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Guide for Completing Form 8823 - page 140 / 197





140 / 197

Chapter 14 Category 11i Violations of the Available Unit Rule Under Section 42(g)(2)(D)(ii)


*Effective July 31, 2008, owners of 100% low-income project are no longer required to complete the annual tenant income recertifications referenced in Treas. Reg. 1.42- 5(b)(1)(vi). Until further guidance is provided through administrative ruling or regulation, the IRS will evaluate an owner’s compliance with the Available Unit Rule as explained here.*


This category is used to report violations of the Available Unit Rule (AUR)1; i.e., situations where an initially qualified household’s income subsequently rises above 140 percent (170 percent in deep rent skewed developments) of the current income limit and a household that is not income qualified moves into a unit of comparable or smaller size *in the low-income building.*

The Available Unit Rule under IRC §42(g)(2)(D) states that if the income of the occupants of a low-income unit increases above 140 percent of the income limit (or 170 percent in deep rent skewed developments), the unit will continue to be treated as a low- income unit if the occupants initially met the income limitation and the unit continues to be rent restricted. If the income of the occupants of the unit increases above 140 percent of the applicable income limitation, the unit will cease to qualify as a low-income unit if any residential rental unit in the building (of a size comparable to, or small than, such unit) is occupied by a new resident whose income exceeds the income limitation.

*Under IRC §142(d)(3)(A), as amended by the Housing Assistance Tax Act of 2008, owners are not required to complete annual income recertifications if the building is part of a 100% low-income project. For purposes of applying the Available Unit Rule only, all households documented as initially income-qualified households are treated as initially income-qualified as long as the owner demonstrates due diligence2 when completing the initial income certification.*

Compliance on a Continuing Basis

The determination of whether a tenant qualifies for purposes of the low-income set-aside is made on a continuing basis, both with respect to the tenant’s income and the qualifying income for the location, rather than only on the date the tenant initially occupies the unit. 3

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The terms Next Available Unit Rule (NAUR) and Available Unit Rule (AUR) are synonymous and can be used interchangeably. *Due diligence is discussed in chapter 3.* H.R. Conf. Rep. No. 841, 99th Cong., 2d Sess. II-89 (1986), 1986-3 (Vol. 4) C.B. 89.

14- 1

Revised October 2009

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