Affordable Housing Compliance Best Practices Manual

A f f o r d a b l e H o u s i n g

C o m p l i a n c e B e s t

P r a c t i c e s M a n u a l

A Leas ing Consul tant ’s Guide to

Compl iance Monitor ing Requirements of

Af fordab le Hous ing Programs

By : J o s é Apon t e , HCCP , NCP - E , SHCM

Reproductions are not permitted without the expressed

written permission of Preferred Compliance Solutions, LLC.

© 2020 Preferred Compliance Solutions, LLC. All Rights Reserved

595 S. 80 E. Suite 415 Logan, Utah 84321

Website: www.preferredcompliance.com

http://www.preferredcompliance.com/

Purpose of this Manual

This manual is intended to be a resource for Preferred Compliance Solutions, LLC. clients

that have been given the responsibility of managing and maintaining compliance.

This manual is a training and reference guide. It is designed to answer the most frequently

asked questions regarding the program procedures, rules, and regulations, as interpreted

and adhered as policy and procedures. It should be a useful resource to on-site

management personnel.

Although state agencies and their contractors monitor program compliance, most times

their compliance requirements invite more lenient procedures than those which are set

forth by the regulations as the most reliable. These also do not take into consideration a

lender or syndicator’s interpretation of compliance, and the owner’s requirement to adhere

to these when more stringent than those set by the state.

Here at Preferred Compliance Solutions, LLC. we believe compliance practices can be

labeled as:

a) Good b) Better c) Best

Policies and procedures in this manual have been set by management for your community

and Preferred Compliance Solutions, LLC. to ensure we protect the owner’s interest with

the BEST compliance program possible.

Property staff must contact management prior to making any exceptions to any of these

policies and/or procedures.

A F F O R D A B L E H O U S I N G C O M P L I A N C E M A N U A L

i

C H A P T E R 1 P A G E

Introduction To Compliance

1.0 Introduction to Compliance 1

1.1 How Does This Affect Your Community? 1

1.2 LIHTC Program Organization Chart 2

1.3 Compliance Timetable 3

1.4 Our Policy 4

1.5 Compliance Involvement With Applications 4

1.6 Managing a Tax Credit Property 7

1.7 Key Stages 8

1.8 Basic Requirements 9

1.9 State Audit Timelines (Annual Management

Review) 10

1.10 The Day of the Audit 10

1.11 After the Audit 11

1.12 Common Non-Compliance 12

1.13 Non-Correctible Non-Compliance 12

1.14 Non-optional vs optional Fees 13

1.15 Overcharged Rent 14

1.16 Rent in Units with Rental Assistance 15


Interviewing an Applicant

2.0 Welcome Card 16

2.1 Four Steps to Pre-Qualifying Applicants 16

2.2 The Application 16

2.3 Identification Needed 18

2.4 Household and Family Size 18

2.5 Absentee Spouses 20

2.6 Underage Household Members Not Members

of the Family 21

2.7 Live In Aide 22

2.8 Full Time Student Applicant 23

2.9 HOME and section 8 Student Rule 24

2.10 Student Exemptions: 25

2.11 Demographic Requirements 26

2.12 Demographic Definitions 27


Anticipated Gross Annual Income

3.0 Types of Income That Must be Included in

the Income Calculation 31

3.1 Types of Income That are NOT Included in

the Income Calculation 44

3.2 Whose Income is Counted 48


Verifying and Documenting Income

4.0 Methods of Income Verification 49

4.1 Reviewing Reported Income Verification 49

4.2 Acceptable Income Verification 51

4.3 Acceptable Forms of Income Verification 58


Calculating Total Gross Annual Income

5.0 Calculating Anticipated Gross Income 65

5.1 Hourly Full Time Employment 65

5.2 Weekly Full-Time Employment 66

5.3 Bi-Weekly Full-Time Employment 66

5.4 Bi-Monthly Full-Time Employment 66

5.5 When Calculating Seasonal or Part-Time

Employment 67

5.6 Year-to-Date Calculation 67

5.7 Pay Increase Calculation 68

5.8 Calculating Income from Educational

Assistance 71

5.9 Annual Income Quick Reference Chart 72


Unemployed Applicants & Applicants Receiving

Rental Assistance (i.e. Section 8)

6.0 Unemployed Applicants 73

6.1 Applicants Participating in Rental Assistance

Programs 73

TABLE OF CONTEN TS


ii


Included and Excluded Assets

7.0 Assets 76

7.1 Included Assets 76

7.2 Excluded Assets 79


Documenting and Calculating Assets

8.0 Asset verification 81

8.1 Determining the Value of Assets 81

8.2 Checking and Savings Accounts 82

8.3 Real Estate 84

8.4 Rental Income From Real Estate 87

8.5 Sale or Disposition of Real Estate 88

8.6 Disposal of Assets for Less than Fair Market

Value 89

8.7 Documenting CDs, Money Market Accounts

or Treasury Bills 91

8.8 Documenting Stocks or Securities 92

8.9 Documenting Trust Funds 93

8.10 Documenting Bonds 98

8.11 Documenting 401K and retirement accounts99

8.12 Documenting IRAs, Keogh or Other

Retirement Savings Accounts 100

8.13 Annuities 101


Tenant Income Certification

9.0 Tenant Income Certification (TIC) 104

9.1 Line-By-Line Instructions 105

C H A P T E R 1 0 P A G E

Change in Status After Move In

10.0 Changes in Family Size 113

10.1 Family Size Decrease 113

10.2 Family Size Increase 114

10.3 Unit Transfers 115


Resident Files

11.0 Resident Files 116

11.1 Correspondance File Set-Up 117

11.2 File Dividers 117

11.3 Compliance File Set-Up 117

11.4 Recommended File Set-Up 118

11.5 Employee Resident File 120


Record Keeping

12.0 Reporting Requirements 122

12.1 Program Report 122

12.2 Next available unit and vacant unit rule 123

12.3 Line-By-Line Instructions (Preferred’s NAU

Log) 127


Lease Agreement vs. Annual Recertification

13.0 Lease Agreement 130

13.1 Lease Agreement vs. Annual Recertification

(AR) 130

13.2 Annual Recertification (AR) 131

13.3 AR Notice Schedule 132


Resident Programs (Tenant Services)

14.0 Resident Programs 134

14.1 Frequency 135

14.2 Record Keeping 135

14.3 Compliance Involvement 136


Forms

15.0 Compliance Forms 137


iii


Maintenance Staff Compliance Policies And

Procedures

16.0 Maintenance Staff And State Audits 138

16.1 Preparing for a Physical Inspection 139

16.2 Major Areas of Focus 142


Las políticas y procedimientos de cumplimiento del

personal de mantenimiento

17.0 El personal de mantenimiento y las

auditorias del estado 145

17.1 Preparamiento para una inspección física. 146

17.2 Áreas Principales de Atención 149


Acquisition and Rehabilitation

18.0 Acquisition and Rehabilitation 152

18.1 Applicable Fraction 153

18.2 Tracking the Applicable Fraction During the

First Year of the Credit Period 153

18.3 Testing for Purposes of the Next Available

Unit Rule During Rehabilitation 155

INTRODUCTION TO COMPLIANCE

1.0 INTRODUCTION TO COMPLIANCE

In order to know how to comply, one must first understand the meaning of

compliance. Let us look at the definition of compliance. Compliance is the

act of yielding to a wish, request, or demand; acquiescence. In other

words, to do as you are directed, to follow the rules or demands of another.

How Does COMPLIANCE Pertain to Us?

Some of the communities that our company manages participate in federal

income tax credit, and other programs instituted by Congress, to provide

eligible households quality and affordable home living. To ensure the

integrity of the programs, the IRS and HUD have state and local agencies

oversee compliance with their regulations.

1.1 HOW DOES THIS AFFECT YOUR COMMUNITY?

Whenever you have a valuable item such as tax credits and other affordable

housing programs the demand is usually greater than the supply. Whoever

meets and maintains compliance (adheres to the requirements of the IRS, HUD

and the state) may utilize the assistance; whoever does not comply, (ignores

these requirements) will be found to be in NON-COMPLIANCE and could be

eliminated from using the programs. Our business is based on managing

communities that have secured these tax credits. If we do not adhere to the

rules, and are found to be in NON-COMPLIANCE, the community could lose

the assistance, and subsequently we could lose the management. The bright

Chapter

1

© 2 0 1 5 P R E F E R R E D C O M P L I A N C E S O L U T I O N S , L L C A L L R I G H T S R E S E R V E D

Copyrighted Material: Do Not Copy 2

side is, if you follow the guidelines as set forth in this chapter, compliance is

easy!

This chapter outlines the compliance issues relevant to the Low Income

Housing Tax Credit Program (LIHTC), Bonds, and HOME as set forth in Section

42 of the Internal Revenue Code, HUD Handbook 4350.3, and state

Compliance Guidebook. State agencies administer the Programs and conduct

routine audits of the resident files by visiting the communities on a regular

basis. This is to ensure that the community and owners adhere to the program

rules. They also require submission of reports on a regular basis, documenting

the demographics and income of the residents. All of the units at your

community are regulated by the Internal Revenue Service and monitored by

your particular state agency.

1.2 LIHTC PROGRAM ORGANIZATION CHART

OWNERSHIP

PROPERTIES

HOUSING FINANCE AGENCY

MONITORING AGENCY

Can Be Housing Finance Agency Subcontractor

INTERNAL REVENUE SERVICE (IRS)

MANAGEMENT COMPANY

© 2 0 1 5 P R E F E R R E D C O M P L I A N C E S O L U T I O N S , L L C A L L R I G H T S R E S E R V E D


1.3 COMPLIANCE TIMETABLE

CCRREEDDIITT PPEERRIIOODD

1100 ccoonnsseeccuuttiivvee yyeeaarrss

CCOOMMPPLLIIAANNCCEE PPEERRIIOODD

CCrreeddiitt ppeerriioodd ++ 55 ooff aaddddiittiioonnaall ccoommpplliiaannccee

YYrr 11 YYrr 1100 YYrr 1155 YYrr 3300++

EEXXTTEENNDDEEDD UUSSEE PPEERRIIOODD

11999900 && llaatteerr pprroojjeeccttss OONNLLYY

CCoommpplliiaannccee PPeerriioodd ++ 1155 ooff aaddddiittiioonnaall ccoommpplliiaannccee oorr mmoorree

© 2 0 1 5 P R E F E R R E D C O M P L I A N C E S O L U T I O N S , L L C . A L L R I G H T S R E S E R V E D


1.4 OUR POLICY

For your protection, all compliance related correspondence, reports and

questions must be directed to management or Preferred Compliance Solutions

staff. All outgoing reports will be reviewed by this department, prior to

forwarding to a State, local or Federal Agency. On site staff must never

contact State, local or Federal Agencies. Any calls initiated by State, local or

Federal Agencies or their monitoring agents must be forwarded to the

compliance department as well. There are no exceptions to this policy.

1.5 COMPLIANCE INVOLVEMENT WITH APPLICATIONS

Management and/or, when applicable, Preferred Compliance Solutions

MUST review and approve all applications for residency prior to move

in, and recertifications immediately upon completion. At no time

should anyone move-in to your community without written final approval.

Compliance Approval

Immediately after all documentation needed in order to qualify a household

with program requirements have been received, the manager must review

all documents prior to sending for approval. No household should move in

unless written approval (“Final Results”) has been received.

Although, Preferred Compliance Solutions reviews all initial certifications on

the same day these are received, final result/approval might take more

than a day due to corrections needed for the file. Therefore, proactively,

an applicant’s move-in date should be scheduled accordingly (no less than

3 business days from the time sent for review and approval). In order to

review application(s), you must send the following information. Note that

not ensuring all documentation is submitted for review may cause a delay

in receiving a final result:

❖ Compliance Application Coversheet



❖ Fully Completed Application

❖ Verification(s) of Income and Supporting Documentation

❖ Asset Affidavit and Supporting Documentation

❖ Student Eligibility Affidavit, Student Verification Form and Student

Income Certification (when applicable)

❖ Birth Certificates that show parent’s name for all minors

❖ Clarification Forms & Statements completed (when applicable)

❖ Any other verification of documentation needed to properly qualify

household

Corrections and/or Clarifications Request

Once compliance reviews the documents listed above, when applicable,

they will issue a “Correction Request” that will list any unclear or non-

compliance findings that will need to be corrected and/or clarified by the

community staff.

Once resolved, corrections and/or clarifications must be sent to compliance.

Once received, compliance staff will review these corrections and/or

clarifications and determine if the “Additional Steps Needed” can be issued.

Additional Steps Needed

Once a file is ready for approval, Preferred Compliance will issue an

“Additional Steps Needed” template indicating the certification can be

completed. This will require a signed lease and TIC be sent to compliance

for final review and “Final Approval”.



Final Approval

Final results will be issued in the form of a “Final Results” template which

will detail if application is approved or denied, with the reason. “Final

Results” will be posted to Preferred Compliance Solutions, LLC NextGen

eFile system. When a correction or result is posted, those able to upload

files to the NextGen eFile system for your property will receive an email

notification. Therefore, it is critical that a current email is listed in their

NextGen eFile account. However, in the absence of a proper email, results

can still be accessed by logging into the NextGen eFile Access system.

It is critical to the eligibility of the household that all corrections

made during the file review process leading to a final result make it

into the final tenant file. Not doing so could cause the unit to be in

non-compliance.

NextGen eFile Access

“NextGen eFile Access” section is a free file sharing solution provided by

Preferred Compliance Solutions, LLC. This solution allows properties the

convenience of uploading applications and corrections that will be reviewed

by compliance professionals. It allows the properties to view the

information before it is submitted, therefore ensuring that all documents

are uploaded. It also gives the properties the immediate confirmation that

documents have been received by our system.

In addition, when using “NextGen eFile Access” your properties are able to

view and print a record of the date and time an application was received

and printed in our office. Because of non-compliance findings, correction

requests and approvals are also uploaded to this section, this also serves as

a solution to our compliance professionals in delivering correction requests

and final results of compliance status.

Best of all it saves everyone time and money, no storage space, no copies

to make, and no boxes with copies of files to ship.



1.6 MANAGING A TAX CREDIT PROPERTY

NOTE 1.6.1: Remember, if you have more than one program on your property, you

should always use the most restrictive guideline.

