HCCP Regulatory Compliance 3 — Questions and Answers
Question 1: A LIHTC unit sits vacant for 6 months without being rented to a qualified tenant. Which compliance issue does this most likely trigger?
- Vacancy loss of credit for that unit during the period it is not occupied by a qualified tenant (Correct answer)
- No compliance issue because vacant units are not counted in the applicable fraction
- Immediate recapture of all credits claimed since the building was placed in service
- The unit must be permanently removed from the low-income set-aside
Correct answer: Vacancy loss of credit for that unit during the period it is not occupied by a qualified tenant
A unit that is not occupied by a qualified tenant does not count in the applicable fraction for that period, reducing the credit that can be claimed.
Question 2: Under IRC §42, which of the following is NOT a permissible basis for excluding an applicant from a LIHTC unit?
- The applicant's national origin (Correct answer)
- Prior criminal conviction for drug-related activity on a housing project
- Income exceeding the applicable limit
- Failure to meet the minimum age requirement for an elderly project
Correct answer: The applicant's national origin
Fair Housing Act protections prohibit denying housing based on national origin; the other factors can be legitimate screening criteria under certain conditions.
Question 3: An owner elects the minimum set-aside in Year 1. In Year 3, can the owner change to a more restrictive set-aside election?
- No, the minimum set-aside election is irrevocable once made (Correct answer)
- Yes, the owner may tighten the set-aside at any point during the compliance period
- Yes, but only with IRS written approval
- Yes, but only during the first three years of the credit period
Correct answer: No, the minimum set-aside election is irrevocable once made
Under IRC §42(g)(1), the minimum set-aside election is irrevocable and binds the project for its entire compliance and extended use period.
Question 4: A household's income must be verified using third-party documentation. Which of the following is NOT an acceptable primary income verification method under LIHTC rules?
- Tenant's self-certification alone with no supporting documents (Correct answer)
- Written verification from the employer
- Copies of signed federal tax returns
- Third-party verification from the Social Security Administration
Correct answer: Tenant's self-certification alone with no supporting documents
Self-certification alone is not sufficient; LIHTC requires third-party or documentary evidence to verify income at move-in.
Question 5: Which of the following correctly describes a 'deep rent skewed' project under IRC §42(g)(4)?
- At least 15% of the low-income units are rent-restricted to 40% AMI tenants and at least 40% of units are low-income (Correct answer)
- At least 20% of units serve households at 50% AMI with no other requirements
- All units must serve households at or below 30% AMI
- At least 25% of units must be rented below market rate with no income restriction
Correct answer: At least 15% of the low-income units are rent-restricted to 40% AMI tenants and at least 40% of units are low-income
A deep rent skewed project under IRC §42(g)(4) requires that at least 15% of low-income units serve tenants at 40% AMI, allowing a 40/60 set-aside alternative.
Question 6: For LIHTC projects using HOME funds, which income limit generally governs when HOME and LIHTC requirements differ?
- The more restrictive of the two applicable limits must be applied to the unit (Correct answer)
- HOME limits always take precedence over LIHTC limits
- LIHTC limits always take precedence over HOME limits
- The owner may choose which program's limit to apply on a unit-by-unit basis
Correct answer: The more restrictive of the two applicable limits must be applied to the unit
When HOME and LIHTC overlap, the more restrictive income and rent limit between the two programs must be applied to ensure compliance with both.
Question 7: A LIHTC property that was financed with tax-exempt bonds is eligible for what percentage of the 4% credit without competing for a state allocation?
- 50% of the project's eligible basis must be financed with tax-exempt bonds to receive the full 4% credit automatically (Correct answer)
- Any amount of tax-exempt bond financing triggers the 4% credit with no threshold
- The project must be 100% tax-exempt bond financed to receive the 4% credit
- Only 25% of eligible basis needs to be bond-financed for the 4% credit
Correct answer: 50% of the project's eligible basis must be financed with tax-exempt bonds to receive the full 4% credit automatically
Under IRC §42(h)(4), at least 50% of the aggregate basis of the building must be financed with tax-exempt bonds to qualify for the automatic 4% credit outside the state cap.
HCCP Regulatory Compliance 3
A LIHTC unit sits vacant for 6 months without being rented to a qualified tenant.
Which compliance issue does this most likely trigger?