LIHTC Property Management & Compliance Monitoring 1 — Questions and Answers
Question 1: What is the initial compliance period required under IRC Section 42 for LIHTC properties?
- 5 years
- 10 years
- 15 years (Correct answer)
- 20 years
Correct answer: 15 years
IRC Section 42 mandates a 15-year initial compliance period during which the property must maintain its qualified low-income status to avoid credit recapture.
Question 2: Which California state agency is primarily responsible for monitoring ongoing LIHTC compliance?
- California Housing Finance Agency (CalHFA)
- California Tax Credit Allocation Committee (TCAC) (Correct answer)
- California Department of Housing and Community Development (HCD)
- California Department of Finance
Correct answer: California Tax Credit Allocation Committee (TCAC)
TCAC serves as the allocating and monitoring agency for LIHTC in California, conducting audits, inspections, and reporting noncompliance to the IRS.
Question 3: Which IRS form must a state allocating agency file to report a LIHTC noncompliance event?
- Form 8609
- Form 8823 (Correct answer)
- Form 8586
- Form 1065
Correct answer: Form 8823
Form 8823 (Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition) is filed by the state agency to notify the IRS of any compliance violations.
Question 4: Under IRC Section 42(g), what is the '20-50 test' minimum set-aside requirement for LIHTC projects?
- 20% of units at 30% AMI
- 20% of units at 50% AMI (Correct answer)
- 40% of units at 50% AMI
- 50% of units at 60% AMI
Correct answer: 20% of units at 50% AMI
The 20-50 test requires that at least 20% of units be rent-restricted and occupied by households earning no more than 50% of area median income.
Question 5: How is the maximum allowable rent for a LIHTC unit restricted at 60% AMI calculated?
- 30% of the tenant's actual income
- 30% of 60% of the area median income adjusted for unit size (Correct answer)
- Fair market rent as determined by HUD
- 50% of the area median gross rent
Correct answer: 30% of 60% of the area median income adjusted for unit size
LIHTC rents are capped at 30% of the applicable income limit (e.g., 60% AMI), adjusted by a utility allowance and imputed household size based on bedroom count.
Question 6: When a LIHTC tenant's income increases above the applicable income limit, which rule generally applies to maintain the building's qualified status?
- The tenant must immediately vacate the unit
- The unit loses its qualified status immediately
- The next available comparable unit must be rented to a qualified household (Correct answer)
- The rent must be raised to market rate within 30 days
Correct answer: The next available comparable unit must be rented to a qualified household
The 'next available unit' rule requires the owner to rent the next comparable available unit to a qualified low-income household before renting to anyone at market rate.
Question 7: How often must LIHTC property owners recertify tenant income under California TCAC regulations?
- Every 6 months
- Annually (Correct answer)
- Every 3 years
- Only at initial move-in
Correct answer: Annually
Annual recertification of tenant income is required under IRC Section 42 and TCAC regulations to confirm ongoing eligibility of households occupying tax-credit units.
LIHTC Property Management & Compliance Monitoring 1
What is the initial compliance period required under IRC Section 42 for LIHTC properties?