Tax Credit Specialist (TCS) — Questions and Answers

Question 1: What is the purpose of the owner's signature on the Tenant Income Certification?

To confirm the rent charged is at or below market rate
To certify that the unit meets habitability standards
To certify that the information has been verified and the unit qualifies as a low-income unit (Correct answer)
To authorize the tenant's right to occupy the unit

Correct answer: To certify that the information has been verified and the unit qualifies as a low-income unit

The owner's signature on the TIC certifies that income has been verified, the information is accurate, and the unit qualifies as a low-income unit under Section 42.

Question 2: How often should tenant files be updated for recertification?

Once every five years
Every six months
Every month
Annually (Correct answer)

Correct answer: Annually

Tenant files should be updated annually to reflect income changes and continued eligibility.

Question 3: What is the primary purpose of the Low-Income Housing Tax Credit (LIHTC) program?

To provide subsidies for home ownership.
To reduce property taxes for homeowners.
To increase luxury housing stock.
To promote affordable rental housing. (Correct answer)

Correct answer: To promote affordable rental housing.

The LIHTC program incentivizes developers to build or rehabilitate affordable rental housing.

Question 4: Which household members must typically be included in income certification calculations?

All household members (Correct answer)
Only employed residents
Only household members over 21
Only the leaseholder

Correct answer: All household members

For income certification calculations in tax credit properties, it is a strict requirement to include all household members. This means the income of every individual residing in the unit, regardless of age or relationship to the leaseholder, must be counted towards the total household income. This comprehensive approach ensures accurate determination of eligibility for the Low-Income Housing Tax Credit (LIHTC) program.

Question 5: Which tool helps ensure consistency and compliance in file audits?

Post-it notes
Calendar invite
File checklist (Correct answer)
Tenant's voicemail

Correct answer: File checklist

File checklists help ensure all required documents are present and compliant.

Question 6: Who allocates LIHTC credits at the state level?

The IRS
The Department of Housing and Urban Development
City Planning Departments
State Housing Finance Agencies (Correct answer)

Correct answer: State Housing Finance Agencies

State Housing Finance Agencies are responsible for distributing LIHTC credits based on state-specific priorities.

Question 7: A pension income of $1,200 per month means the annual income counted is:

$1,200
$12,000
$10,800
$14,400 (Correct answer)

Correct answer: $14,400

Monthly pension income of $1,200 is annualized by multiplying by 12 months, yielding $14,400 in annual income.

Question 8: Which federal program provides tax credits to property owners for creating affordable rental housing?

Homeowner's Property Tax Relief
Low-Income Housing Tax Credit (LIHTC) (Correct answer)
Section 8 Voucher Program
Public Housing Program

Correct answer: Low-Income Housing Tax Credit (LIHTC)

The Low-Income Housing Tax Credit (LIHTC) is the primary federal program designed to incentivize the creation and preservation of affordable rental housing. This program provides tax credits to private developers who build or rehabilitate housing units that are then rented to low-income individuals and families at restricted rates. LIHTC is a crucial tool for addressing the affordable housing crisis across the United States.

Question 9: Which of the following is an example of illegal steering under the Fair Housing Act?

Refusing to rent to a household that does not meet income criteria
Enforcing an occupancy standard of two persons per bedroom
Directing applicants of a particular race to units in a specific building or area (Correct answer)
Showing all available units to every applicant

Correct answer: Directing applicants of a particular race to units in a specific building or area

Steering occurs when applicants are directed to or away from certain units or areas based on a protected class, which is illegal under the Fair Housing Act.

Question 10: Which of the following is a required element of third-party income verification at move-in?

A copy of the applicant's driver's license
A verbal confirmation from the employer
A signed verification form sent directly to and from the employer (Correct answer)
A screenshot of the applicant's online pay portal

Correct answer: A signed verification form sent directly to and from the employer

Third-party verification requires written confirmation from a neutral source, such as a signed employer verification form, not verbal or applicant-provided documentation.

Question 11: Which form do state agencies use to report noncompliance to the IRS?

