit for physical and file review?"


Summary: 1) Yes, the inspections can be conducted at different times. 2) No, different units must be selected for physical and file reviews if the two types of inspections are on different days.

The new regulation 1.42-5(c)(2)(iii)(C) says: "Agencies generally may not select the same low-income units of a low-income housing project for on-site inspections and low-income certification review because doing so would usually give prohibited advance notice." 1.42-5(c)(2)(iii)(C)(7) adds: "If the Agency chooses to select the same units for on-site inspections and low-income certification review, the Agency must complete both the inspections and review before the end of the day on which the units are selected." In total, this makes it clear that physical and file reviews can be done at different times, and that different units must be selected for each type of review, unless the inspections are conducted on the same day.

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