To successfully manage a tax credit property, you must always have the

following information on hand. This can be found in the Land Use Restriction

Agreement (LURA) for your property:

❖ The number of units set aside for tax credit compliance

requirements

❖ The applicable maximum income for each family size

❖ The maximum allowable gross rents

❖ The utility allowance for each unit size

❖ Resident services promised on the Land Use Restriction Agreement

(LURA) and/or Extended Use Agreement (EUA)

The following information needs to be posted where all residents and

prospective residents can see it:

❖ Income Limits and Rents

❖ Utility Allowance Chart

❖ Resident Selection Policy

❖ Late Charge Policy

❖ Fair Housing Poster (English and Spanish)

❖ Office Hours

❖ Emergency Phone Numbers



1.7 KEY STAGES

There are four key stages in the life of a Tax Credit project.

A. DEVELO PMENT PERIOD

The development period for a project begins when commitment of LIHTCs or

other Affordable Housing program(s) are made by the state and lasts until the

owner places the project in service. A building is determined to be “placed in

service” when the first unit is ready for occupancy (certified for occupancy). In

general, the owner must place the project in service before the end of the 2nd

calendar year in which the project receives its LIHTC or other Affordable

Housing program commitment.

B. LEASE-UP PERIOD

The lease-up period starts once a project has been placed in service and lasts

until the owner begins to claim the project’s Tax Credits. Owners can start

claiming a project’s Tax Credits at the end of the tax year following the project

being placed in service.

During this period, owner/managers need to qualify all of the units they will

count as set-aside.

C. COMPLIANCE PERIOD (SEE SECTION 1 .3)

The compliance period begins with the first tax year in which the owner claims

Tax Credits for the project and lasts for 15 consecutive years.

D. EXTENDED USE PERIOD (SEE SECTION 1.3)

Once the 15-year compliance period ends, projects enter the extended use

period. Owners/managers of these projects are required to maintain the

property’s low-income occupancy for an additional 15 years beyond the end of

the compliance period – the remaining life of the extended use agreement for

the project. In some cases longer, for example, most of our communities

require a 50-year extended use period.



1.8 BASIC REQUIREMENTS

For a unit to be counted as a Tax Credit unit, the following six conditions

must be met:

❖ All units in the same building identification number must be certified

by qualified households.

❖ The resident’s income may not exceed the applicable income limit

for your community (at time of move-in).

❖ The rent paid by the resident plus allowance for resident-paid

utilities may not exceed the maximum allowable rent for that unit.

❖ The physical condition of that unit must meet local health, safety

and building codes.

❖ Management must execute a lease of no less than seven months

with the resident.

❖ Management must list the unit as an eligible unit on reports

submitted to the state or local agencies.

❖ In most states and in mixed used properties, property staff must re-

examine the resident’s eligibility annually and maintain rents at or

below applicable rent limits.

As mentioned before, here at Preferred Compliance Solutions, LLC. we believe

compliance practices can be labeled as:

a) Good b) Better c) Best

Policies and procedures in this manual have been set by management for your

community and Preferred Compliance Solutions to ensure we protect these

basic requirements with the BEST compliance program possible.



1.9 STATE AUDIT TIMELINES (ANNUAL MANAGEMENT REVIEW)

The State or local agency will write or call your office, management and/or

owner telling them the date they will be doing an on-site audit of your property.

If you receive a letter or a call, please notify the compliance department and

your supervisor immediately. Please note in many instances, notice of an audit

is received only days before the audit.

NOTE 1.9.1: The date of the Audit is set by the State or local agency and is

always changing. There are no set dates.

NOTE 1.9.2: Prior to the date of the audit

❖ Send a notice to all residents advising them of the date of

the audit, and that apartments will be randomly picked for a

physical inspection.

❖ Do a complete inventory of files.

1.10 THE DAY OF THE AUDIT

❖ Have a folder prepared with current copies of

a. Questionnaire (State or their monitoring agency will mail with audit

notification)

b. Copies of your last advertising

c. Last three months Newsletters

d. Rent Roll (printed the day of the audit)

e. Updated copy of Utility Allowance (if using PHA chart, dated within

90 days)

f. Latest Income Limits and Rent Schedule Chart



g. Updated Next Available Unit Log (Properties with market units only)

h. Updated State’s program compliance reports including summary

pages

i. Copies of resident services sign-in logs and other applicable

information needed to prove that it was provided (when applicable)

❖ Have a quiet area with plenty of workspace for the auditor(s)

❖ Have refreshments on hand (i.e. soda, chips, etc.)

❖ Check on auditor(s) periodically to see if they need anything

A representative from management may be present to furnish all

information and answer the Auditor’s questions. This will free you to

work and keep you from getting into a situation in which you may

feel unsure. Be polite but look to the representative for guidance. If

you happen to be in a position that your representative is not present

during the audit, you are to be polite, but ask the Auditor to refer

questions to the representative. The representative is there to take the

pressure off of you and to protect you from any miscommunication.

1.11 AFTER THE AUDIT

After the audit has been completed, you will receive a review letter. This takes

an average of 2 to 4 weeks. When the review letter is received, you will be

informed of the outcome.

Any time you receive a letter from the State or local agency, call

management and send a copy immediately.

Do not answer questions about your audit either in person or by phone if the

State or local agency contacts you. Instead, politely offer to take their name,

phone number, and inform them that someone from management will contact

them as soon as possible. You must immediately contact the compliance

department. We may already have the answer for the caller, and they

may just be confused about whom to call.



1.12 COMMON NON-COMPLIANCE

a. Units not ready for immediate occupancy – IRS has instructed state

agencies to issue 8823s for vacant units that are not available for

rent because the units are not prepared for immediate occupancy

b. Not complying with the time requirements of forms required by the

monitoring agency

c. Not having the resident file information such as application,

certification and/or lease

d. Health and life safety issues such as smoke detectors

e. Not completing required annual income certifications in a timely

manner

f. Not calculating assets correctly

g. Not calculating income correctly

h. Using incorrect Income Limits – not updating yearly in a timely

manner

i. Not updating Utility Allowance figures annually as required

j. Exceeding Maximum Allowable Rent as a result of using incorrect

AGMI or Utility Allowances

k. Failure to make the next unit available to a Housing Credit qualified

household when an existing HC household’s income exceeds 140%

of the maximum allowable income.

1.13 NON-CORRECTIBLE NON-COMPLIANCE

a. Ineligible household

b. Improper transfers



c. Ineligible students

d. Not reporting in a timely manner

e. Overcharged rent

1.14 NON-OPTIONAL VS OPTIONAL FEES

Typical non-compliance may involve converting common areas to

commercial property or charging fees for facilities (such as a swimming

pool and clubhouse), the cost of which were included in the Eligible Basis.

Fees may not be charged for common areas that have been included

as part of the Eligible Basis. Prior to charging a fee, property staff

must confirm with management that such fee is allowed under

program regulations.

Units may be residential rental property notwithstanding the fact that

services other than housing are provided. However, any charges to low-

income tenants for services that are not optional generally must be

included in gross rent calculation. A service is optional when the service is

not a condition of occupancy and there is a reasonable alternative.

PET, LAUNDRY ROOM, AND OTHER FEES

Charges for non-optional services such as a washer and/or dryer hookup

fee and built-in/on storage sheds (paid month-to-month or a single

payment) would always be included within gross rent. No separate fees

should be charged for tenant facilities (i.e., pools, parking, recreational

facilities) if the costs of the facilities are included in eligible basis. Assuming

they are optional, charges such as pet fees, laundry room fees, garage, and

storage fees may be charged in addition to the rent; i.e., they are not

included in the rent computation. All required costs or fees, i.e.,

redecorating fees, which are not refundable, are included in the rent

computation and therefore could result in overcharged rent.



APPLICATION FEE

Unless otherwise approved by the State Agency, application fees may be

charged to cover the actual cost of checking a prospective tenant’s income,

credit history, and landlord references. The fee is limited to recovery of the

actual out-of-pocket costs. No amount may be charged in excess of the

average expected out-of-pocket costs of checking tenant qualifications at

the project. It is also acceptable for the applicant to pay the fee directly to

the third party actually providing the applicant’s rental history.

1.15 OVERCHARGED RENT

Gross rent includes any utility allowance. Tenant rent is the portion of the

Total Tenant Payment the tenant pays each month to the property for rent.

Tenant rent is calculated by subtracting the utility allowance from the Total

Tenant Payment.

Because HUD determines a tenant’s rent on a monthly basis, state

agencies must determine whether the property is in compliance with

the gross rent limits each month of the owner’s current tax year.

The worst noncompliance possible is over charged rent. Once a unit is

determined to have been noncompliant with the rent limits, the unit ceases

to be a low-income unit for the remainder of the owner’s tax year. The unit

is back in compliance on the first day of the next tax year if the rent

charged on a monthly basis does not exceed the limit. An owner cannot

avoid the disallowance of the tax credits by rebating excess rent or fees to

the affected tenants.

EXAMPLE 1.15.0:

The owner of a 100% LIHC building leased all the units to eligible

tenants during 2007, the third year of the credit period. However,

management inadvertently overcharged rent to tenants occupying 3

bedroom apartments. The error impacted 15 out of 75 units. The

owner is a calendar year taxpayer.



The Applicable Fraction for 2007 is 60/75, which equals 80 percent,

rather than the required 75/75, which is equals to 100 percent.

Therefore, the owner has lost 20 percent credits for the calendar

year. The unit is back in compliance on January 1, 2008 if the owner

correctly limits the rent for all units.

EXAMPLE 1.15.1:

Overcharged Rent Impacted Minimum Set-Aside

The owner leased the rental units in a 100% LIHC building to

eligible tenants by the end of the first year of the credit period.

However, management overcharged rent for all the units and, as a

result, failed to meet the minimum set-aside for the first year of the

credit period.

The building does not qualify for LIHC.

1.16 RENT IN UNITS WITH RENTAL ASSISTANCE

As long as the household is receiving Federal rental assistance, their portion

of the rent, according to the Section 8 calculations, can be more than the

maximum allowable rent applicable to the unit, if permitted by your state

agency. However, USC Title 26 Section 42(g)(2)E states that if their

income rises to a point where it maxes out under Section 8, so that no

rental assistance payment is being received, they are no longer considered

a Section 8 household, and the HC rent restrictions “kick-in” and the

household’s rent would have to be reduced.

EXAMPLE 1.16.1:

At initial certification Sallie is receiving rental assistance. Her tenant

paid portion, as calculated by Section 8, is $695; this exceeds the

maximum allowable rent of $690. As long as she continues to receive

Federal rental assistance, the tenant portion of the rent plus utility

allowance can be more than the maximum allowable rent of $690.

However, if Sallie were to stop receiving Section 8 rental assistance, her

rent must be reduced to applicable limits of $690.

INTERVIEWING AN APPLICANT

2.0 WELCOME CARD

The welcome card is a tool designed by management to determine the

eligibility of prospective applicants. Use this form to assist in the initial

interview with the prospective applicant.

2.1 FOUR STEPS TO PRE-QUALIFYING APPLICANTS

❖ Determine Household Size

❖ Compute Annual Gross Income

❖ Compare Income to Maximum Allowable Income Limits

❖ Verify Income Information

❖ Determine all household members student status (see section 2.8)

2.2 THE APPLICATION

The applicant must always complete the application with the assistance of a

leasing consultant. The application may never be given to anyone to be

completed outside of the leasing office.

It is important that all sections of the application are fully and clearly

completed and signed by all adults. N/A is NOT an acceptable answer to any

question on the application. Answer “No” or “None” instead.

Chapter

2



Multiple applicants (other than spouse) must fill out separate applications.

The application should include:

❖ The name and correct age of each person who will occupy the unit

(legal name should be given just as it will appear on the Lease and

Tenant Income Certifications).

❖ All sources and amounts of current and anticipated annual income

expected to be earned during the twelve (12) month certification

period (including total assets and asset income).

❖ The signature of the applicant(s) and the date the application was

completed. (You should explain to the applicant that all the

information they provide is considered confidential and will be

handled accordingly.)

❖ Student Status including full and part-time.

When the application reflects anticipated income less than what the income

verified by the employer states (by a difference of $1,000 or more), the

applicant must clarify with a written statement explaining the reason for the

difference. If the applicant anticipates significantly more than what the verified

income reflects (by $1,000 or more), to best document eligibility, applicant

must write a very detailed self-affidavit that includes explanation as to why

there are such large differences. Certification must not be completed until

eligibility has been fully documented.

If an area of the application needs to be revised, the applicant should draw a

single line through the incorrect information and list the correct information

above or beside. All changes must be initialed by the applicant.

“WHITE OUT” may never be used. The use of “White Out” on any document

voids the signed document. It is your company’s policy that there be no white

out allowed at the properties.

It is management’s responsibility to obtain sufficient information on all

applicants at the time of application so that verification forms can be

completed.



2.3 IDENTIFICATION NEEDED

NOTE 2.3.1: To properly qualify a household, verifications must always include

picture ID, social security card for everyone and birth certificates for all

occupants under 18. In Senior (Elderly) properties, a government

issued ID is required for household members that will qualify the unit as

“Elderly,”

Applicants with no social security card must provide copies of legal work

permit, green card or other legal document permitting them to work in the

United States. Please be sure to check your resident selection criteria to

see if management has alternate requirements.

BIRTH CERTIFICATES

The importance of birth certificates: Eligibility for low-income housing is

based on an income limit, which is based on the number of people in the

household. We need to determine if the occupants, particularly minors, are

members of the household. Although not required by regulation, the best

way to determine this is to request a Vital Statistics birth certificates. When

there is an absent parent there is a possibility that the household receives

child support. (see sections 2.4, 2.5 and 4.3 for additional guidance)

NOTE 2.3.2: The only exception to this is foster children. In this case, the

resident must provide proof of foster parenthood and we do not

count income paid to the resident for foster care (see section 3.1(E)

for additional guidance) when such income is made through the

official foster care agency.

