LIHTC Ethical Standards & Professional Conduct 3 — Questions and Answers
Question 1: A LIHTC property manager receives a request from local law enforcement to provide a tenant's lease information without a warrant. What is the correct ethical response?
- Provide all requested information immediately to cooperate with authorities
- Consult legal counsel and require proper legal process before disclosing tenant records (Correct answer)
- Notify the tenant before complying with any law enforcement request
- Refuse all law enforcement requests regardless of legal authority
Correct answer: Consult legal counsel and require proper legal process before disclosing tenant records
Tenant privacy rights require that property management consult legal counsel and follow proper legal process before disclosing confidential tenant records.
Question 2: In LIHTC professional ethics, 'steering' refers to which prohibited practice?
- Directing investors toward higher-yielding tax credit partnerships
- Directing applicants toward or away from units based on their protected class (Correct answer)
- Guiding tenants to income-restricted units within a mixed-income development
- Advising applicants on which documents to submit with their applications
Correct answer: Directing applicants toward or away from units based on their protected class
Steering is the illegal practice of directing prospective tenants toward or away from units based on their race, national origin, or other protected characteristics.
Question 3: A LIHTC compliance auditor discovers the property owner has been under-reporting annual income recertifications to the state. Ethical standards require the auditor to:
- Give the owner 90 days to self-correct before reporting to the agency
- Document findings and report the noncompliance to the allocating agency promptly (Correct answer)
- Assist the owner in amending records retroactively without formal reporting
- Keep findings confidential to maintain the client relationship
Correct answer: Document findings and report the noncompliance to the allocating agency promptly
Auditors must document noncompliance and report it to the allocating agency; concealing noncompliance would make the auditor complicit in fraud.
Question 4: Which of the following best describes the 'duty of loyalty' for a LIHTC general partner?
- Maximizing developer fee revenue regardless of impact on project feasibility
- Acting in the best interests of the partnership rather than solely in the GP's own interests (Correct answer)
- Loyalty to lenders whose financing is essential to project completion
- Prioritizing local government relationships over investor obligations
Correct answer: Acting in the best interests of the partnership rather than solely in the GP's own interests
The duty of loyalty requires the general partner to act in the best interests of the partnership as a whole, not to prioritize the GP's own financial interests.
Question 5: A LIHTC property charges an application fee that is not disclosed in the project's marketing materials. This violates which ethical principle?
- Affirmative fair housing marketing
- Transparency and full disclosure to prospective tenants (Correct answer)
- The prohibition on security deposits exceeding two months' rent
- California's rent stabilization ordinances
Correct answer: Transparency and full disclosure to prospective tenants
Undisclosed fees violate the ethical principle of transparency, which requires that all fees be clearly disclosed to prospective tenants before application.
Question 6: When a LIHTC developer's qualified basis is found to have been overstated after credit allocation, what is the ethical obligation?
- Absorb the discrepancy through reduced developer fees without notifying the allocating agency
- Voluntarily disclose the error to TCAC and repay any excess credits received (Correct answer)
- Request a waiver from the IRS before notifying the state allocating agency
- Only disclose if the overstatement exceeds 10% of the total credit allocation
Correct answer: Voluntarily disclose the error to TCAC and repay any excess credits received
Voluntary disclosure of qualified basis overstatements and repayment of excess credits is required by professional ethics and federal program rules.
Question 7: Under California LIHTC ethical guidelines, what obligation does a property manager have when a unit becomes vacant?
- Offer the unit to any interested applicant regardless of the waiting list
- Follow the established waiting list and selection criteria in a consistent, documented manner (Correct answer)
- Prioritize local residents over those on the waiting list from other cities
- Hold the unit vacant until the owner approves each prospective tenant individually
Correct answer: Follow the established waiting list and selection criteria in a consistent, documented manner
Professional conduct requires following the established waiting list and selection criteria consistently to prevent favoritism or discrimination.
LIHTC Ethical Standards & Professional Conduct 3
A LIHTC property manager receives a request from local law enforcement to provide a tenant's lease information without a warrant.
What is the correct ethical response?