• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Online Training Login

Elizabeth Moreland Consulting

We Train Tax Credit Managers

  • Home
  • Compliance Certification
  • Online Training
    • Course Catalog
    • Sign up for the Free Demo Course
    • Compliance Exams and Retake Exams
    • Course Features
    • 12 Reasons to Take a Course at the Housing Credit Training Center
    • Automatic Training System
    • Unlimited Training Subscription
    • State Agency Staff Receive FREE Training
    • NCP Professional Development Center
    • Specialized Solutions for:
      • Individual Students
      • Small and Medium Companies
      • Large Companies
  • Live Training
    • Live Training Options
    • Schedule
  • Products & Services
    • Online Resources
      • NCP Professional Development Center
      • Unlimited Training Subscription
    • Forms & Systems
      • LIHTC Certification Processing Kit
      • Solving the Eligibility Puzzle… Five Steps for Determining Eligibility 2013 Edition
      • LIHTC Policy & Procedure Boot Camp-In-A-Box
    • Books, Special Reports & Newsletters
      • The Compliance Monitor
      • Practical Solutions for Managing Tax Credit Developments
      • LIHTC Certification Study Guide
    • Services
      • Tax Credit Compliance Coach
  • NCP Membership
    • NCP Mission Statement
    • Becoming A NCP Member
    • Membership Application (pdf)
    • NCP Membership FAQs
    • NCP Membership Renewal
    • NCP Professional Development Center
    • National Compliance Professional Directory
  • LIHTC Resoures
    • Latest News
    • Hot Topics
    • Archive
  • Contact Info and W-9
    • Contact Us
    • Email Alerts

Final Rules on Housing Credit Compliance Regulations Issued

February 27, 2019 By Elizabeth

On February 26, the IRS issued the final Compliance Monitoring regulations for the Housing Credit program. These replace the temporary compliance regulations that have been in place since 2016 and are immediately effective.

These final regulations revise and clarify the State Monitoring Agency requirement to conduct physical inspections and review reviews making significant changes including increasing the number of units State Monitoring Agencies need to monitor in some cases.

Sample Size

Historically, State Monitoring Agencies were not required to physically inspect every Housing Credit unit in a project rather the agency was allowed to infer that uninspected units were similar to the units inspected in the random sample if this sample yielded satisfactory results. Originally this sample size was 20% of a project’s Housing Credit units which is different than the sample size under the REAC protocol implemented by HUD.

In the 2016 temporary, yet final regulations a 2-step process was introduced and Revenue Procedure 2016-15 was concurrently published outlining the specific details how the amended rules should be implemented. At that time, the minimum number of Housing Credit units that had to be contained in a State Monitoring Agency’s monitoring sample was the lesser of:

  • 20% of the Housing Credit units in the project, rounded up to the nearest whole number;  OR 
  • the number of Housing Credit units set forth in the procedure’s Low Income Housing Credit Minimum Unit Sample Size Reference Chart.

At that time, the IRS also indicated their concern that the sample size may not be big enough for projects with a relatively small number of Housing Credit units indicating they would revisit this before the 2016 temporary regulations would be finalized.

In the 2019 final regulations, this 2-prong option was removed now requiring State Monitoring Agencies to inspect at least as many units as specified by project size in the Low Income Housing Credit Minimum Unit Sample Size Reference Chart with the option to increase this number at their discretion. Basically both the Treasury Department and the IRS determined the REAC numbers produce a statistically valid sampling of units and have further determined that the REAC numbers reasonably balance burden on the State Monitoring Agencies, tenants, and building owners with the need to adequately monitor habitability and compliance.

All-Buildings Requirement

The 2016 temporary regulations required State Monitoring Agencies to physically inspect all buildings in a Housing Credit project by the end of the second calendar year following the year the last building was placed in service and at least once every 3 years thereafter. However, Revenue Procedure 2016–15 indicated that projects subject to the REAC protocol were exempt from this all-buildings requirement based on confidence in an inspection done under HUD oversight. At that time, many wanted the all-building requirement to also be applied to buildings not subject to the REAC protocol.

In the 2019 final regulations, the all-buildings rule was maintained. Under this rule, if the randomly selected minimum number of Housing Credit units fails to include units in every building, then the State Monitoring Agency may satisfy the all-buildings requirement by inspecting some aspect of each omitted building. These aspects might include the building exterior, common area, HVAC system, etc.