2.4 HOUSEHOLD AND FAMILY SIZE

As a general rule, a “household” consists of all individuals (or tenants)

residing in a unit. To determine the household income limit, all applicable

income standards are adjusted for family size. For LIHTC purposes, all



occupants of a unit are considered in the determination of family size

except the following:

1. Live-in aides. A person who resides with one or more elderly

persons, near-elderly persons, or persons with disabilities, and who

is determined to be essential to the care and well-being of the

person(s); is not obligated for the support of the person(s); and

would not be living in the unit except to provide the necessary

supportive services. While a relative may be considered to be a live-

in aide/attendant, they must meet the above requirements. The

income of live-in aides is not included in the household’s income.

2. Guests. A visitor temporarily staying in the unit with the consent of

the tenant or another member of the household who has expressed

or implied authority to consent on behalf of the tenant.

INCLUDED IN HOUSEHOLD SIZE

When determining family size for income limits, you must include the following

individuals who are not living in the unit:

1. Children temporarily absent due to placement in a foster home;

2. Children in joint custody arrangements who are present in the

household 50% or more of the time. If disputed, determine which

parent claimed the children as dependents for purposes of filing a

federal income tax return.

3. Children who are away at school but who live with the family during

school recesses;

4. Unborn children of pregnant women (as self-certified by the

woman);

5. Children who are in the process of being adopted;

6. Foster children that are in the legal guardianship or custody of a

State, county, or private adoption or foster care agency, yet are

cared for by foster parents in their own homes under some kind of

foster care arrangement with the custodial agency.



7. Foster adult is usually an adult with a disability who is unrelated to

the tenant family and who is unable to live alone.

8. Temporarily absent family members who are still considered family

members if approved to live in the unit. For example, the property

may consider a family member who is working in another state on

assignment to be temporarily absent;

9. Family members in the hospital, or a rehabilitation facility, for

periods of limited or fixed duration are considered a family member.

These persons are temporarily absent;

10. Persons permanently confined to a hospital or nursing home. The

family decides if such persons are included when determining family

size for income limits. If the family chooses to include the

permanently confined person as a member of the household,

property staff must include income received by the confined person

in calculating family income.

2.5 ABSENTEE SPOUSES

There are several questions that must be answered when dealing with an

absentee spouse. They are the following:

• Is the absentee spouse a household member?

• Why is the absentee spouse not going to be residing in the apartment?

• For how long is the absentee spouse not going to be residing in the

apartment?

• Is the absentee spouse providing any financial support to the

household?

In the event it is anticipated that the absentee spouse is a household member

and/or will be residing in the unit in the twelve months following the

certification (certification period), his/her income must be documented and

counted towards the maximum allowable income.



The policy and procedure set is; all applicants 18 years and older, or in the case

of emancipation, must sign an “Affidavit of Estrangement” if their spouse will

not be residing in the unit and will not be counted as a household member.

This is not to be confused with an absent spouse who will be counted as a

household member (i.e., away on military leave, temporarily absent, etc.) and

whose income will be counted.

When the spouse will be absent and is, or will, no longer be a household

member for the twelve months following the certification (certification period),

applicant(s) must:

1. Sign an “Affidavit of Estrangement or Absent Spouse” form.

When it is determined that a spouse will be absent due to not being able to

enter the country, and therefore not anticipated to be a household member in

the twelve months following the certification, he/she is not included in the

certification. The applicant should sign an “Affidavit of Estrangement or Absent

Spouse” form and provide supporting documentation as applicable. Any

income he/she contributes to the household is counted as a recurring gift or

contribution.

2.6 UNDERAGE HOUSEHOLD MEMBERS NOT MEMBERS OF THE FAMILY

In order to be considered a household member, a minor must be shown to live

in the household at least 50% of the time, but is not required to be a “family”

member. Applicants are allowed to decide what constitutes their “family.” For

example, if an applicant wants to include his nephew as part of the “family” or

“household,” it is required that the minor be determined part of the household

by how much time the minor will be in the unit.

At time of application, it might be determined by looking at the birth certificate

(See section 2.3) that a parent or both parents are missing from the household.

If at least one parent is in the unit, it could be assumed the child will be in the

unit at least 50% of the time, unless a divorce decree, child support order, or

other documents placed in the file state otherwise.

In the event that both parents are not part of the household, documentation

that the minor is indeed part of the household must be obtained from an



independent source (guidance counselor, clergy, social worker, school where

the minor is attending, etc.). Documentation must show at least one adult

household member as guardian for the minor.

NOTE 2.6.1: A letter from either the minor’s parent or legal guardian is NOT

sufficient proof. This policy was set to avoid fraudulent letters in an

effort to increase household size in order to increase applicable income

limits.

2.7 LIVE-IN AIDE

A live-in aide is an individual who resides with one or more elderly persons,

near-elderly persons, or persons with disabilities and who:

1. Is determined to be essential to the care and well-being of the

persons;

2. Is not responsible for the support of the persons; and

3. Would not be living in the unit except to provide the necessary

supportive services (24 CFR 5.403).

While a relative may be considered to be a live-in aide, they shall

meet the above requirements, especially the last. The live-in aide

qualifies for occupancy only when the individual needing supportive

services qualifies and shall not qualify for continued occupancy as a

remaining family member. A spouse can never be a live-in aide.

Verification that the live-in aid is needed, must be obtained from the

person’s physician, psychiatrist or other medical practitioner or health care

provider. The property may not require applicant or tenants to provide

access to confidential medical records or to submit to a physical

examination.

Once established that an individual is a Live-in Aide his or her income is not

included in determining household eligibility.



2.8 FULL TIME STUDENT APPLICANT

In general, occupants of a unit should not be considered qualified, if

all of the occupants are full-time students, unless they meet certain

exceptions listed in section 2.9. This is the same at time of annual

recertification as it is at time of initial certification.

The IRS has defined full-time students as follow:

Student Definition: Those attending or who will attend an

educational organization for five months

during the calendar year in which the

certification will be effective (months need not

be consecutive).

Educational Organization: One that normally maintains a regular faculty

and curriculum, and normally has an enrolled

body of pupils or students in the attendance

at the place where its educational activities

are regularly carried on. The term

“educational organization” includes

elementary schools, junior and senior high

schools, colleges, universities, and technical,

trade, and mechanical schools. It does not

include on-the-job training courses.

Determining Status: The determination of student status as full or

part-time is based on the criteria used by the

educational institution the student is

attending. Such is documented by the

institution on the “Student Verification” form.

In order to qualify to reside in a low-income unit when the household is

determined to be composed of all full-time students, they must meet one of

the student exemptions listed in section 2.9.



It must also be noted that in the event a household member is determined

to be a student, full-time or part-time, and the household receives HUD

Section 8 assistance, all income received or anticipated to be received as

educational assistance must be counted in determining the household’s

income eligibility. For additional guidance on this, please see Chapter

3.1(I).

2.9 HOME AND SECTION 8 STUDENT RULE

Effective August 23, 2013 the HOME program adopts the Section 8 Housing

Choice Voucher (HCV) program restrictions on student participation found

at 24 CFR 5.612, which exclude any student that:

1. Is enrolled in a higher education institution

2. Is under age 24

3. Is not a veteran of the U.S. military

4. Is not married

5. Does not have a dependent child(ren)

6. Is not a person with disabilities

7. Is not otherwise individually eligible, or has parents who,

individually or jointly, are not eligible on the basis of income.

All of the above are prohibited from receiving any type of HOME assistance,

including renting HOME-assisted rental units, receiving HOME tenant-based

rental assistance, or otherwise participating in the HOME program

independent of their low- or very low-income families.

What triggers the student rule?

LIHTC/MMRB When ALL household members are students

HOME When ANY member is a student

HOME AND SECTION 8 STUDENT ELIGIBILITY



A student enrolled in an Institute of Higher Education as defined by the

Higher Education Act of 1965-Amended 1998 will be deemed eligible for

assistance if the student meets all other eligibility requirements, passes

screening criteria and is:

1. Living with parents/guardian or

2. 24 or older or

3. A veteran of the United States armed services or

4. Married or

5. Has a dependent child or

6. Can prove independence of parents including

a. The parents did not claim the student on the most recent tax

return and

b. The student has lived independent of the parents for at least

one year or meets the Department of Education’s definition

of an independent student

c. Can legally sign a lease

7. Is disabled and was receiving assistance as of November 30, 2005

or

8. Has parents who are income eligible for the Section 8 program

2.10 STUDENT EXEMPTIONS:

The following list of exemptions includes those for HOME properties

committed before August 23, 2013. See section 2.9 for a list of those who do

not qualify under the current student rules of the HOME program.

MMRB, LIHTC, SAIL, and HOME properties only:

• At least one household member will be residing in the unit who is NOT a

full-time student.

Must List all such household members on the application: (Part-time

students must include verification from school documenting this

status)

• Applicants are full-time students, married AND file a joint tax return

APPLICANT MUST PROVIDE: A copy of marriage license.



LIHTC / MMRB / SAIL properties only:

• Applicant is currently receiving assistance under Title IV of the Social

Security Act (i.e., AFDC or TANF)

APPLICANT MUST PROVIDE: A third-party verification of AFDC or

TANF award required

• Applicant is a full-time student that is a single parent and his/her children

are also full-time students and are not dependents on another individual’s

tax return other than a parent of such children.

APPLICANT MUST PROVIDE: A signed copy of most recent tax

return

• Applicant is a full-time student that is enrolled in the Job Training

Partnership Act (JTPA) or under similar Federal, State, or local laws.

APPLICANT MUST PROVIDE: A verification of enrollment &

mission statement of the program if not JTPA

• Applicant is a full-time student who previously was under the care and

placement of a foster care program. She/he must be currently

transitioning into independent living.

APPLICANT MUST PROVIDE: Third party verification is the only

acceptable form of verification of foster care.

SAIL properties only:

• Applicant is full-time student participating in an educational or training

program approved by the state (i.e. Soldiers for Scholars)

APPLICANT MUST PROVIDE: A verification of enrollment &

mission statement of the program

NOTE 2.10.1: Remember, if you have more than one program on your

property, you should always use the most restrictive guidelines.

2.11 DEMOGRAPHIC REQUIREMENTS

Demographic requirements (a.k.a. Special Set Aside) are the occupancy

requirements, or restrictions to serve commercial fishing worker, the elderly,



farmworkers, homeless, and other communities. Set-aside housing for these

groups might have been promised by the developer in order to serve the needs

of these demographic. Regulatory Agreements describes the requirements

when applicable to the property.

2.12 DEMOGRAPHIC DEFINITIONS

Elderly Household In order to be considered an elderly household,

in an 80/20 set-aside property, at least one of

the occupants must be 55 years or older.

Pursuant to the Federal Fair Housing Act, when

the property has an 80/20 set-aside, no more

than 20% of the units can be rented to families,

and at no time, less than 80% of the units must

be rented to the elderly. Other than in a

federally funded property, occupants under the

age of 18 are not required to be allowed.

In order to be considered an elderly household

in a property which has 100% of units set-aside

for the elderly, all household members must be

62 years or older. Other than in a federally

funded property, occupants under the age of 18

are not required to be allowed to live there.

Homeless An individual or family who lacks a fixed,

regular, and adequate nighttime residence or

an individual or family who has a primary

nighttime residence that is:

1. A supervised publicly or privately

operated shelter designed to

provide temporary living

accommodations, including welfare

hotels, congregate shelters, and

transitional housing; or



2. An institution that provides a

temporary residence for individuals

intended to be institutionalized; or

3. A public or private place not

designed for, or ordinarily used as,

a regular sleeping accommodation

for human beings.

The term does not refer to any individuals

imprisoned or otherwise detained pursuant to

state or Federal law.

Commercial Fishing Household A household of one or more persons wherein

at least one member of the household is a

Commercial Fishing Worker at time of initial

occupancy.

A laborer who is employed on a seasonal,

temporary, or permanent basis in fishing in

saltwater or freshwater and who derived at

least 50% of their income in the immediately

preceding 12 calendar months from such

employment.

The definition includes a person who has

retired as a laborer due to age, disability, or

illness.

1. In order to be considered retired

from commercial fishing work due

to age, a person shall be 50 years

of age or older and shall have been

employed for a minimum of five

(5) years as a fishing worker

immediately preceding retirement.




from commercial fishing work due

to disability or illness, a person

must be:

a. Medically established that

the person is unable to be

employed as a fishing

worker due to such

disability or illness.

Farmworker Household Unless specified in the Regulatory Agreement,

a household of one or more persons wherein

at least one member of the household is a

Farmworker at time of initial occupancy.

A farmworker is any laborer who is employed

on a seasonal, temporary or permanent basis

in the planting, cultivating harvesting or

processing of agricultural or aqua cultural

products, and who has derived at least 50%

of their income in the immediate preceding 12

calendar months from such employment.

The definition includes a person who has

retired as a laborer due to age, disability, or

illness.


from farm work due to age, a

person shall be 50 years of age or

older and shall have been

employed for a minimum of five

(5) years as a farmworker

immediately preceding retirement.




from farm work due to disability or

illness, a person must be:

a. Medically established

that the person is

unable to be employed

as a Farmworker due to

such disability or illness.

"Aquaculture" means the cultivation of aquatic

organisms. "Aqua cultural producers" means

those persons engaging in the production of

aqua cultural products are certified.

"Aquaculture products" means the aquatic

organisms and any product derived from

aquatic organisms that are owned and

propagated, grown, or produced under

controlled conditions. Such products do not

include organisms harvested from the wild for

depuration, wet storage, or relay for

purification. Most State’s Statutes require

that any person engaging in aquaculture shall

be certified by the State Department of

Agriculture and Consumer Services.



ANTICIPATED GROSS ANNUAL INCOME

3.0 TYPES OF INCOME THAT MUST BE INCLUDED IN THE INCOME

CALCULATION

Household income is defined as 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 household’s certification of income. If the

household’s income cannot be determined based on current information

because the household reports little to zero income, or income fluctuates,

income may be determined based on actual income received or earned

within the last twelve months before the determination.

Income includes, but is not limited to, earned and unearned income from

all household members age 18 and older (adults, including foster adults),

unearned income of minor children and foster children under the age of 18,

and income from assets. Emancipated minors, persons under the age of 18

who have entered into a lease under state law, are treated as adults.