Form 8823 (Correct answer)
Form 8609
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 12: An owner makes a capital improvement to a LIHTC property that temporarily displaces tenants. The owner must ensure:

Displaced tenants reapply as new applicants upon return
Displaced tenants waive their right to return in writing
Displaced tenants are offered comparable temporary housing at no extra cost (Correct answer)
Displaced tenants permanently vacate the LIHTC project

Correct answer: Displaced tenants are offered comparable temporary housing at no extra cost

Owners must offer displaced tenants comparable temporary housing at no additional cost during capital improvement work and must allow tenants to return to their original or comparable unit.

Question 13: Which income group is the LIHTC program primarily designed to assist?

All income groups equally
High-income families
Low-income households (Correct answer)
Middle-income earners

Correct answer: Low-income households

The LIHTC program targets individuals and families earning 60% or less of the area median income (AMI).

Question 14: Which of the following is typically included in a tenant file?

Medical records
Employment contracts
Proof of income and lease agreements (Correct answer)
Personal diaries

Correct answer: Proof of income and lease agreements

Tenant files often include income documentation, lease agreements, and certification forms.

Question 15: What is the length of the initial compliance period for Low-Income Housing Tax Credit properties under Section 42?

15 years (Correct answer)
10 years
30 years
20 years

Correct answer: 15 years

The LIHTC compliance period is 15 years, during which the owner must maintain income and rent restrictions or risk credit recapture.

Question 16: Which form is commonly used to document household income and rent limits for LIHTC properties?

Credit application
HUD-50059
Lease addendum
Income and Rent Limit Schedule (Correct answer)

Correct answer: Income and Rent Limit Schedule

An Income and Rent Limit Schedule provides the maximum allowable income and rents for qualified households.

Question 17: Why is ongoing compliance monitoring critical in LIHTC properties?

To ensure developer profit.
To maintain program compliance and eligibility. (Correct answer)
To increase rent prices.
To promote commercial use of units.

Correct answer: To maintain program compliance and eligibility.

Monitoring ensures continued eligibility of tenants and preservation of tax benefits for investors.

Question 18: If a property owner provides an owner-paid utility allowance to a tenant, the amount provided:

Is excluded from gross rent calculations
Must equal the HFA-published utility allowance exactly
Is added to the tenant's income
Reduces the maximum allowable contract rent (Correct answer)

Correct answer: Reduces the maximum allowable contract rent

When an owner provides a utility allowance directly to tenants, it reduces the maximum contract rent that can be charged to keep gross rent within limits.

Question 19: What must owners do if they cannot correct a physical deficiency within the required timeframe?

Notify the state agency and provide a corrective action plan with a revised timeline (Correct answer)
Terminate the tenant's lease
Request a waiver from the IRS
Vacate the affected unit until repairs are complete

Correct answer: Notify the state agency and provide a corrective action plan with a revised timeline

Owners must notify the state housing finance agency and submit a corrective action plan explaining the delay and providing a revised completion schedule.

Question 20: Which agency typically monitors compliance for LIHTC properties?

Local city council
State Housing Finance Agency (HFA) (Correct answer)
U.S. Treasury
Department of Labor

Correct answer: State Housing Finance Agency (HFA)

Compliance for LIHTC properties is typically monitored by the State Housing Finance Agency (HFA). These state-level agencies are responsible for allocating the tax credits, overseeing the development process, and conducting regular inspections and reviews to ensure properties adhere to all federal and state regulations regarding affordability and tenant eligibility. The HFA acts as the primary regulatory body for LIHTC projects within its jurisdiction.

Question 21: When a state agency files Form 8823 indicating that a noncompliance event was corrected within the allowable correction period, what is the typical IRS outcome?

Required re-inspection before any further credits are allowed
A 5% penalty assessed on the allocated credit amount
No credit recapture pursued since correction occurred timely (Correct answer)
Automatic recapture of credits for the noncompliance period

Correct answer: No credit recapture pursued since correction occurred timely

If Form 8823 indicates the noncompliance was corrected within the correction period, the IRS generally does not pursue credit recapture since the issue was resolved.