Notice Requirements

In the 2016 temporary regulations, State Monitoring Agencies were required to select units in their sample size in a manner that did NOT give advance notice of the selected units to the owner or its management agent and generally defined reasonable notice as no more than 30 days with limited extensions in certain situations. If an Agency chooses to select the same units for both monitoring components, it may perform them at the same time or separately but once the owner is informed which units are included, it must be performed within the reasonable timeframe. The IRS did request comments on this specifically requesting feedback on whether the same notice period is reasonable for both components or whether the physical inspection notice should be shortened indicating that under REAC protocol, an inspector provides a 15-day notice of an upcoming physical inspection but the selected units are not provided until the day of the inspection.

The 2019 final regulations shorten the reasonable notice requirement to a 15-day notice. Both Treasury and the IRS believe that the 15-day notice period gives building owners reasonable notice that a file review will occur and gives building owners and tenants reasonable notice that a project will be inspected and that low-income units will be inspected if they are in the random sample that will later be selected.

Scattered Site Projects

After the 2016 temporary regulations were published, commenters recommended special treatment for scattered site projects or multiple buildings with a common owner and plan of financing. It was recommended that the sample size on these types of projects be conducted as if the multiple buildings were part of a single project, even if the owner had not made a multiple-building election on Line 8b of the  8609.

In the 2019 final regulations, it was noted that the multiple-building election is a statutory requirement and since no suggestions were provided other than the one to treat these buildings as if such an election had been made, this suggestion was not adopted.

Effect on Other Documents

The 2019 final regulations contain the guidance that State Monitoring Agencies need and do not rely on the IRS to provide implementation guidance. Accordingly, Revenue Procedure 2016–15 is obsolete as of the date on which the state agency’s QAP is amended to reflect these final regulations, and, in all cases, is obsolete after December 31, 2020.

Filed Under: Latest News

Primary Sidebar

Elizabeth L. Moreland
NCP-E, SCS, HCCP, SHCM, FHC

My goal, quite simply, is to prevent people from feeling overwhelmed by the program rules and all of the responsibilities that come with managing a Housing Credit property like I was when I was in the field! It was so frustrating! So when I started Elizabeth Moreland Consulting, I vowed to make a difference and to help people become Compliance Confident!“

  • Facebook
  • LinkedIn

Frequently Asked Questions

  • How do I receive industry email updates?
  • How do I get compliance training?
  • How do I learn the Tax Credit rules?
  • How do I know what class to take?
  • How do I train my team?
  • How can I obtain continuing education?
  • How do I view your Course Catalog?
  • How do I get certified in compliance?
  • How do I order copies of my training or designation certificates?
  • How do I retake an exam?
  • How do I learn more about the Site Compliance Specialist designation?
  • How do I learn more about the National Compliance Professional designation?
  • How do I renew my NCP designation?
  • How do I put Elizabeth on our team?
  • How do I obtain Elizabeth’s reference guides?
  • How do I get forms for processing applications?
  • How do I write my compliance policies & procedures?
  • How do I order your newsletter?
  • How do I attend the Annual NCP Conference?
  • How do I learn more about Elizabeth?
  • How do I obtain a W-9?

Elizabeth Moreland Consulting, Inc.
6907 University Ave, Suite 196
Middleton, WI 53562

TOLL FREE PHONE:
800-644-0390

TOLL FREE FAX:
800-466-5689

EMAIL:
[email protected]

Categories

  • Hot Topics
  • Latest News
  • Old Stuff
  • Online Training Offers
  • Special Offers

Who Is Elizabeth Moreland?

Elizabeth is the affordable housing industry’s most sought after speaker, trainer and consultant due to her dynamic speaking style, concrete understanding of the various affordable housing programs’ rules and nuances, and sense of humor & style in delivering such information and advice. As the President of Elizabeth Moreland Consulting, Inc. and the Housing Credit Training Center, Elizabeth has taught thousands and thousands of industry professionals from across the country. Much of her expertise is garnered from her years in the trenches of property management working with all types of housing including Housing Credits, HUD Section 8, HOME, Bond, special needs, students and conventional. She has held practically every position in this field and has over 25 years of experience, so her advice and teachings are realistic and proven in the real world of affordable housing!
Read More… about Who Is Elizabeth Moreland?

Copyright © 2022 · Elizabeth Moreland Consulting, Inc. · All Rights Reserved