Income of Adults and Dependents

Adults

Count the annual earned and unearned income of the head, spouse or co-

head, and other adult members of the family, including foster adults. In

addition, persons under the age of 18 who have entered into a lease under

state law are treated as adults, and their annual income must also be

counted. These persons will be either the head, spouse, or co-head; they

are sometimes referred to as emancipated minors.

Chapter

3



NOTE 3.0.1: If an emancipated minor is residing with a family as a member other

than the head, spouse, or co-head, the individual would be

considered a dependent and his or her income is not counted.

Dependents

A dependent is a family member who is under 18 years of age, is disabled,

or is a full-time student. The head of the family, spouse, co-head, foster

child, or live-in aide are never dependents. Some income received on

behalf of family dependents is counted and some is not.

Earned income of minors (family members under 18) is not counted.

However, unearned annual income is counted, including that of foster

children.

Because households’ certifications are based on a “snap shot” of the

household’s income at time of initial certification, earned income of minors

that will turn 18 years old during the twelve months following the effective

date of the certification is not required to be counted.

NOTE 3.0.2: Benefits or other unearned income of minors is counted.

Employment Income

Employment income includes (but is not limited to) hourly wages, salaries,

overtime pay, tips, bonuses, and commissions before any payroll

deductions. Payments in lieu of employment income are also included; e.g.,

workers compensation, severance pay, unemployment and disability

compensation. Earned income from employment of children (including

foster children) is excluded.

Any household member that receives tip income or works in a

position/industry that would normally receive tips, must complete a

“Declaration of Tip Income.” The household member’s signature on the

declaration must be witnessed by property management representative.



Maximum benefits and annualized payments should not be used unless the

source of funds is expected to continue throughout the certification period

or for an indeterminable length of time. For example, if the third party does

not indicate the length of time for which the tenant will be receiving a

certain income, then the income should be annualized. In the event that

the family cannot provide documentation that access to a specific source of

income is for a limited and determinable time period, the benefits should be

considered to be available for an indefinite time period and annualized.

EXAMPLE 3.0.0: Benefits for Indefinite Time Period

John works as a telemarketer for $9.00 an hour, 40 hours a

week. He does not work overtime, has no other source of

income, and is not planning to leave his job. His anticipated

income is computed as:

($9.00/hour) x (40 hours/week) x (52 weeks/year) = $18,720/year

EXAMPLE 3.0.1: Benefits for Definite Time Period

A teacher’s assistant works nine months annually and

receives $1,300 per month. During the summer recess, the

teacher’s assistant works for the Parks and Recreation

Department for $600 a month. The teacher’s assistant’s

anticipated income is computed as:

($1,300 x 9 months) + ($600 x 3 months) = $13,500

If information is available on changes in income expected to occur during

the year, use that information to determine the total anticipated income

from all know sources during the year.

EXAMPLE 3.0.2: Anticipated Changes in Income

In May 2004, an unemployed plumber applies for LIHTC

housing. At that time, the plumber is receiving

unemployment benefits of $250.00 per month and will

qualify for benefits for 4 more months. Documentation that



such is the case is available. Beginning in October, the

plumber will be employed at $1,000 per month. The

plumber’s anticipated income is computed for the period

from May to September 2004 plus the income for October

2004 through May 2005.

($250.00 x 5 months) + ($1,000 x 7 months) = $8,250

Property staff are expected to make reasonable judgments regarding the

most reliable method for estimating the income a household will receive

during the year. If the tenant’s income cannot be determined using current

information, the property staff may include actual income received or

earned within the 12-month period before the determination of annual

income.

EXAMPLE 3.0.3: Sporadic Employment

Justine is disabled and not always able to work full-time. She

has income from disability insurance and a family trust, and

also works as a typist with a temporary agency when she is

well. Last year she worked nearly six months, but at the time

she applies for an LIHTC apartment, she has more medical

problems and does not know when or how much she will be

able to work.

Because Justine is not working at the time of the certification

and actual income from her sporadic employment as a typist

cannot be reasonably determined, the income earned during

the six-month period in the prior year should be included in

the income certification.

Management staff must make a reasonable judgment. The

prior year’s income should not be used to estimate Justine’s

future income if she can provide sufficient documentation

that her earning capabilities have changed; e.g., her contract

with the temporary agency has been terminated.

Military Income



Military employment may include (but is not limited to) base and longevity

pay, proficiency pay, sea and foreign duty pay, hazardous duty pay,

subsistence and clothing allowances. All these are includable in income.

Hostile fire pay, however, is excluded from income. Note: a temporarily

absent individual on active military duty must be removed from the family

and his or her income must not be included in the computation of

household income, unless (1) that person is the head of the family, spouse,

or co-head or (2), the spouse or a dependent of the person on active

military duty resides in the unit.

Military Basic Housing Allowance

Military basic housing allowances are also included in income.

Student Income

The treatment of a student’s income is dependent on the age of the

student, the type of income, and the status of the student within the

household. It doesn’t matter whether the student is living with the

household or is away at school.

1. If the full-time student is 18 years of age or older and is the head of

the family, spouse or co-head, all income is included.

2. If the full-time student is 18 years of age or older and a dependent,

only the lesser of actual earned income or $480 is included, along

with unearned income and income from assets. Documentation

that the full-time student is a dependent of a household member

and verification of full-time student status, must be placed in the

file. When such documentation is not available, we must count all

earned incomes.

3. If the full-time student is a minor (under the age of 18), then only

unearned income and income from assets is included. No income

from employment is counted.

The treatment of educational scholarships and grants is discussed later

in this chapter.



NOTE 3.0.3: The income of full-time students 18 years of age or older who are

members of the household but away at school is counted the same as

the income for other full-time students. The income of minors who are

members of the household but away at school is counted the same as

the income for other minors.

Foster Care Payments

Payment received by the family for the care of foster children or foster adults is

not counted. This rule applies only to payments made through the official

foster care relationships with local welfare agencies.

Adoption Assistance Payment

Adoption assistance payments in excess of $480 per child per year are not

counted.

Income of Temporarily Absent Family Members

You must count all income of family members approved to reside in the

unit, even if some members are temporarily absent, unless the absent

individual is on active military duty.

A temporarily absent individual on active military duty must be removed

from the family, and his or her income must not be counted unless that

person is the head of the family, spouse, or co-head. However, if the

spouse or a dependent of the person on active military duty resides in the

unit, that person’s income must be counted in full, even if the military

member is not the head, or spouse of the head of the family. The income

of the head, spouse, or co-head will be counted even if that person is

temporarily absent for active military duty.



Examples – Income of Temporarily Absent Family Members

• John Chouse works as an accountant. However, he suffers from a disability that

periodically requires lengthy stays at a rehabilitation center. When he is confined to

the rehabilitation center, he receives disability payments equaling 80% of his usual

income.

During the time he is not in the unit, he will continue to be considered a family

member. Even though he is not currently in the unit, his total disability income will

be counted as part of the family’s annual income. Properties with Section 8 are

required to conduct an interim recertification.

• Mirna Martinez accepts temporary employment in another location and needs a

portion of her income to cover living expenses in the temporary/new location. The

full amount of the income must be included in annual income.

• Charlotte Paul is on active military duty. Her permanent residence is her parents'

assisted unit where her husband and children live. Charlotte is not currently exposed

to hostile fire. Therefore, because her spouse and children are in the assisted unit,

her military pay must be included in annual income. (If her dependents or spouse

were not in the unit, she would not be considered a family member and her income

would not be included in annual income.)

Income of Permanently Confined Family Members

An individual permanently confined to a nursing home or hospital may not

be named as family head, spouse, or co-head but may continue to count as

a family member at the family’s discretion. The family’s decision on

whether or not to include the permanently confined family member as a

family member determines if that person’s income will be counted.

Include If the permanently confined individual is counted as a

family member, his/her income is counted.

Exclude If the permanently confined individual is excluded as a

family member the income is not counted.



If the family elects to include the permanently confined member, the

individual is listed on the TIC as an adult who is not the head, spouse, or

co-head, even when the permanently confined family member is married to

the person who is or will become the head of the family.

Educational Scholarships or Grants

All forms of student financial assistance (grants, scholarships, educational

entitlements, work study programs, and financial aid packages) are

excluded from annual income but must be included when the household

receives Section 8 assistance. This is true whether the assistance is paid

to the student or directly to the educational institution. This is also true if

the student is part time or full time.

For students receiving Section 8 assistance, all financial assistance a

student receives (1) under the Higher Education Act of 1965, (2) from

private sources, or (3) from an institution of higher education that is in

excess of amounts received for tuition is included in annual income except if

the student is over the age of 23 with dependent children or the student is

living with his or her parents who are receiving Section 8 assistance. See

sections 2.6 and 5.8 for further information.

Alimony or Child Support

Alimony or child support amounts awarded by the court are counted, unless

the applicant certifies that payments are not being made and he or she

provides documentation of having taken all reasonable legal actions to

collect amounts due, including filing with the appropriate courts or agencies

responsible for enforcing payment and provides a current payment history

showing no payments received. See Note 4.3.2 for further guidance in

regard to child support.

Regular Cash Contributions and Gifts

Any regular contributions and gifts from persons not living in the unit must

be counted as income. These sources may include rent and utility

payments paid on behalf of the family and other cash or noncash

contributions provided on a regular basis.



Examples – Regular Cash Contributions

• The father of a young single parent pays her monthly

utility bills. On average he provides $100 each month.

The $100 per month must be included in the family’s

annual income.

• The daughter of an elderly tenant pays her mother’s

$175 share of rent each month. The $175 value must

be included in the tenant’s annual income.

NOTE 3.0.4: Groceries and/or contributions paid directly to the childcare provider

by persons not living in the unit are excluded from annual income.

NOTE 3.0.5: Temporary, nonrecurring, or sporadic income (including gifts) is not

counted.

Temporary, Nonrecurring, or Sporadic Income

Irregular, nonrecurring monetary gifts, or contribution to resident are not

included in income.

Income from a Business

When calculating annual income, you must include the net income from

the operation of a business or profession, including self-employment

income. Net income is the gross income less business expenses, interest

on loans, and depreciation computed on a straight-line basis. If the net

income from a business is negative, it must be counted as zero income. A

negative amount must not be used to offset other family income.

NOTE 3.0.6: In addition to net income, you must count any salaries or other

amounts distributed to family members from the business, and cash

or assets withdrawn by family members, except when the

withdrawal is a reimbursement of cash or assets invested in the

business.



NOTE 3.0.7: When calculating net income, you must not deduct principal

payments on loans, interest on loans for business expansion or

capital improvements, other expenses for business expansion, or

outlays for capital improvements.

NOTE 3.0.8: A low-income tenant may use a portion of a low-income unit

exclusively and on a regular basis as a principle place of business,

and claim the associated expenses as tax deductions, as long as the

unit is the tenant’s primary residence. If the tenant is providing

daycare services, the tenant must have applied for (and not have

been rejected), be granted (and still have in effect), or be exempt

from having a license, certification, registration, or approval as a

daycare facility or home under state law.

Periodic Social Security Payments

Count the gross amount, before deductions for Medicare, etc., of periodic

Social Security payments. Include payments received by adults on behalf of

individuals under the age of 18 or by individuals under the age of 18 for

their own support.

Adjustments for Prior Overpayment of Benefits

If an agency is reducing a family's benefits to adjust for a prior

overpayment (e.g., social security, SSI, TANF, or unemployment benefits),

count the amount that is actually provided after the adjustment.



Example – Adjustment for Prior Overpayment of Benefits

Lee Park’s social security payment of $250 per month is being

reduced by $25 per month for a period of six months to make up

for a prior overpayment. Count his social security income as

$225 per month for the next six months and as $250 per month

for the remaining six months.

Periodic Payments from Long-Term Care Insurance, Pensions,

Annuities, and Disability or Death Benefits

The full amount of periodic payments from annuities, insurance policies,

retirement funds, pensions, and disability or death benefits is included in

annual income. (See subparagraph O below for information on the

withdrawal of cash or assets from an investment.) Payments such as Black

Lung Sick Benefits, Veterans Disability, and Dependent Indemnity

Compensation for the Widow of a Killed in Action Serviceman are examples

of such periodic payments.

NOTE 3.0.9: Withdrawals from retirement savings accounts such as Individual

Retirement Accounts and 401K accounts that are not periodic

payments do not fall in this category and are not counted in annual

income.

Example – Withdrawals from IRAs or 401K Accounts

Isaac Freeman retired recently. He has an IRA account but is not

receiving periodic payments from it because his pension is adequate

for his routine expenses. However, he has withdrawn $2,000 for a

trip with his children. The withdrawal is not a periodic payment and is

not counted as income.



Long-term Care insurance Payments

If the tenant is receiving long-term care insurance payments, any

payments in excess of $180 per day must be counted toward the gross

annual income.

Federal Government Pension Funds Paid to a Former Spouse

Federal government pension funds paid directly to an applicant’s/tenant’s

former spouse pursuant to the terms of a court decree of divorce,

annulment, or legal separation are not counted as annual income. The

state court has, in the settlement of the parties’ marital assets, determined

the extent to which each party shares in the ownership of the pension.

That portion of the pension that is ordered by the court (and authorized by

the Office of Personnel Management (OPM)), to be paid to the

applicant’s/tenant’s former spouse is no longer an asset of the

applicant/tenant and therefore is not counted as income. However, any

pension funds authorized by OPM, pursuant to a court order, to be paid to

the former spouse of a Federal government employee is counted as income

for a tenant/applicant receiving such funds.

Income from Training Programs

Amounts received under HUD-funded training programs are excluded from

annual income.

Incremental earnings and benefits received by any family member due to

participation in qualifying state or local employment training programs are

excluded. Income from training programs not affiliated with a local

government, and income from the training of a family member resident to

serve on the management staff, is also excluded.

Excluded income must be received under employment training programs with

clearly defined goals and objectives and for a specific, limited-time period. The

initial enrollment must not exceed one year, although income earned during

extensions for additional specific time periods may also be eligible for exclusion.



Training income may be excluded only for the period during which the family

member participates in the employment training program.

Exclusions include stipends, wages, transportation or child care payments (if

made directly to the child care organization), or reimbursements.

Income received as compensation for employment is excluded only if the

employment is a component of a job training program. Once training is

completed, the employment income becomes income that is counted.

