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Guide for Completing Form 8823 - page 32 / 197

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Chapter 4 Category 11a Household Income Above Income Limit upon Initial Occupancy

Definition

This category is used to report units that have been rented to households with incomes that do not meet income eligibility restrictions. According to IRC §42(g)(1), an owner of a tax credit property must elect to serve tenant populations with gross incomes that are either 50% or less of Area Median Gross Income (AMGI) or the National Nonmetropolitan Median Gross Income (NNMGI) when applicable,1 or 60% or less of AMGI or NNMGI when applicable, as adjusted for family size.2 *The National Nonmetropolitan Median Gross Income (NNMGI) is applicable if:

  • 1.

    IRC §1400N(c)(4), Special Rule for Applying Income Tests, is applicable. The LIHC project was (1) placed in service during 2006, 2007, or 2008, (2) is located in the Gulf Opportunity Zone, and (3) in a nonmetropolitan area (as defined in IRC §42(d)(5)(C)(iv)(IV)).

  • 2.

    IRC §42(i)(8) is applicable.3 The LIHC project is located in a rural area (as defined in section 520 of the Housing Act of 1949) and the NNMGI is greater than the AMGI. IRC §42(i)(8) is not applicable if the LIHC buildings are financed with tax-exempt bonds.*

Under the terms of an extended use agreement, an owner may agree to service tenant populations at AMGI levels lower than identified in IRC §42(g); nonperformance of such agreements is not a reportable noncompliance event.

Annual Household Gross Income is the gross income (with no adjustments or deductions) the household anticipates it will receive in the 12-month period following the effective date of the income certification. The combined income of all occupants of a unit, whether or not legally related, is compared to the appropriate percentage of the AMGI for a family with the same number of members4.

If information is available on changes expected to occur during the year, that information is used to most accurately determine the anticipated income from all known sources during the year. Unanticipated income received after the household moves in will not affect the original determination that a household is eligible for LIHC housing.

State agencies are required to review the low-income certifications, and the supporting documentation, for the tenants in a sample of LIHC units.5 Therefore, the state agency must review the initial income certification if the tenant moved in within the last year and the most recent income recertification for continuing tenants. *For state agency reviews

1 2 3 *See IRC §§42(g)(4), 42(i)(8), 142(d)(2)(B) and 1400N(c)(4).* Note: Once made, this election is irrevocable and applies to all low-income units. See IRC §§42(g)(1) and 42(i)(3)(A)(ii). *IRC §42(g)(8) is applicable for determinations made after July 30, 2008. See section 3004(f) of the Housing Assistance Tax Act of 2008.* See Rev. Rul. 90-89, 1990-2 C.B. 8. See Treas. Reg. §1.42-5(c)(2)(ii)(A) and (B). 4 5

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Revised October 2009

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