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Compliance Terms

Tax Credit Terms:

140% Rule - Also called the “Available Unit Rule” which applies if the household income increases to more than 140% above the current maximum income limit for the household size

Acquisition Credits - tax credits that are claimed based on the purchase price of a building. Acquisition credits are always combined with the rehab of a building

Applicable Fraction - The fraction of the residential units that house tax credit qualified households calculated as the lower of the number of residential rental units or the square footage of the residential rental units.  The calculation follows:

The total LIHTC portion of the building

The total residential portion of the building

Applicable Credit Percentage – a rate published by the treasury that fluctuates each month. This rate is multiplied by the qualified basis to establish the annual tax credits that will be claimed for a building. Once a developer locks into the rate, it is fixed for the credit period. There are two categories of credit percentages, commonly referred to as 4 or 9% credits. 4% credits are related to “federally subsidized” properties (those that are financed with tax-exempt bonds) and acquisition credits. All other credits are 9%

BIN – Building Identification Number that is assigned to each building on form 8609.

Credit Period – The 10 year time period that credits are claimed, starting with the first year credits are claimed

Compliance Period – The full 15 years that compliance must be maintained beginning with the first year that credits are claimed

Eligible Basis – The amount of money that a tax credit building costs to construct. Eligible basis does not include land or the portion of costs funded by federal grants

Empty Unit – An LIHTC unit that has never been rented to a qualified household (common industry term, not used in code)

Extended Use – The period of time starting with the first year credits are claimed that ends at least 15 year after the end of the Compliance Period. During this time, the owner must maintain compliance with state requirements

Gross Rent – Resident rent plus the utility allowance and any non-optional charges

HFA – Housing Finance Agency. The agency contracted with the IRS to allocate and monitor tax credits in each state

Income Limits – The amount of income that a household cannot exceed

LIHTC – Low Income Housing Tax Credit

Minimum Set-Aside – The federally required minimum percentage of units that must house tax credit qualified households. The minimum set-aside also establishes the applicable federal income limit for a property

PHA – Public Housing Authority. Local agencies contracted with HUD to provide vouchers to provide rental assistance in a community

Placed in Service (PIS) – The date that a building becomes available as housing for compliance purposes

Qualified Allocation Plan (QAP) – Plan that State Allocating Agency uses to decide who gets credits each year using a scoring system

Qualified Basis – The portion of the building cost that is qualified for tax credits.  The formula follows:

Eligible Basis X Applicable Fraction

Rehab Credits – tax credits claimed based on the cost of rehabilitating a building

 

Rent Limits – The rental amount that the gross rent cannot exceed

TIC – Tenant Income Certification (common industry term, not found in code)

Unsecured Anticipated Income – Income that is anticipated within the 12 month certification period, but has not been secured by the effective date of the certification. How to handle such income is not mandated by HUD or the IRS, and is highly controversial among state agencies (common industry term, not found in code)

Utility Allowance – Includes an estimate of the average of any utilities that a resident must pay to live in a unit

Vacant Unit – An LIHTC unit from which a qualified household has moved

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