Amounts received during the training period from sources that are unrelated to

the job training program, such as welfare benefits, social security payments, or

other employment, are not excluded.

Resident Service Stipends

Resident service stipends are generally modest amounts of money received

by residents for performing services such as hall monitoring, fire patrol,

lawn maintenance, and resident management.

Include If the resident stipend exceeds $200 per

month, you must include the entire amount in

annual income. This includes but it is not

limited to full or partial concessions on rent,

washer/dryer, cable, or others.

Exclude If the resident stipend is $200 or less per

month, you must exclude the resident

services stipend from annual income. This

excludes full or partial concessions on rent,

washer/dryer, cable, or others that are giving

to a household member as part of

compensation for employment, whether part

or full-time. Such are always counted as

income.



Withdrawal of Cash or Assets from an Investment

The withdrawal of cash or assets from an investment received as periodic

payments should be counted as income. Lump sum receipts from pension

and retirement funds are counted as assets. If benefits are received

through periodic payments, do not count any remaining amounts in the

account as an asset. See Section 7 for guidance on calculating income

from an asset.

Lump Sum Payments

Generally, lump sum amounts received by a family, such as inheritances,

insurance settlements, or proceeds from the sale of property are considered

assets, not income.

When social security or SSI benefit income is paid in a lump sum as a result

of deferred periodic payments these are considered assets, not income.

Settlement payments from claim disputes over welfare, unemployment, or

similar benefits may be counted as assets. Lump sum payments caused by

delays in processing periodic payments for unemployment or welfare

assistance are included as an asset at time of the certification following the

receipt of such lump sum.

NOTE 3.0.10: Lottery winnings paid in one payment are treated as assets. Lottery

winnings paid in periodic payments must be counted as income.

3.1 TYPES OF INCOME THAT ARE NOT INCLUDED IN THE INCOME

CALCULATION

A. Employment income of members of the household that are under 18,

including foster children. Head of household and spouse may never be

considered minors. (Unearned incomes, such as social security payments

received on behalf of minors, must be included as income.)



B. Resident service stipends not exceeding $200 per month received by a

resident for performing a service for the property, on a part-time basis,

that enhances the quality of life in the housing development. If the stipend

exceeds $200 per month, the entire amount is included in annual income.

Such services may include, but are not limited to, floor patrol, hall

monitoring, lawn maintenance, and resident initiative coordination. No

resident may receive more than one such stipend during the same period.

This excludes full or partial concessions on rent, washer/dryer, cable, or

others that are giving to a household member as part of compensation for

employment, whether part or full-time. Such are always counted as

income.

C. Earnings in excess of $480 for each full-time student, 18 years or older that

is not a head or co-head of household or spouse.

D. Loans regardless of how the money is used. Loans are not counted as

income because loans are required to be repaid. (Special note: repayments

of a loan to an applicant/tenant are considered income.)

E. Income associated with persons who live in the unit but are not household

members. For example, income from live-in attendants.

F. The principal portion of the payment received on mortgage or deeds of

trust.

G. Hazardous duty pay to a family member serving in the Armed Forces who

is exposed to hostile fire.

H. Temporary, non-recurring or sporadic income (including gifts).

I. Payments received under training programs funded by HUD

(Comprehensive Improvement Assistance Program).

J. Adoption assistance payments in excess of $480 per adopted child per year.

K. Reparation payments paid by a foreign government pursuant to claims filed

under the laws of that government by persons who were persecuted during

the Nazi era. Examples include payments by German and Japanese

governments for atrocities committed during the Nazi era.



L. Home care payments paid by the State Agency to families that have

developmentally disabled children or adult family members living in the

home.

M. Deferred periodic payments of SSI and Social Security benefits that are

received in lump sum.

N. Recurring monetary contributions that are paid directly to a childcare

provider by persons not living in the unit. HUD interprets the regulations to

mean that child care expenses that are reimbursed are not included as

annual income.

O. The value of any childcare provided or arranger (or any amount received as

payment for such care or reimbursement for costs incurred for such care)

under the Child Care and Development Block Grant Act of 1990 (CCDBGA)

(42 U.S.C. 9858q). Participating families may either pay a reduced amount

based on a sliding fee scale or they may receive a certificate for child care

services.

NOTE 3.1.1: This exclusion does not apply to amounts received by childcare provider

for services paid through the CCDBGA.

P. Other forms of income excluded by federal statutes are:

a) The value of the allotment made under Food Stamp Act of 1977.

b) Payment received under Domestic Volunteer Services Act of 1973

(employment through VISTA, Retired Senior Volunteer Program, Foster

Grandparents Program, youthful offender incarceration alternatives,

senior companions).

c) Payments, rebates, or credit received under Federal Low-Income Home

Energy Assistance Programs, includes any winter differentials given to

elderly persons.

d) Payment under programs funded in whole or in part under the Job

Training Partnership Act (employment and training programs for Native

Americans, migrant and seasonal farm workers, Job Corps, veterans’

employment programs, state job training programs, career intern

programs).



e) Only when not receiving section 8 assistance, the full amount of student

financial assistance paid either directly to the student or to the

educational institution. This includes scholarships, grants, fellowships,

and any other kind of student financial assistance. It does not matter

what the assistance is actually used for.

f) Interest of individual Indians in trust or restricted lands, and the first

$2,000 per year of income received by individual Indians that derived

from trusts or restricted lands (25 U.S.C. 1408).

g) Payments received under the Alaskan Native Claims Settlement Act (43

U.S.C. 1626(c)).

h) Payments from certain sub marginal U.S. land held in trust for certain

Indian tribes.

i) Payments from disposal of funds of Grand River Bank of Ottawa

Indians.

j) The first $2,000 of per capita shares received from judgments awarded

by the Indian Claims Commission of the Court of Claims, or from funds

the Secretary of Interior holds in trust for an Indian Tribe.

k) Payments received after January 1, 1989, from the Agent Orange

Settlement Fund or any other fund established pursuant to the

settlement in the In Re: Agent Orange product liability litigation, M.D.L.

No. 381 (E.D.N.Y.).

l) Payment received under Title V of the Older Americans Act (Green

Thumb, Senior Aides, Older American Community Service Employment

Program).

Q. Income from employer due to reimbursable expenses

R. Grants or other amounts received specifically for;

a) Medical expenses



b) Set aside for use under a Plan to Attain Self Sufficiency (PASS) and

excluded for purposes of Supplemental Security Income (SSI) eligibility,

and

NOTE 3.1.2: A PASS permits a person with disabilities who is receiving SSI, and who

is also receiving other income, to set aside a portion of the other income

in order to achieve a work-related goal.

c) Out-of-pocket expenses for participation in publicly assisted programs

and only to allow participation in these programs. These expenses

include special equipment, clothing, transportation, childcare, etc.

3.2 WHOSE INCOME IS COUNTED

HOUSEHOLD MEMBER Employment

Income

Other Income (Including

Income from Assets)

Head YES YES

Spouse YES YES

Co-Head YES YES

Child (under 18) who is Head, Co-Head, or

Spouse YES YES

Dependent Children NO YES

Full-Time Students, 18 years old and older, who

are not Head of Household, Co-Head, or Spouse $480 ONLY YES

Full-Time Students, 18 years old and older, who

are Head of Household, Co-Head, or Spouse YES YES

Foster Child NO YES

Foster Adult YES YES

Live-In Attendant NO NO

Income of a Spouse not living in the apartment. (Unless Divorced or Legally separated). If no

legal document is available, tenant must provide a statement (See 2.4).

VERIFYING AND DOCUMENTING

INCOME

4.0 METHODS OF INCOME VERIFICATION

To properly determine the household qualification status, 3rd party

verification of income must be obtained.

VERIFICATION TRANSMITTAL AND RECEIPT

Acceptable income verifications vary from state to state.

Requests for income verification must be sent by management directly to the

source, not through the applicant.

The applicant may never “hand deliver” a verification of employment.

Facsimile verifications are acceptable.

4.1 REVIEWING REPORTED INCOME VERIFICATION

Any significant differences between the amounts given on the application

and the amounts reported on third party verifications must be clarified.

This is done by having the applicant sign a self-affidavit. If the applicant's

email address is listed on the application, it can be used to obtain a self

affidavit from the applicant via email. When the amount listed on the

application is more than $1,000 higher than the amount reported on third

party verification, this could raise questions at time of an audit. To best

document eligibility, applicant must write a very detailed self-affidavit that

Chapter

4



includes explanation as to why there are such large differences.

Certification must not be completed until eligibility has been fully

documented.

WHEN REVIEWING A VERIFICATION OF INCOME

❖ All Income and Asset Verifications must be signed and dated within

120 days prior to move-in or recertification.

❖ Employment Verification letters completed on company letterhead

are not acceptable forms of income verification.

❖ Completed verifications of income should NOT contain any

alterations of figures or the use of “White Out.”

❖ When third party verification is unclear, it can be verbally clarified

directly with the source (see Clarifying vs. Verifying.) The

information must be documented using Clarification Form and

include the following:

1. Clarification date

2. The name and title of the person with whom you spoke

3. Phone number of the person with whom you spoke

4. Reason for the call

5. What they said

6. Your signature

7. Your title

CLARIFYING VS. VERIFYING

Because it is our policy that clarification statements may be used only to

clarify information and not to verify information, it is important to

understand the difference between clarifying vs. verifying.



Verifying

As mentioned above, there will be times when third party verification is

incomplete. When this happens, it is compliance best practice that a

new verification be requested, because additional information needed to

calculate the income will have to be verified. In an effort to

demonstrate due diligence, this information must come directly from

the source. For example, when the employer gives an anticipated date

of pay increase, but does not state the amount to be received. Without

this information the income cannot be properly calculated, and it will

require that the information be provided by the employer in order to

calculate anticipated annual income.

When an income verification has been received through a good

third party source (fax or mail) and that verification includes an

email address for the employer, the email can now be used to

verify any incomplete information on the verification form. This is

true even if the email address listed is not a company issued email

(i.e. Yahoo, Gmail, etc.).

Clarifying

When unclear third party verification is received and all that is needed is

a clarification of the information furnished, as mentioned above, this

can be completed using a clarification form. For example, when the

employer gives a total annual gross income but fails to state that the

information was including, but not limited to tips, bonuses, overtime,

commissions, and pay increases, for the next twelve months a

clarification statement would be sufficient, because annual gross income

was already provided.

4.2 ACCEPTABLE INCOME VERIFICATION

NOTE 4.2.1: When household’s income is within $500 of the maximum

allowable income limit, it is compliance best practice to

request the most recent 4-6 paystubs from the applicants.

We would then calculate the 4-6 pay stubs and the YTD



income and ensure this income does not put the total

household’s income higher than the allowable limit.

a) Internet Verifications of Income

Verifications printed from the internet are considered third-party

verification. If the applicant or resident has an employer or other

source that makes income information available on the internet,

property staff may print out the most recent available information from

a computer on-site. This type of verification must be printed by office

staff and never hand carried by the applicant or resident. Print out

must include:

1. Sufficient information to calculate anticipated gross annual

income, including all possible income sources

2. Date of verification

3. Reliable source name and address

4. Applicant name, social security number, and hire date

5. Internet address and header or footer that identifies the

company issuing the statement

b) The Work Number or Similar

Verifications obtained by 1-800, 1-900, 1-888 numbers like “The Work

Number” can be used, provided all necessary information is included. If

the source requires payment for the verification, this cost should not be

paid by the applicant. The following information must be included on

the statement:

1. Sufficient information to calculate anticipated gross annual

income (a minimum of 4 pay histories for new hires, 4-6

pay histories for all others)

2. Date of verification

3. Source’s name and address (i.e., employer’s name)



4. Applicant name, social security number, and hire date

5. Sufficient information to identify the company issuing the

statement

When using employment verifications similar to the one provided by

“The Work Number” you will be required to calculate income using all

information provided. For example, you will have to calculate Year-to-

Date income, average pay based on pay history, etc. Highest of all

calculations must be used when determining eligibility. Average

number of hours is not required to be calculated, other than when these

are shown on the verification.

c) Offer Letters

Employment offer letters are an acceptable verification of income as

long as the start date is after the effective date of the certification.

Once employed, one of the other acceptable types of verification must

be requested. Please note also, offer letters must address all income

information required to properly calculate anticipated annual income

(i.e., over-time, shift differential, tips, bonuses, commissions, pay-

increases, etc.).

d) Employment Verification Form

This Form must be sent directly to the employer’s HR or Payroll

Department and must never be hand carried by the applicant or

resident. As noted below, there are requirements on how the form

must be sent and received from the employer.

It is never a reliable source, when employer comes to the property

to complete the Employment Verification in person. In such cases,

it is compliance best practice they be instructed to either fax, email,

or mail the letter to your property. In the event that your company

has a policy of allowing employers to complete the form at the

property, we strongly recommend a copy of the employer's ID be

obtained along with a current copy of the Company's Business



License. All properties must have management approval before

accepting verifications of employment completed at the property.

Sending the Form

The following is equally applicable to any other verification that will be

sent in the same manner.

e-mail once completed it would have to be scanned and

attached to an email. The email address of the

individual must be a company issued email, including

the name of the individual, or department. Therefore,

Yahoo, Gmail, or similar type of accounts are not a

reliable source. A copy of the sent email must be kept in

the file to prove that request was sent by email and not

handled by the applicant.

Mail a copy of the form with the required information

completed must be kept in the file. Stamp or make

notation that the original was sent in the mail. In an

effort to demonstrate due diligence, a self-addressed

envelope should not be included with the request. A

copy of the envelope used to send the form must be

retained in the file.

Fax if faxed to the employer, it is required that a copy of the

fax coversheet, fax transmission receipt and the

completed request form be kept in the file.

Prior to sending the request, you must complete the following

information:

1. Request Date

2. Employee Name

3. Employee last four of SS#

4. Company Name



5. Employer’s Address

6. HR Contact Name

7. Phone Number / Fax #

8. E-Mail Address

In addition, applicant or resident must complete and sign the section

titled “Employee Consent” prior to sending the request.

Verifications not fully completed will be unacceptable and file will be

considered in non-compliance.

