Eligible Basis and Qualified Basis

Compare the Maximum Qualified Basis identified on line 3a by the state agency and the eligible basis identified on line 7 by the taxpayer.

• If the numbers are the same, then (1) the building was intended to be a 100% low-income building and (2) the state agency determined that it was necessary to allocate the maximum amount of credit possible to assure that the project would remain feasible throughout the 15-year compliance period.

• If the eligible basis is more than the qualified basis, then either the building is a mixeduse building (both low-income and market-rate units) or the state agency determined that it was not necessary to allocate the maximum amount of credit possible to assure that the project would remain feasible throughout the 15-year compliance period.

• If the eligible basis is less than the maximum qualified basis, the issue should be addressed during the audit.

If the percentage on line 3b is larger than 100%, then the eligible basis identified on line 7 has been artificially increased above the actual costs because the building is in a location that is considered difficult to develop; e.g., the costs of construction, land, and utilities are high compared to the location's Area Median Gross Income or there is a particularly high concentration of low-income individuals. The increased eligible basis increases the amount of credit available to subsidize costs that cannot be supported by debt or future cash flow from rents.

There should be a one-to-one match of Forms 8609 to Forms 8609-A filed with the tax return. Compare the eligible basis on Form 8609, line 7, to the eligible basis identified on Form 8609-A, line 1. The numbers should be the same. If the eligible basis on Form 8609-A, line 1, is less than reported on Form 8609, then a recapture event may have occurred and the issue needs to be addressed during the audit. The eligible basis on Form 8609-A, line 1, should never be larger than the eligible basis reported on Form 8609, line 7.