Question 22: Which of the following is a valid reason for a change in household eligibility?

A change in household income (Correct answer)
Changing internet provider
Purchasing a new car
Renting a storage unit

Correct answer: A change in household income

A change in income, household size, or employment status can affect eligibility.

Question 23: Which document verifies a household’s eligibility for affordable housing?

Tenant Income Certification (TIC) (Correct answer)
Monthly rent receipt
Work ID badge
Social media profile

Correct answer: Tenant Income Certification (TIC)

The Tenant Income Certification (TIC) form is used to confirm income eligibility.

Question 24: What is a best practice for ensuring accurate recertification?

Skip the review step
Ignore income discrepancies
Rely solely on verbal confirmation
Use a standardized checklist for document review (Correct answer)

Correct answer: Use a standardized checklist for document review

Reviewing documentation thoroughly and using a checklist helps prevent errors and omissions.

Question 25: A LIHTC property fails an inspection due to a deficient exterior drainage system that causes flooding. After correction, when should the owner notify the state agency?

Only at the next annual monitoring cycle
Within 10 days of completing the repair
When filing the next annual report
Within the timeframe specified by the state agency's corrective action notice (Correct answer)

Correct answer: Within the timeframe specified by the state agency's corrective action notice

Owners must notify the state agency of deficiency corrections within the timeframe specified in the agency's corrective action notice or noncompliance letter.

Question 26: What documentation is essential for tenant eligibility in affordable housing?

Pay stubs, tax returns, and household information. (Correct answer)
Utility bills only.
Bank statements only.
Photo ID only.

Correct answer: Pay stubs, tax returns, and household information.

Proof of income, household size, and other financial documents are necessary to determine eligibility.

Question 27: What is one risk of poor tenant file organization?

More rent payments
Higher staff satisfaction
Increased social activity
Compliance issues and penalties (Correct answer)

Correct answer: Compliance issues and penalties

Missing or outdated documentation can lead to compliance violations and loss of program funding.

Question 28: A property has 100 LIHTC units. Under the Fair Housing Act, how many units must be accessible for persons with mobility disabilities?

At least 5% of the total units (Correct answer)
All ground-floor units
10% of total units
5% of ground-floor units

Correct answer: At least 5% of the total units

Under the Fair Housing Act design and construction requirements, at least 5% of total units in covered multifamily housing must be accessible for mobility disabilities.

Question 29: What role does a Tax Credit Specialist play in the LIHTC program?

Allocate tax credits to investors.
File taxes for developers.
Inspect building materials.
Verify tenant eligibility and maintain compliance. (Correct answer)

Correct answer: Verify tenant eligibility and maintain compliance.

Tax Credit Specialists ensure compliance with program regulations and maintain income eligibility documentation.

Question 30: Which IRS publication provides guidance on calculating income and assets for LIHTC properties?

IRS Publication 527
IRS Revenue Ruling 94-57
IRS Notice 88-91
HUD Handbook 4350.3 (Correct answer)

Correct answer: HUD Handbook 4350.3

HUD Handbook 4350.3 is the primary reference for calculating income and assets in LIHTC and other affordable housing programs.

Question 31: An owner refuses to rent to an applicant because they receive Section 8 voucher assistance. This is:

Always illegal under LIHTC rules
Illegal only if the state or local jurisdiction has source-of-income protections (Correct answer)
Legal if disclosed in the application policy
Legal under federal fair housing law

Correct answer: Illegal only if the state or local jurisdiction has source-of-income protections

Federal law does not prohibit source-of-income discrimination, but many states and localities have enacted laws protecting voucher holders from discrimination.

Tax Credit Specialist (TCS)

The NCHM Tax Credit Specialist (TCS) certification tests knowledge of the Low-Income Housing Tax Credit (LIHTC) program under IRS Section 42, covering tenant eligibility, income calculation, compliance monitoring, and fair housing requirements. It is the leading compliance certification for affordable housing professionals.

100

Questions

120 min

Time Limit

70%

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