Receiving the Form

The following is equally applicable to any other verification that will be

received in the same manner.

e-mail a copy of the e-mail must be kept in the file with the

form. The email address of the individual where it

comes from must be a company issued email, including

the name of the individual, or department. Preferably it

will be of the individual who completed the form,

otherwise it will have to be clarified and documented

why he/she did not e-mail the completed form. Yahoo,

Gmail, or similar type of accounts are not a reliable

source of verification.

Mail original envelope including the post mark from the

US Postal Service in which the verification was

received, and the completed form must be kept in the

file.

Fax fax transmission must show employer’s fax number

and employer’s name, as listed on the form and

“Application for Residency.” In the event, the fax

transmission does not show the company name and fax

number from where it comes from, or it is not the same

as the one shown on the verification as the employer

fax, the verification will be acceptable only if it includes



the official company fax cover sheet. Management

should always continue to make reasonable efforts to

receive the original verification of income and place in

the file including the envelope in which it was received.

When the form is received via fax, all pages of the

fax transmission must be kept in the file. For

example, if a fax strip says page 1/3, all 3 pages

must be kept even if they do not contain any

relevant information.

d) HUD Form 50058

HUD Form 50058, or equivalent, for households possessing a Section 8

Voucher issued by a public housing agency may be used as verification

of household income, if permitted by your state agency. This

verification must also be sent directly from the source and may not be

hand carried by the applicant.

e) Documents Provided by the Applicant

The preferred method of verifying income is always through third

parties. Only when (A) third party contacts are considered impossible,

(B) the source does not respond, (C) third party charges a fee, or (D)

no third party is available, property staff can then request documents

provided by the applicant (i.e., pay stubs).

Consider the Following:

Property staff must consider the following when using tenant-

provided documentation:

1. Is the document current? Documentation may be

inaccurate if it is not recent. Therefore, properties

must ensure that each of the pay stubs are dated

within 120 days prior to the anticipated move in date

for initial certifications. For annual recertifications, the

most current pay stub must be dated within 120 days

of the recertification effective date. The pay date on



the pay stub will be used to determine the age of the

stub.

2. Is the documentation complete? Properties may

not accept paystubs to document employment

income unless the applicant or tenant provides the

most recent four to six consecutive pay stubs to

illustrate variations in hours worked. A minimum of

four pay stubs are required for new hires. These

must show employee name, company name, pay

period and frequency dates, and provide sufficient

information to fully calculate income. Actual

paychecks or copies of paychecks should never be

used to document income because deductions are not

shown on the paycheck.

3. Is the document an unaltered original? The

greatest shortcoming of tenant-provided documents

as a verification source is their susceptibility to

undetectable change through the use of high-quality

copying equipment. Documents with original

signatures and those that prove to be original are the

most reliable. Photocopied documents generally

cannot be assumed to be reliable and therefore must

never be used when such is what provided by the

applicant.

In short, original and unaltered paystubs may be used to project or

estimate annual income and document employment income

provided that tenant provides most recent four to six consecutive

pay stubs.

Using Check-Stubs (a.k.a Paystubs)

See “Consider the Following” above.



File must always include no less than the last four to six (4-6)

consecutive stubs. Note that it says THE LAST, and CONSECTUIVE.

All others will be considered noncompliant.

When using stubs, at least four full pay stubs will be required for

applicants that are "new hires" that have not been employed enough

time to have receive 6 pay checks. Please note that the first pay stub

should not be utilized for the calculations if the applicant did not work

the full pay period. Management should complete two calculation sheets

for the file. One showing the calculations for all pays stubs and a second

showing the calculations using just the full pay stubs. A clarification

should be added to the file explaining that to be conservative,

management has chosen to complete a second calculation sheet using

just the full pay stubs as these are a more accurate reflection of true full

pay. The hire date must be properly documented using one of the

suggestions mentioned below.

Other requirements:

1. When calculating income using stubs, it is required that

two different calculations be completed (see chapter 5)

and remember that not using the proper hire date may

result in miscalculation of the year to date (YTD)

income.

2. The use of stubs will require you complete a YTD

income, and therefore you must have the hire date.

This you can get from, Employment ID, hire letter,

insurance card, anything that was issued by the

employer and shows the hire date.

NOTE 4.2.2: Gross income shown on pay stubs will not always be the total gross

income. Any pretax deductions will not be included in this amount

(i.e. Retirement, Health Insurance, 401k, etc.).

4.3 ACCEPTABLE FORMS OF INCOME VERIFICATION



Management must approve all other forms of employment verification not

listed below.

INCOME FROM EMPLOY MENT

See section 4.2

INCOME FROM A BUSINESS OR SELF-EMPLOYMENT

Income from a Business and income from Self Employment are not the same,

but normally documented the same.

Acceptable documentation for income from self-employment is as follows:

1. The applicant’s statement (Self Employed Declaration) of anticipated

NET income for the next twelve (12) months, and one of the

following;

a) an entire signed copy of the most recent year’s Federal Tax Return

including Profit/Loss Statement, must include 1040/1040A and IRS

Schedule C, E, or others as applicable. In the absence of a signed

copy, an official IRS income tax return transcript will be the only

acceptable documentation, or;

b) Financial Statement of Net Income completed by an accountant,

audited or un-audited financial statement(s), current Profit & Loss

statement, detailed payment history, contracts, or other supporting

documentation.

*Note that the absence of tax return requires that the Self Employed

Declaration be notarized and a Clarification Form must be completed by

property staff explaining why tax returns are not available.

Acceptable documentation for income from a business is as follows:

1. The applicant’s statement (Self Employed Declaration) of

anticipated NET income for the next twelve (12) months, and;



a) an entire signed copy of the most recent year’s Federal

Tax Return including Profit/Loss Statement, must

include 1040/1040A and IRS Schedule C, E, or others

as applicable. In the absence of a signed copy, an

official IRS income tax return transcript will be the only

acceptable documentation, or;

b) Financial Statement of Net Income completed by an

accountant, (audited or un-audited). Including the

accountant’s calculation of straight-line depreciation

expense. Such statement must be sent to the property

directly from the third party.

At time of Initial Certification

The following procedure is not applicable at time of annual recertification

because tenant would be expected to have filed a tax return. The only

exemption will be if the business or self-employment commenced after initial

certification and such exemption is approved by compliance.

On or before March 14 for income from a business, and April 14 for self-

employment income:

In the absence of a from above, the only other acceptable

documentation will be a Financial Statement of Net Income from Self

Employment, or from a Business as applicable. Such statement will

need to be completed by an accountant.

After March 14 for income from a business, and after April 14 for self-

employment income:

The prior will only be acceptable if applicant provides a copy of filed IRS

Form 7004 “Application for Automatic Extension of Time to File Certain

Business Income Tax, Information, and Other Returns” or Form 4868

“Application for Automatic Extension of Time to File U.S. Individual

Income Tax Return”;



There is very little guidance on what is and what is not sufficient from an

accountant, as it must include a Profit/Loss Statement. Therefore, we have

created the form “Accountant Financial Statement of Net Income” which will

have to be completed by an accountant. When applicable, an accountant may

include additional supportive information, but must always fully complete the

form. Such information must come directly from the accountant and never

hand carried by the applicant.

Fully completed “Accountant Financial Statement of Net Income” must

include the name, address, phone number, Preparer Tax Identification

Number (PTIN) or Social Security Number (SSN) all others will not be

acceptable statements.

INCOME FROM UNEMPLOYMENT

The household member must sign an Unemployed Declaration, and provide

a) Benefit award letter from the agency (must be dated within 120

days) providing the benefit, including frequency of payment.

NOTE 4.3.1: When calculating income from unemployment, weekly benefit

amount is annualized.

INCOME FROM CHILD SUPPORT AND/OR ALIMONY

1. Non-Court Ordered Child Support

The applicant’s statement of child support (Child Support

Declaration). Separate affidavits are required when the

children have different parents or the birth certificate only

shows one parent. A notarized statement from the absent

parent stating the amount paid and the frequency of payment

is also required. If the absent parent refuses to provide a

statement, the applicant must complete a Child Support

Payment Declaration thus listing the amounts received.

2. Court Order Child Support



a) The applicant’s statement of child support (Child Support

Declaration). Separate affidavits are required when the children

have different parents or the birth certificate only shows one parent,

and one of the following:

1. A copy of the court order and if more than one year old

proof of current payments received, or,

2. A statement from Child Support Enforcement office

showing court ordered amount and proof of current

payments received, or

3. A statement from the County Court Clerk showing court

ordered amount and proof of current payments received,

or;

4. A copy of a separation or settlement agreement or a

divorce decree stating court ordered amount and proof of

current payments received.

Proof of current payment received must reflect at least the last six

months history. When calculating average, we will use all history

shown, but never more than last 12 months.

NOTE 4.3.2: If the applicant has a court order for child support and/or alimony but

does not receive payments, income must be counted when determining

eligibility unless the applicant provides verification (i.e., motion for

contempt, letter from attorney, etc.) of efforts made to receive such

income and provide third party documentation showing that no

payments have been received.

Properties will come across files where applicants, although not

receiving the full amount awarded, are receiving a portion, and such

is being paid directly to the “agencies responsible for enforcing

payments”. When dealing with this scenario it could be assumed

that the “agencies responsible for enforcing payments” are not only

collecting payments, but also doing so because the applicant “has

taken all reasonable legal actions to collect amounts due, including



filing with” their agency, and as a result portions of the amounts

due are or have recently been received.

Therefore, when applicants have been awarded child support and

receive the full or a portion of the amounts awarded by way of the

agency responsible for enforcing payment, we would be ok counting

only the portion received by annualizing it after calculating an

average for the period of time documented and never using over 12

months of history.

The above is not to be confused with someone who has not received

payments or someone who receives sporadic payments that are not

made directly to agencies responsible for enforcing such. In both of

these cases, “income can be excluded from annual income only

when applicants have made reasonable efforts to collect amounts

due, including filing with courts or agencies responsible for enforcing

payments” and such has been documented in the file as has been

traditionally done.

NOTE 4.3.3 When no documentation of child support, divorce, or separation is

available, either because there was no marriage or for another

reason, property staff may require the family to sign a certification

stating the amount of child support received. However, this is

strictly to be an exception and never the rule. Recurring use of the

following procedure could be considered non-compliance.

INCOME FROM AFDC AND TANF

a) A benefit verification letter from the agency providing the benefits to

the resident stating the gross amount to be received monthly (this

letter must be less than 120 days old), or

b) A printout from the agency providing the benefits stating the gross

amount to be received monthly.

NOTE 4.3.4: An Annual award letter is not an acceptable form of verification of

AFDC or TANF.



INCOME FROM SOCIAL SECURIT Y BENEFITS,

SUPPLEMENTAL SECUR ITY INCOME ( SSI) AND

DISABILITY

a) A benefit printout from the agency providing the benefits, or;

b) An award or benefit notification letter of Disability Income, no older

than 120 days

c) An annual award or benefit notification letter of Social Security

Benefits

Verifications of income from the Social Security Administration can be

requested online at www.ssa.gov

NOTE 4.3.5: Verified amounts must be gross. If net is indicated, the

applicant/resident should visit ssa.gov to obtain a statement showing

the gross benefit amount.

VETERANS, CIVI L SERVICE, PENSION, WORKMEN’S

COMPENSATION, STUDENT BENEFI TS

a) A benefit statement completed by the agency providing the benefits, or;

b) An award or benefit notification letter prepared and signed by the

authorizing agency.

RECURRING CONTRIBUTIONS AND GIFTS

A notarized “Recurring Contributions and Gifts” form signed by the

Applicant/Resident, and the person providing the contribution and/or gift. Note

that it is the signature of the person providing the contribution and/or gift that

must be notarized. If a notarized "Recurring Contributions and Gifts" form is

impossible to obtain, the applicant/resident can complete a "Verification of Self

Declared Income" form. Note that on the form, the applicant/resident must

indicate a valid reason as to why a third party notarized statement cannot be

provided.



CALCULATING TOTAL GROSS ANNUAL INCOME

5.0 CALCULATING ANTICIPATED GROSS INCOME

Income should be calculated according to the applicant’s payroll schedule (i.e.,

weekly, bi-weekly, monthly, etc. To calculate gross annual anticipated income,

use methods listed in this chapter):

NOTE 5.0.1: All income calculations must be shown on a calculation sheet. Note that

some state agencies require a calculator tape in addition to a calculation

sheet.

NOTE 5.0.2: When household’s income is within $500 of the maximum allowable

income limit, it is compliance best practice to request the last 4-6

current paystubs from the applicants. We would then calculate the pay

stub income and YTD income and ensure this income does not cause

the total household’s income to exceed the allowable limit.

5.1 HOURLY FULL TIME EMPLOYMENT

Multiply hourly gross wages by the number of anticipated hours per week and

then multiply result by number of weeks anticipated for the next 12 months.

EXAMPLE 5.1.1:

$5.75/hour anticipated at 40 hours/week for 52 weeks (12 months)

$5.75 x 40 = $230/week

$230 x 52 weeks = $11,960 Gross Annual Income

Chapter

5



5.2 WEEKLY FULL-TIME EMPLOYMENT

Multiply average weekly gross wages by the number of times anticipated to be

received within the next 12 months.

EXAMPLE 5.2.1:

$200/week, as anticipated for 52 weeks (12 months)

$200/week x 52 weeks = $10,400 Gross Annual Income

5.3 BI-WEEKLY FULL-TIME EMPLOYMENT

Multiply average bi-weekly gross wages by the number of times anticipated to

be received within the next 12 months.

EXAMPLE 5 .3 .1:

$800 every 2 weeks (Anticipated for the next 12 months)

$800 x 26 (26 bi-weekly periods in one year) = $20,800 annual

income

5.4 BI-MONTHLY FULL-TIME EMPLOYMENT

Multiply average bi-monthly gross wages by the number of times

anticipated to be received within the next 12 months.

EXAMPLE 5 .4 .1:

$900 twice per month anticipated for the next 12 months

$900 x 24 (24 bi-monthly periods in one year) = $21,600 annual

income

NOTE 5.4.2: When an employer gives a low and high figure, (example: between

$10,000 and $12,000), always use higher figure.

NOTE 5.4.3: When the employer states several figures (hourly, weekly, monthly,

and/or annually), calculate the income for all figures and use the

highest amount.



