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Guide for Completing Form 8823 - page 141 / 197

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Changes in Area Median Gross Income

The determination of an over-income *unit* is not limited to instances where the household’s income increases. A unit may also become over-income if, subsequent to the initial income qualification, there is a decrease in the Area Median Gross Income (AMGI). Likewise, an increase in AMGI increases the income limitation used to calculate whether an owner must rent any available residential unit of comparable or smaller size to a new low-income tenant. See Rev. Rul. 94-57 for additional information.

Treatment of Vacated Over-Income Units

If an over-income *unit is vacated,* it will be treated as an over-income unit subject to the Available Unit Rule until the effective date of the tenant income certification for the new income-qualified household that moves into the unit or the unit is rented to a nonqualifying tenant.

Next Available Unit Defined

The “next available unit” is any vacant unit, or any unit that is subsequently vacated in the same building, of a comparable or smaller size. Treas. Reg. §1.42-15(c) states that a unit is not available when the unit is no longer available for rent due to contractual arrangements that are binding under local law.

Comparable or Smaller Unit

A comparable or smaller unit is defined in §1.42-15 as “a residential unit in a low- income building that is comparably sized or smaller than an over-income unit or, for deep rent skewed projects described in IRC §142(d)(4)(B), any low-income unit. For purposes of determining whether a residential unit is comparably sized, a comparable unit must be measured by the same method used to determine qualified basis for the credit year in which the comparable unit became available.” Since a comparable unit may need to be identified before the end of the year when the qualified basis is determined, an owner may consider a residential unit with *the same number of bedrooms (or fewer)*and *comparable* amenities to be a comparable unit.

Summary

Key concepts of the Available Unit Rule include:

1. The Available Unit Rule is used to replace over-income *units* with new *low- income units* as available units are rented. Alternatively, over-income units may be returned to low-income status if the household’s income decreases or the AMGI increases.

  • 2.

    In a project containing more than one low-income building, the Available Unit Rule applies separately to each building.

  • 3.

    Low-income units containing households whose income rises above 140% (or 170% for deep rent skewed projects) of the current income limit are still considered low- income units as long as the rent remains restricted and available units of comparable or smaller size are rented to qualified low-income households *with restricted rents.*

  • 4.

    For purposes of determining whether a residential unit is comparably sized, a comparable unit must be measured by the same method used to determine qualified basis for the credit year in which the comparable unit became available. *For example,* an owner may consider a residential unit with *the same number of bedrooms (or fewer)* and *comparable* amenities to be a comparable unit.

  • 5.

    The owner of a low-income building must rent all comparable units that are available or that subsequently become available in the same building *as low-income units* in order to continue treating the over-income unit as a low-income unit. Once the

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Revised October 2009

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