TCS Inspection and Physical Compliance 2 — Questions and Answers
Question 1: Under IRS regulations, what percentage of a project's LIHTC units must be physically inspected by the state agency?
- 5%
- At least the greater of 20% or 5 units (Correct answer)
- All low-income units
- 10% or 3 units, whichever is greater
Correct answer: At least the greater of 20% or 5 units
The IRS requires state agencies to inspect the greater of 20% of the project's LIHTC units or 5 units during compliance monitoring reviews.
Question 2: An owner voluntarily discloses a physical deficiency to the state agency before inspection. This is treated as:
- A self-reported noncompliance event requiring IRS notification (Correct answer)
- Proof of good faith that reduces the severity of the violation
- No different than a deficiency discovered during inspection
- Grounds for immediate IRS credit recapture
Correct answer: A self-reported noncompliance event requiring IRS notification
Voluntarily disclosed physical noncompliance must still be reported to the IRS by the state agency, though good faith may affect how the agency pursues corrective action.
Question 3: Which of the following would constitute a physical noncompliance event under LIHTC rules?
- A unit with a leaking faucet that was repaired the same day
- A unit with an inoperable heating system during winter months (Correct answer)
- A common area hallway that needs repainting
- A landscaping area that requires seasonal maintenance
Correct answer: A unit with an inoperable heating system during winter months
An inoperable heating system in winter is an emergency health and safety deficiency that constitutes physical noncompliance and requires immediate remediation.
Question 4: How does the IRS receive notification of physical noncompliance at a LIHTC property?
- The owner submits Form 8823 directly to the IRS
- The state housing finance agency files Form 8823 reporting the noncompliance (Correct answer)
- Tenants file a complaint directly with the IRS
- The state agency sends a letter to the IRS General Counsel
Correct answer: The state housing finance agency files Form 8823 reporting the noncompliance
State housing finance agencies are required to report noncompliance events to the IRS using Form 8823, Low-Income Housing Credit Agencies Report of Noncompliance.
Question 5: Which form do state agencies use to report noncompliance to the IRS?
- 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 state agencies to report compliance events to the IRS.
Question 6: A LIHTC building has one vacant unit with a physical deficiency. Must the owner correct it even though no tenant is affected?
- No, vacant units are exempt from physical inspection requirements
- Yes, all LIHTC units including vacant units must meet habitability standards (Correct answer)
- Only if the unit is expected to be re-leased within 30 days
- Only if the state agency specifically flags the vacant unit
Correct answer: Yes, all LIHTC units including vacant units must meet habitability standards
All LIHTC units, including vacant ones, must meet physical habitability standards because they are part of the project's qualified low-income housing.
TCS Inspection and Physical Compliance 2
Under IRS regulations, what percentage of a project's LIHTC units must be physically inspected by the state agency?