NOTE 5.4.4: When an employer shows the number of hours and adds additional

information such as “+ overtime,” or “# of hours +,” a verification

statement must be completed.

5.5 WHEN CALCULATING SEASONAL OR PART-TIME EMPLOYMENT

When calculating seasonal or part-time employment, follow the same

guidelines for calculating full-time employment. Even though the number

of hours per week, or weeks per year may be different, the methods of

calculating are the same. Number of weeks worked per year must be

verified directly with the employer. However, all applicants/tenants

with seasonal employment must sign a self affidavit explaining what

they do during the off-season (i.e. collect unemployment benefits, work a

second job, etc.) and all other income earned during such off-season must be

documented and counted as part of the household income at time of

certification.

5.6 YEAR-TO-DATE (YTD) CALCULATION

Verify the hire date and employment status, and then divide the YTD gross

income by the number of weeks worked in the current year (even if they get

paid bi-weekly or any other way, you will use a weekly average). When

counting weeks you count backwards from the latest pay-stub’s period ending

date, (e.g. If the latest period ending date was on a Tuesday, you will count

backwards every Tuesday until the first Tuesday of employment within the

current year). Then you will divide the current total YTD income by the number

of weeks paid to date, this will be the average gross income per week. Then

take the average gross income per week and multiply it by 52 weeks.

EXAMPLE 5.6.1:



January 2003 February 2003 March 2003

Su Mo Tu We Th Fr Sa

1 2 3 4

5 6 7 8 9 10 11

12 13 14 15 16 17 18

19 20 21 22 23 24 25

26 27 28 29 30 31


1

2 3 4 5 6 7 8

9 10 11 12 13 14 15

16 17 18 19 20 21 22

23 24 25 26 27 28


1

2 3 4 5 6 7 8

9 10 11 12 13 14 15

16 17 18 19 20 21 22

23 24 25 26 27 28 29

30 31

With March 26th being ground zero, and because it falls on a Wed, the 19th

becomes week one when counting. We would count every Wed…i.e., 12th, 5th,

Feb 26th, 19th, and so on until whichever comes first; the hire date if in the

current year or January 1st of the current year. In this example YTD income is

divided by 12 weeks.

Y-T-D gross income as of 03/26/03 = $8,200

Household member’s hire date 11/02/00.

$8,200 / 12 weeks worked = $683.33 average gross income per week

$683.33 x 52 weeks per year = $35,533.16 total annual gross income

5.7 PAY INCREASE CALCULATION

Verify the effective date and amount/percentage of increase the employee will

be receiving. In an effort to demonstrate compliance due diligence note (1)

that in the event the employer is unable to anticipate the effective date, but has

stated that an increase is anticipated, you will have to use the hire date

anniversary as the anticipated date of increase. Remember that you must get

the 3rd party verification of hire date (i.e., Employment ID, hire letter, insurance

card, anything that was issued by the employer and shows the hire date). Also

note that (2) in the event that the employer is not willing or is unable to

anticipate the amount of increase, but has anticipated that the employee will

receive an increase, you must do one of the following:

When incomplete:

http://www.timeanddate.com/calendar/custom.html?year=2003&month=1&country=1&typ=1&display=1





a) Contact the employer by mail, electronic transmission, or by phone,

and have them provide the missing information. Email is always the

fastest and most reliable method when the employer included such

on the signature portion of the form they already completed.

Therefore, the "Preferred" method.

When "Unknown":

a) Contact the employer by mail, electronic transmission, or by phone,

and have them provide the missing information. Email is always the

fastest and most reliable method when the employer included such

on the signature portion of the form they already completed.

Therefore, the "Preferred" method.

b) In the event additional efforts to verify the information results in the

employer's continual statement that such is "unknown", please

document and include such efforts in the file as an effort to further

support due diligence if the file is ever audited or future

certifications indicate the applicant did receive a pay increase.

c) Because the income increase is unverifiable, and truly unknown,

never would in this case a 3% cost of living increase be added to

the income calculation.

Note the above is not to be confused with those times when an employer

answers, "Yes" a pay increase is anticipated, and states the date and/or

amount are/is "Unknown". When the employer has indicated that an

increase is anticipated, but refuses to provide an amount for the increase,

management should include a 3% cost of living increase. Efforts to verify

the increase amount with the employer should be documented in the file

and a clarification added explaining that since the employer confirmed an

increase will be paid, but the amount is unclear, management will include a

3% increase to be conservative.

Please note that we do this in an effort to demonstrate due diligence. It is

compliance best practice not to ignore the fact that the employer

anticipated a pay increase, as all anticipated income must be included when

determining household’s eligibility.



EXAMPLE 5.7.1:

January 2003 February 2003 March 2003


1 2 3 4

5 6 7 8 9 10 11

12 13 14 15 16 17 18

19 20 21 22 23 24 25

26 27 28 29 30 31


1

2 3 4 5 6 7 8

9 10 11 12 13 14 15

16 17 18 19 20 21 22

23 24 25 26 27 28


1

2 3 4 5 6 7 8

9 10 11 12 13 14 15

16 17 18 19 20 21 22

23 24 25 26 27 28 29

30 31

With March 26th having been determined to be the anticipated effective date of

increase and January 24th the date the employer signed the verification of

income, you will assume March 26th is ground zero, and because it falls on a

Wed, the 19th becomes week one when counting. We would count every

Wed…i.e., 12th, 5th, Feb 26th, 19th, and so on until January 29th …because the

24th is on a Friday you will not count to the 22nd.

• Anticipated Date of Increase = March 26th

• Letter Signed by employer = January 24th

From the calendar above we determined that this employee will work:

• Total Weeks Before Increase = 8

• Total Weeks in the Year = 52 – 8 = 44

When calculating, you will calculate income without increase for eight (8) weeks

and income after increase for 44 weeks of the anticipated 12 months.

• Anticipated Increase = 2%

• Hourly Rate = $10.00

• Total Weekly Regular Hours = 40

• Hourly Overtime Rate = $15.00

• Total Weekly Overtime Hours = 5






Calculating Income Before Increase

Regular Before Increase 10 x 40 x 8 = $3,200.00

Overtime Before Increase $15 x 5 x 8 = $ 600.00

Total $3,800.00

Calculating Income After Increase

Regular After Increase $10 x 2% x 40 x 44 = $17,952.00

Over Time After Increase $15 x 2% x 5 x 44 = $ 3,366.00

Total $21,318.00

Total Income Including Anticipate Pay Increase $25,118.00

5.8 CALCULATING INCOME FROM EDUCATIONAL ASSISTANCE

Every student that is part time or full time over the age of 18 must fill out a

Student Income Declaration when the household receives Section 8

assistance. This income is not counted and the form is not completed when

the household does not receive Section 8 assistance. There are two

exemptions that the resident can meet so that educational assistance can be

excluded as income:

1. If the applicant is 24 years or older with a dependent child (show birth

certificate as proof), or

2. If the applicant is 23 years or younger living with a parent or legal

guardian (must show birth certificate as proof).

If the applicant does not meet either exemption and receives financial aid in

excess of tuition, then we must obtain the following information from them:

a. Documentation showing financial aid/loans that are received by

the applicant and one of the following;



b. Tuition statement from the school showing total current

semester tuition and a clarification from the applicant/resident

confirming how many semesters they will attend over the next

12 months.

c. A clarification from the applicant/resident stating how many

credit hours they plan to take over the next 12 months and a

printout from the school showing the cost of 1 credit hour

without fees.

Calculation for Student income

All financial aid = $6,000 ( $3,000 per semester and they will be attending 2

semesters in 12 months)

Loans = $1,500 per semester = $3,000 for next 12 months

Tuition = $100 per credit without fees and they will be attending 18 hours in 12

months = $1,800

$6,000 - $3,000 - $1,800 = $1,200

We would add this to the income because the students will be receiving this

from the school. If the amount is negative, then we add nothing to the

income. However, if the income is negative please have the applicant clarify

how they will be paying that difference.

5.9 ANNUAL INCOME QUICK REFERENCE CHART

1. Hourly = Multiply hourly wages by 2,080 hours (if 40 hours/week)

2. Weekly = 52 weekly periods in one year

3. Every other week = 26 bi-weekly periods in one year

4. Twice per month = 24 bi-monthly periods in one year

5. Once per month = 12 monthly periods in one year

All overtime pay, tips, bonuses, commissions, and merit raises anticipated over the

next twelve months must be added to these calculations.

UNEMPLOYED APPLICANTS & APPLICANTS RECEIVING

RENTAL ASSISTANCE (I.E. SECTION 8)

6.0 UNEMPLOYED APPLICANTS

An “Unemployed Declaration” form must be completed by all applicants

claiming to be unemployed but claiming some other source of income. The

form includes a section where all other sources of income must be shown.

This income must be documented and included.

If an applicant is currently unemployed and claiming zero (0) income;

he/she must sign only a “Certification of Zero Income” form and provide an

explanation of how they anticipate supporting themselves for the next

twelve months. If claiming “Zero Income”, applicants would not need an

“Unemployment Affidavit” as well, unless required by the state. As a note,

the HOME program does require both an Unemployed Declaration and a

Certification of Zero Income to be completed, when applicable.

6.1 APPLICANTS PARTICIPATING IN RENTAL ASSISTANCE PROGRAMS

(SEE NOTE BELOW RE: THIS SECTION)

As part of the unique “Affordable Housing Program” of your property, it is

required that all households have a total annual income of at least their annual

rent (annual rent = monthly rent x 12).

When dealing with households receiving rental assistance, in most cases their

portion of the rent cannot be verified until inspection of the unit and/or final

approval is received from the agency providing the support (i.e. Housing

Chapter

6



Authority). By this time, it is too late to verify whether or not the household

makes at least their portion of the rent. In some cases, they do not, and then

the unit is in non-compliance, which could cause an issuance of a “Form 8823.”

To avoid this we recommend, at managers’ discretion, doing the following

for all applicants receiving rental assistance:

Provide verification of participation in a rental assistance program, (i.e.

Section 8 Voucher), and

a. Prior to application approval or move-in provide evidence of

the amount the Housing Authority will assist with, or

b. Prior to application approval or move-in provide evidence of

their portion of the rent, or

c. Prior to application approval or move-in provide 3rd party

verification of income that anticipates a total monthly income

equal to or more than the monthly applicable rent for the

size unit application is made for, or

d. Meet all requirements just like any other applicant not

receiving Section 8 assistance, pay for the full amount of the

rent until the Housing Authority contract is received. Note

that the amount the tenant paid in rent must be credited from

the beginning date of the HAP contract.

In the event that none of the above requirements can be met, the application

approval may be issued with condition that a lease agreement is signed and the

move in date be scheduled for 10 business days after approval. This will allow

time for the agency providing the assistance to inspect the unit and calculate

tenant’s portion of the rent. In addition, we recommend that on the front page

of the lease or a lease addendum be signed with the following stipulation must

be added:

“In the event that written verification of tenant’s portion of the rent is

not received by the commencement date of this lease agreement, move

in date will be postponed until such verification is received and



household monthly income is equal to or greater than their anticipated

monthly portion of the rent.”

Many are not aware that tenant’s portion of the rent is calculated immediately

after unit inspection and written verification may be obtained by calling the

caseworker assigned to the applicant by the agency. Note that it is not the

contract (i.e. HAP Contract) that you will be requesting, for this takes longer,

but it is written or verbal verification of the anticipated tenant’s portion of the

rent.

In the event that their monthly portion of the rent is more than their monthly

income, we recommend move in date be postponed until third (3rd) party

verification of income that is equal to or more than their monthly portion of the

rent is received and approved by management.



INCLUDED AND EXCLUDED ASSETS

7.0 ASSETS

Assets are items of value, such as money held in checking and savings

accounts, certificates of deposit, stocks, bonds, IRA accounts, and real

estate.

It is the income derived from the assets, or the earning power, that must

be included as part of the household’s anticipated gross annual income.

When computing asset income, you must ask three questions:

1. What is the asset worth as cash? (Cash Value)

2. What amount of income from the asset can be anticipated for

the next 12 months?

3. Is the combined cash value of the household’s assets worth

$5,000 or more?

NOTE 7.0.1: Assets of all household occupants regardless of age must be

included in the total asset value (this includes minor children).

7.1 INCLUDED ASSETS

a. Cash held in savings and checking accounts, safety deposit boxes,

homes, direct deposit accounts, etc. This includes cash on hand.

Chapter

7



b. Trusts - include the principal value of any trust available to the

household. Do not include irrevocable trusts or trusts that no family

member can control. An example of an irrevocable trust is a trust fund

established for a son or daughter, prior to the parent’s death. The

benefactor receives only the interest from the trust during their lifetime

and cannot withdraw the principal.

c. Equity in real estate or other capital investments – includes current

market value, less any unpaid balance, or any loan secured by the

property and any reasonable costs that would be incurred in selling the

asset (prepayment penalties, legal or broker fees).

d. Stocks, bonds, treasury bills, certificates of deposit, money

market funds.

e. Individual Retirement Savings Accounts, (IRA’s) and Keogh

Accounts – IRA, Keogh, and similar retirement savings accounts are

counted as assets, even though withdrawal would result in a penalty,

*unless benefits are being received through periodic payments.*

f. 401K Retirement and Pension Funds

1. For persons under 59 ½ years old and with a 401k account that

is held by their current employer, include only amounts the

family can withdraw without retiring or terminating

employment. Count the whole amount less any penalties or

transaction costs. Accessibility to the account can be certified

using a “401k Account Declaration.”

2. For persons over 59 ½ years old and with a 401k account that is

held by their current employer, include only amounts the family

can withdraw without retiring or terminating employment. Count

the whole amount less any penalties or transaction costs.

Accessibility to the account must be third party verified using an

“Investment Account 401 IRA Other Verification.”

