Compliance Requirements

The taxpayer is also subject to the following rules which may impact compliance on a unit-byunit basis, at the building level, or the entire project.

Minimum Set-Aside – A housing project will not qualify for any credit unless it includes a specified minimum number of qualified low-income rental units.

Available Unit Rule – Generally, if the income of an existing tenant rises above a specific limit, the next available comparable unit in the building must be rented to an income-qualified tenant.

Vacant Unit Rule – If a low-income unit becomes vacant, the taxpayer must make reasonable attempts to rent the unit to income-qualified tenants before renting any market-rate units to tenants who are not income-qualified.

General Public Use – The rental units must be available for use by the general public. A unit is for use by the general public if the unit is rented in a manner consistent with housing policy governing non-discrimination, as evidenced by rules or regulations of the Department of Housing and Urban Development (HUD)(24 CFR subtitle A and Chapters I through XX), and if the unit is not provided only for a member of a social organization, not provided by an employer for its employees, or not part of a hospital, nursing home, sanitarium, life care facility, trailer park, or intermediate care facility for individuals with mental or physical disabilities.

Material Participation of Qualified Nonprofit Organizations – If the taxpayer received an allocation under IRC §42(h)(5), a set-aside of credit designated for projects owned by qualified nonprofit organizations, then the qualified nonprofit organization must materially participate in both the development and operation of the project throughout the 15-year compliance period.

Extended Use Agreement – No credit is allowable for a taxable year unless this agreement between the taxpayer and the state agency allocating the credit is in effect as of the last day of such taxable year. The agreement must be recorded in the land records as a restrictive covenant and is enforceable under state law.

Certifications and Annual Reports – A taxpayer completes a certification with respect to the first year of the credit period, which is a one-time filing of Form 8609, Low-Income Housing Credit Allocation and Certification, with the IRS.

Part I is completed by the state agency and Part II is completed by the taxpayer.

The taxpayer also files Form 8609-A, Annual Statement for Low-Income Housing Credit, with its tax return for each year of the 15-year compliance period. The taxpayer is also required to certify at least annually to the state agency that the project met all the requirements.

Inspections by State Agency – Tenant records and the low-income project are subject to physical inspection by the state agency.