Example 1: Failure to Make Reasonable Attempts to Comply with Program Requirements
The owner did not allow *the state agency to conduct* physical inspections or tenant file reviews after the end of the 10-year credit period.
Explanations from the owner should be solicited and analyzed for reasonableness. It is important that the owner be given an opportunity to respond and provide explanations. The reasonableness of the explanations should be evaluated for credibility, presence of corroborative or contradictory evidence, and collateral evidence from third party sources. Refer to chapter 3 for additional guidance.
An attachment to Form 8823 should be used to explain the extent of noncompliance.
The Owner has Voluntarily and Permanently Withdrawn From the Program and is No Longer Claiming Credits
An owner, during the 15-year compliance period, may voluntarily withdraw a property from the low-income housing credit program, but retain ownership. The building still exists physically, but is not being operated as an LIHC property. For example, the owner may have converted the entire building to a use other than as an LIHC housing project or 100% of the units may be vacant (and the owner has no intention of renting any of the units in the future).
An attachment to the Form 8823 should be used to explain why the property was withdrawn and identify the last year the property was in service. This information is needed for the IRS to determine whether the owner properly recaptured accelerated credits.
Failure to Respond to Repeated Requests for Reports, Certifications, Reviews, or Other Essential Communication
State agencies may remove an LIHC property from the program if the owner fails to respond to repeated notices for monitoring reviews3, or annual reports and owner certifications are not submitted, and Forms 8823 identifying the noncompliance were previously submitted to the IRS.
Under the inspection provisions of Treas. Reg. §1.42-5(d)(1), the state agency must have the right to perform an on-site inspection of any low-income housing project at least through the end of the compliance period of the buildings in the project.
Under the certification provisions of Treas. Reg. §1.42-5(c), state agencies may remove a property from the program if annual reports and owner certifications are not submitted
A state agency should send follow-up notices clearly stating that failure to respond will result in the agency notifying the IRS that the property is no longer in compliance and is no longer participating in the LIHC program. See Treas. Reg. §1.42-5(e)(2), which requires the state agency to provide prompt notification to the owner if the project is not in compliance with the provisions of IRC §42.
The date of noncompliance is the first day of the first year that the owner failed to provide annual reports or certifications or did not respond to a request for the
See Treas. Reg. § 1.42-5(c)(2).
Revised October 2009