HCCP Utility Allowances and Rent Calculations

Question 1

Under Section 42 of the Internal Revenue Code, how is 'gross rent' defined for LIHTC compliance purposes?

Accepted Answer

The contract rent charged to the tenant plus any utility allowance for tenant-paid utilities

Answer

The total rental income collected by the property owner in a given month

Answer

The fair market rent for comparable units in the surrounding area

Answer

The net rent after deducting all operating expenses from contract rent

Question 2

Maximum gross rents under Section 42 are set at what percentage of the applicable income limit divided by 12?

Accepted Answer

30%

Answer

25%

Answer

35%

Answer

40%

Question 3

For a 1-bedroom LIHTC unit, what imputed household size is used to determine the income limit for maximum gross rent?

Accepted Answer

1.5 persons

Answer

1 person

Answer

2 persons

Answer

2.5 persons

Question 4

When a tenant pays utilities directly to the utility company, how must this be accounted for in the Section 42 gross rent calculation?

Accepted Answer

The utility allowance is added to the contract rent to calculate gross rent

Answer

The utility allowance is subtracted from the published maximum rent limit

Answer

Tenant-paid utilities are excluded from the gross rent calculation entirely

Answer

The utility allowance reduces the amount of tax credit the owner may claim

Question 5

Under Treasury Regulation 1.42-10, how frequently must utility allowances be reviewed for LIHTC properties?

Accepted Answer

Annually

Answer

Monthly

Answer

Quarterly

Answer

Every two years

Question 6

Which entity publishes the utility allowance schedule most commonly used as an approved source for LIHTC properties?

Accepted Answer

The local Public Housing Authority (PHA)

Answer

The Internal Revenue Service

Answer

The U.S. Department of Housing and Urban Development

Answer

The state housing finance agency

Question 7

If a utility allowance increases at the annual review and causes gross rent to exceed the Section 42 maximum, what must the owner do?

Accepted Answer

Reduce the contract rent so that gross rent does not exceed the maximum allowable amount

Answer

Apply to the state housing finance agency for a temporary gross rent waiver

Answer

Increase the tax credit basis to offset the higher gross rent

Answer

Notify the IRS on Form 8823 and continue charging the existing rent