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IRS amends LIHTC compliance-monitoring regulations

Tomorrow the Internal Revenue Service (IRS) will post two notices that revise and clarify requirements for on-site physical inspections and file reviews conducted by state allocating agencies at low-income housing tax credit (LIHTC) properties. Final and temporary regulations will be published in the Federal Register and, at the same time, the IRS will concurrently issue Revenue Procedure 2016-15. The revenue procedure and notice make several key changes, including:

  • Amending the requirements for the number of LIHTC units and files that must be inspected by the state allocating agency as part of an on-site monitoring review. Formerly, the state agency was required to review 20 percent of the LIHTC units and files in the project. Now, the revenue procedure states that the minimum number of units and files that must undergo inspection is the lower of:

o    20 percent of the tax credit units in the project (rounded up to the nearest whole number); or

o    The number of tax credit units as identified in the Low-Income Housing Credit Minimum Unit Sample Size reference chart included in the revenue procedure.

  • Stating that HUD’s REAC protocol satisfies the physical inspection requirements of the LIHTC program. The revenue procedure makes clear that conducting an inspection under the REAC protocol does not excuse the state allocating agency from reviewing the low-income certifications in accordance with the regulations. The state agency may rely on a REAC inspections when:

o    Both vacant and occupied LIHTC are included in the population of units selected for inspection

o    The inspection complies with the procedural and substantive requirements of REAC, including using the most recent REAC UPCS inspection software

o    The inspection is performed by a REAC inspector; and

o    The inspection results are sent to HUD, reviewed and scored within HUD’s secure systems without any involvement of the inspector who conducted the inspection, and HUD makes the inspection report available.

  • Removing the requirement that physical inspections must be conducted for the same units as the file reviews. While state agencies are no longer required to select the same LIHTC units for on-site inspections as for file reviews, they may continue to do so.

The revenue procedure is effective February 25, 2016. Agencies using the REAC protocol under the physical inspections pilot program may implement the provisions for onsite inspections retroactively to January 1, 2015. Although the proposed regulations are adopted as final, comments and requests for public hearings may be submitted within 90 days of the publication of the notice.

Senior trainer Samantha Sowards has been a part of the NMA team since 2008. As NMA’s manager of curriculum development, Samantha oversees publications from concept and creation through the ongoing revision process, including NMA Master Books, model policies, and handbooks. She has previously written for the NMA blog about the key differences between the project-based voucher (PBV) program and the (HCV) housing choice voucher program.

Is your staff in need of LIHTC training? NMA is the only training company that offers LIHTC classes from a PHA perspective. Register now and save $125 on each registration to our upcoming class in Chicago, Illinois or 10 percent on our upcoming class in Norfolk, Virginia. We can also bring the seminar to you. Email for more information about our affordable onsite training options.