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Guide for Completing Form 8823 - page 110 / 197





110 / 197

Chapter 10 Category 11f Project Failed to Meet Minimum Set-Aside Requirement


This category is used to report projects that have violated the minimum set-aside rules; i.e., the number of qualifying units falls below the minimum requirement.

Under IRC §42(g)(1), a “qualified low-income housing project” means any project for residential rental property if the project meets one of the two requirements below, whichever is elected by the owner on Form 8609, line 10c.

  • 1.

    At least 20% of the available rental units in the development are rented to households with incomes not exceeding 50% of Area Median Gross Income (AMGI) adjusted for family size.

  • 2.

    At least 40%1 of the available rental units in the development are rented to households with incomes not exceeding 60% of AMGI adjusted for family size.

The choice of minimum set-aside also establishes the income limit and rent limit applicable to low-income units in the project.

Project Defined

Each building is considered a separate project under IRC §42(g)(3)(D) unless, before the close of the first calendar year in the project period2, each building that is, or will be, part of a multiple-building project is identified *as such by checking the “yes” box on line 8b of Form 8609 and attaching the statement described in the instructions for line 8b.* The minimum set-aside documented on Form 8609, line 10c, must be the same for all buildings in a multiple-building project.

Deep Rent Skewing Under IRC §142(d)(4)

Two or more qualified low-income buildings may be included in a multiple-building project only if they:

  • 1.

    are located on the same tract of land (unless all of the dwelling units in all of the buildings being aggregated in the multiple-building project are low-income units (see IRC §42(g)(7));

  • 2.

    are owned by the same person for Federal tax purposes;

  • 3.

    are financed under a common plan of financing; and

  • 4.

    have similarly constructed residential units.

In addition to the election of a minimum set-aside, the owner may elect on Form 8609, line 10d, to provide housing to households with incomes of 40 percent or less of the AMGI under IRC §142(d)(4)(B). Under this “deep-rent skewing” set-aside, at least 15% of the low-income units in the project must be occupied by individuals with incomes at 40% or less of the AMGI (adjusted for family size) applicable to the units.

1 2

For the boroughs of New York City, 25% is substituted for 40%. See IRC §42(g)(4) and IRC §142(d)(6). Defined in IRC §42(h)(1)(F)(ii).


Revised 10-2009

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