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Guide for Completing Form 8823 - page 71 / 197

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Chapter 5 Category 11b Owner Failed to Correctly Complete or Document Tenant’s Annual Income Recertification

Definition

*Under Treas. Reg. 1.42-5(b)(1)(vi), owners are required to complete an annual income certification for each low-income household.* The recertification process is identical to the initial certification in terms of documenting household composition, income, and income from assets. State agencies are required to review the tenant income recertifications and the

supporting documentation for the tenants in the units. be reviewing the most recent income recertification.

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Therefore, the state agency should

*Exception for Certain Buildings*

*Under Treas. Reg. §1.42-5(c)(4), a state agency may except buildings financed by the Rural Housing Service (RHS) under the section 515 program and buildings financed with tax-exempt bonds (50% or more of the aggregate basis of the building and land) from the annual income recertification as part of its certification and review provisions. To qualify for this exception, the state agency must enter into an agreement with the RHS or tax- exempt bond issuer. Under the agreement, RHS or the bond issuer must agree to provide information concerning the income and rent of the tenants in the building to the state agency. The state agency may assume the accuracy of the information provided without further verification.

Under this exception, owners are not required to perform annual income recertifications specific to IRC §42, and the state agencies are not required to review, tenant income recertifications, supporting documentation, and rent records. Instead, the state agency must review the information provided by RHS or the bond issuer and determine whether the owner is in compliance with the income limitations and rent restrictions in IRC §42(g)(1) and (2). If the information provided by RHS or the bond issuer is not sufficient for the state agency to make a determination, the state agency must request the necessary additional income or rent information from the owner of the buildings.

NOTE: RHS determines tenant eligibility based on its definition of “adjusted annual income,” rather than “annual income” as defined under the Section 8 program. Therefore, the state agency may be required to calculate the tenant’s income for IRC §42 purposes and may need to request additional income information from the owner.*

Noncompliance Corrected by Owner Prior to Notification of State Agency’s Compliance Review

Noncompliance with the annual income recertification requirements that is identified and corrected by the owner prior to notification of the compliance review by the state agency need not be reported; i.e., the owner has demonstrated due diligence by addressing noncompliance issues independently. See chapter 3.

Example 1: Noncompliance Corrected Before Notification of Compliance Review

On January 15, 2004, the owner of a LIHC building incorrectly completed a household’s income recertification. The owner identified the problem and corrected the documentation deficiency on March 30, 2004. The owner was notified on April 20, 2004, that the state agency would be conducting a tenant

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See Treas. Reg. 1.42-5(c)(2)(ii)(B).

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Revised October 2009

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