LIHTC Eligibility Criteria & Application Process 2 — Questions and Answers
Question 1: Under California's LIHTC program, what is the minimum percentage of units that must be rent-restricted and occupied by income-qualified tenants for the 40-60 test?
- 20% at 50% AMI
- 40% at 60% AMI (Correct answer)
- 50% at 50% AMI
- 60% at 40% AMI
Correct answer: 40% at 60% AMI
The 40-60 test requires that at least 40% of units be occupied by tenants earning no more than 60% of AMI.
Question 2: Which California state agency administers the LIHTC program and issues tax credit allocations?
- California Department of Housing and Community Development
- California Tax Credit Allocation Committee (Correct answer)
- California Housing Finance Agency
- California Department of Finance
Correct answer: California Tax Credit Allocation Committee
The California Tax Credit Allocation Committee (CTCAC) is the state agency responsible for allocating federal and state low-income housing tax credits.
Question 3: A LIHTC project in California receives a reservation of credits. How long does the developer typically have to place the project in service?
- 12 months
- 18 months
- 24 months
- 36 months (Correct answer)
Correct answer: 36 months
CTCAC generally requires projects to be placed in service within 36 months of the credit reservation date.
Question 4: What happens to a tenant's eligibility if their income rises above 140% of the applicable income limit during their tenancy in a LIHTC unit?
- They must vacate immediately
- They may remain until the next available unit of comparable size is rented to an income-qualified tenant (Correct answer)
- Their rent automatically increases to market rate
- The unit loses its tax credit status permanently
Correct answer: They may remain until the next available unit of comparable size is rented to an income-qualified tenant
Under the next available unit rule, over-income tenants may stay until the next comparable unit is rented to a qualified tenant.
Question 5: In California LIHTC applications, what does the term 'basis' refer to in the context of the credit calculation?
- The total number of affordable units in the project
- The eligible costs of the building on which the tax credit percentage is applied (Correct answer)
- The income level of the targeted tenant population
- The annual rent charged per affordable unit
Correct answer: The eligible costs of the building on which the tax credit percentage is applied
Basis (eligible basis) refers to the qualified development costs of the building to which the applicable credit percentage is applied to determine the annual credit amount.
Question 6: Under the California LIHTC Qualified Allocation Plan (QAP), which project characteristic typically earns points in the competitive scoring process?
- Proximity to a major freeway
- Targeting of special needs populations (Correct answer)
- Use of market-rate units exceeding 50%
- Location in a low-poverty census tract
Correct answer: Targeting of special needs populations
California's QAP awards competitive points for projects serving special needs populations such as homeless, disabled, or farmworker households.
Question 7: What is the purpose of the 'carryover allocation' in the LIHTC application process?
- To allow unused credits to roll over to the next calendar year's pool
- To permit projects not yet placed in service to receive a binding credit allocation (Correct answer)
- To transfer credits between different projects within the same portfolio
- To carry over tenant income certifications from one compliance year to the next
Correct answer: To permit projects not yet placed in service to receive a binding credit allocation
A carryover allocation allows a project to receive a binding tax credit commitment before it is placed in service, as long as 10% of project costs are incurred within 12 months.
LIHTC Eligibility Criteria & Application Process 2
Under California's LIHTC program, what is the minimum percentage of units that must be rent-restricted and occupied by income-qualified tenants for the 40-60 test?