3. For persons who are not currently employed OR the 401k

account is not held by their current employer, the 401k account

must be included as an asset.



g. Lump sum receipts – include inheritances, capital gains, one-time

lottery winnings, and settlements on insurance and other claims.

h. Personal Property Held as an Investment - such as gems, jewelry,

coin collections, antique cars, paintings, vacation rentals, etc.

i. Cash Value of Life Insurance Polices Available to the Individual

Before Death (e.g., the surrender value of a whole life policy or a

universal life policy.) It would not include a value for term insurance,

which has no cash value to the individual before death.

j. Assets Owned by More than One Person should be prorated according

to the percentage of ownership.

k. A Mortgage or Deed of Trust Held by a Member of the Household –

payments on these types of assets are often received as one combined

payment of principle and interest with the interest portion counted as

income from the asset, not the loan payment portion.

l. Assets Disposed of for Less than Fair Market Value - When the fair

market value of the disposed asset exceeds the gross amount that the

family has received by more than $1,000, then you must include as

assets the difference between the cash value and the amount received.

If the difference is less than $1000, do not count it.

m. Cash Apps – The Cash App is a peer-to-peer

payments service by Square, Zelle, Venmo, etc. Individuals can send and

receive payments using a credit or debit card on the Cash App, available

for free. Users can also add money to their account on the Cash App and

use the funds via a free Cash Card or debit card.

NOTE 7.1.2: DO NOT consider assets disposed of for less than fair market value

as a result of:



a. Foreclosure when final

b. Bankruptcy when final

c. Divorce or separation settlement

(You must show proof that this has happened. If the home is in the process of

foreclosure, we must still count it as an asset.)

NOTE 7.1.3: DO consider:

a. Assets put into trust.

b. Business assets disposed of for less than fair market value.

Business assets are excluded from the net household assets

only while they are part of an active business.

c. Assets owned by more than one person – prorate the value

of the asset according to the percentage of ownership.

7.2 EXCLUDED ASSETS

a. Necessary personal Property – such as automobiles, furniture,

clothing, etc.

b. Vehicles especially equipped for the handicapped

c. Interest in Indian Trust Land

d. Term Life Insurance Policies where there is no cash value

e. Equity in a cooperative unit in which the family lives

f. Assets that are part of an active business – (This exception does not

include rental of properties that are held as investments and not a main

occupation.)



g. Assets held in the applicant’s name but are actually owned by

someone else, such as:

1. Assets and any earned income that is accrued to the benefit of

someone else.

2. A situation wherein another person is responsible for income taxes

incurred on income from the assets.

3. If the applicant is responsible for dispersing someone else’s money,

such as in the case of having Power of Attorney, but the money is of

no benefit to him/her.

h. Assets that are not effectively owned by the applicant. Assets are

not effectively owned when they are held in an individual’s name, but the

asset and any income they earn accrue to the benefit of someone else who

is not a member of the family, and that other person is responsible for the

income taxes incurred on income generated by the assets.

NOTE 7.2.1: In order for these assets to be excluded 3rd party verification

is required and management must approve application prior

to excluding asset

DOCUMENTING AND CALCULATING ASSETS

8.0 ASSET VERIFICATION

Assets must be verified prior to move-in or recertification. Most programs

do not require verification of assets with a value of less than $5000. All

properties federally funded (i.e. HOME, MMRB) are required to document all

assets and income from such assets, no matter the value or income

earned.

Verifications must be from a 3rd party source and dated within 120 days

prior to the move-in or recertification date. Asset verifications must be

kept in the permanent file.

8.1 DETERMINING THE VALUE OF ASSETS

The income from all household assets must be totaled and shown on the

“Declaration of Assets” and Tenant Income Certification. However, some states

require the use of an “Under $5,000 Asset Certification”. When this is the case,

properties would not use the “Declaration of Assets”.

The types of assets included in the anticipated gross annual income calculation

are shown below with examples for calculating their income:

When computing the value of assets, applicants must use the cash value of the

assets (the amount the applicant(s) would receive if the assets were converted

to cash). Expenses that may be deducted from the cash value include:

1. Penalties for withdrawing funds before maturity;

Chapter

8



2. Broker/legal fees assessed to sell or convert the asset to

cash; and/or

3. Settlement costs for real estate transactions (see real Estate

Ownership).

NOTE 8.1.1: All value of assets and income from assets must show on the

Asset Affidavit. In addition, all income calculations from

such assets must be completed on an Asset Worksheet or

Asset Calculation Sheet.

8.2 CHECKING AND SAVINGS ACCOUNTS

Checking Accounts

When working with checking accounts, the 6 month average balance is

used. This is because the checking account is considered a fluctuating

account. When verifying the average balance with the banking institution,

you must verify the average for the past 6 months. When a banking

institution provides an average that is less than or more than 6 months,

unless permitted by your state agency, further verification of the true 6

month average must be obtained. If the banking institution will not provide

additional information, the applicant/tenant must provide 6 current

consecutive bank statements for management to calculate the 6 month

average.

New Checking Accounts

If the checking account is a new account, the current balance of the

account can be used. However, the date the account was opened must

also be verified and included in the file.

Savings and Direct Express Accounts

When working with savings, direct deposit and “Direct Express” accounts,

the current balance is used as this is considered a more stable account.



“Direct Express” accounts are for recipients of social security benefits that

do not have other types of bank accounts. Anyone that receives social

security benefits must have a bank account in order to receive direct

deposit of such benefits. When an applicant states they receive social

security benefits and does not have a checking or savings account, she/he

would have a “Direct Express” account. Current balance in this account

must show on the Declaration of Assets.

Income from Checking and/or Savings Accounts

You must obtain the appropriate balance on both types of accounts and

determine if any interest rate applies. Once these numbers are

determined, you must multiply the account balance by the applicable

annual interest rate to determine the actual asset income.

Documentation Needed

Acceptable forms of verifications are lettered, in order by preference,

as described below.

a. Statement from the institution showing applicable balance

(average balance for past six month for checking

accounts and current balance on saving accounts) and

the applicable percentage interest rate for each account

must also be verified in order to calculate income earned.

However, remember that percentage interest rate may

change each month in some accounts. In the event that

they do, the current interest rate will be used for the

calculations; or

b. Verification of Assets form completed by the bank. This

verification must be sent to the bank by fax or mail, and it

must be received from the bank by fax or mail. Applicants

should not handle the verification unless it includes the

bank’s official seal after completion, in which case the form

can be hand carried to the property (when permitted by your

state agency).



c. Copies of applicant’s/tenant’s bank statement(s) if applicable

interest rates are reflected. Most recent consecutive six

months for checking and most recent for savings. All pages

of all statements are needed. Since bank statements provide

more information than the previous suggestions, please

review the statement in full to ensure deposits and charges

correspond with information provided by household and do

not affect household’s eligibility with program requirements.

When calculating the 6 month average, management should

use any amounts reflected. For any months reflecting a

negative ending balance, the negative figure will be used

when calculating the average.

Calculating income from checking and saving accounts

1. CASH

Multiply the actual balance on the savings and the average balance (past 6

months) of the checking account by the interest rate and show on appropriate

blanks on the Asset Affidavit.

EXAMPLE 8.2.1:

Cash – Savings

$1,000 held in a savings account with a 4% interest rate (See 8.2 (a)

Documentation Needed)

$1,000 x 4% = $40.00 income from the asset

Cash – Checking

$800 (average six month balance in checking account) at 1.5% interest

(See 8.2 (a) Documentation Needed)

$800 x 1.5% = $12.00 income from the asset

8.3 REAL ESTATE



If the applicant owns real estate, the cash value or equity of the real estate

must be determined. This is achieved by deducting the current mortgage

balance and possible expenses incurred from the current market value, should

the house be sold. Once determined, you must figure what amount of income

could be derived from this equity and add it to the applicant’s income. This

must be done whether the applicant plans to sell or not. All amounts must be

supported with third party verification. These amounts must be shown on the

Asset Affidavit and all calculations be shown on the Asset Worksheet or Asset

Calculation Sheet.

In order to properly calculate household’s total value of assets, it is important to

verify the status of the real estate (i.e. rented, vacant, held as investment, etc.)

Therefore, all applicants/residents that own real estate must sign an “Real

Estate Status Declaration.”


a. Property Appraisal or latest Tax Assessment (must show fair market

value)

b. Verification from a Title Company in the area that the property is

located, of average closing costs and other fees

c. Current mortgage balance

Calculating the cash value of a real estate

EXAMPLE 8.3.1:

$60,000 current market value of the asset (see 8.3 (a)

Documentation Needed for explanation)

less $ 4,200 closing cost and other fees (estimated @ 8% in the

area the asset is in. Obtained by calling a Title company

in the area the asset is located and documented using a

clarification statement)

less $ 34,000 current mortgage balance



(Obtained from the mortgage company.)

$21,800 CASH VALUE OF THE REAL ESTATE (see Notes below)

NOTE 8.3.1: When an applicant owns a real estate with another individual, and

that individual will not be counted as a household member, the cash

value of the real estate will be divided and only the portion owned

by the applicant is counted as an asset.

NOTE 8.3.2: When an applicant owns a real estate but it is not occupying such, it

must be determined if it is vacant held as an investment, occupied

by someone else, or in foreclosure, but the foreclosure is not final.

This is done by having the applicant sign a Real Estate Status

Declaration. Below you will find guidance on what to do in all

scenarios.

Vacant Inform applicant that if the real estate is sold,

rented, or occupied by someone else prior to the

effective date of the initial certification it could

affect their eligibility. They must notify you

immediately if this were to happen. You will have

to redo the asset portion of the eligibility process.

Occupied In the event that the real estate is occupied by

someone else, it must be determined if that

someone else is paying rent or the mortgage

payment directly to the bank. Both are considered

rental income and you will have to follow steps in

Section 8.4. If the person occupying the unit is the

ex-spouse or estranged spouse of the applicant,

and she/he is paying the mortgage, and also has

ownership to the home, we would not count any

portion as rental income to the applicant.

Foreclosure When a foreclosure is not final, we must take into

consideration that it could stop at any given time,

and the applicant will remain owning real estate.



Therefore, unless the applicant is able to provide

final court proceedings or final foreclosure

documents, the real estate will have to be counted

as an asset owned and steps shown above in

section 8.3 will have to be followed.

8.4 RENTAL INCOME FROM REAL ESTATE

Rental income from real estate owned by the applicant/resident, less the

annual operating expenses is considered income.

If someone is occupying the real estate and he/she is paying the mortgage

company directly, the value of such mortgage payments must be counted

as income; except if it is the ex-spouse or estranged spouse who is residing

and making such payments (see Note 8.4.1).

To figure actual income, take the yearly rental income less any expenses

(i.e., taxes, insurance, maintenance costs, utilities included in rent, and

mortgage interest.) This can be determined by the applicant/resident

providing a signed copy of Schedule E (IRS Form 1040) of the most

recently filed tax return and adding line 20 (Depreciation) to line 26

(Income) of the Form. This must be done because depreciation is

required to be included as part of the rental income. This can also be

determined by reviewing the current mortgage statement for the

property. A mortgage statement will typically reflect the following

expenses: taxes, insurance, and mortgage interest.

Verification must be included and documented in the applicant’s/resident’s

file. For documentation purposes only, this amount will be shown on the

Declaration of Assets. If the actual income amount is zero or less, enter

zero on the “Income From Rental” Column. However, on the TIC rental

income is shown on the “Other” income section and not in the income

from asset section.




Acceptable forms of verifications are lettered in order by preference, as

described below.

a. Current copy of lease agreement, and

b. Signed copy of Schedule E IRS (Form 1040) of the most

recently filed tax return, or

c. Proof of operating expenses (i.e., Taxes, Insurance,

Maintenance cost, utilities included in rent, and mortgage

interest, etc.)

Calculating income from real estate

EXAMPLE 8.4.1:

$4,000 rental income for the next 12 months

(applicant/resident must provide copy of lease

agreement)

less $3,000 total expenses for rental unit (Obtained from line 24

+ line 20 of IRS Schedule E OR the current mortgage

statement)

$1,000 ACTUAL INCOME FROM ASSET

NOTE 8.4.1: In the event that the person occupying the unit is the ex-spouse or

estranged spouse of the applicant and she/he is paying the

mortgage, and also has ownership to the home, we would not count

any percentage as income.

NOTE 8.4.2: Rental income is shown on the “Other” income section of the TIC

and not in the income from asset section.

8.5 SALE OR DISPOSITION OF REAL ESTATE

If the Application indicates that the applicants have owned any real estate

in the 2 years prior to the Certification (IC, IR, or AR) date, or are in the



process of selling community property, acceptable documentation (as

shown in section 8.6 & 8.7) must be obtained prior to move-in.

Assets owned at time of application but sold prior to move-in must be

counted as an asset disposed of. The Application, Asset Affidavit and all

other applicable documentation must be updated to reflect that the asset

was disposed of. Remember that not doing this at time of initial

certification will reflect non-compliance at time of the annual recertification.

NOTE 8.5.1: Be sure to document the file to flag management to carry forward

the appropriate portion on any recertification within 24 months after

disposal of such an asset.

8.6 DISPOSAL OF ASSETS FOR LESS THAN FAIR MARKET VALUE

Any asset disposed of (given away) or sold within the 24 months prior to

the effective date of Move-in/Income Certification must be considered in

determining household income. Assets are generally real estate. In order

to calculate and verify the correct amounts, you will obtain documentation

showing what the asset was worth, what the asset was sold for, and any

costs that were incurred in the sale or transaction.

NOTE 8.6.1: If an asset was disposed of before move-in, it must be carried for 24

months from the date of disposal. In some cases, this would

require a portion of the income to be counted on the first

recertification.

We require the applicant to supply the appraisal or tax assessor’s statement

(see section 8.6 (b) Documentation Needed) showing the “Fair Market

Value” and the closing/settlement statement of said property showing the

amount for which the asset was disposed/sold. If the asset was disposed

for $1,000 or greater BELOW Fair Market Value, this is considered an asset.

Anytime an asset was disposed and proceeds were received at time of

disposal, household must provide documentation of where the earned

money is (i.e. checking account, saving account, already spent, etc.). Do

not include assets disposed of as a result of foreclosure, divorce,



bankruptcy, or separation settlement. Proof of these exceptions

must be obtained for the permanent file.

NOTE 8.6.2: Quit Claim Deeds are not an acceptable form of verification of

asset disposed.

NOTE 8.6.3: Be sure to document the file to flag management to carry forward

the appropriate portion on any recertification within 24 months after

disposal of such an asset.

The correct procedure when assets are disposed of for more than Fair

Market Value within 24 months prior to the effective date of the income

certification is as follows:

The applicant must complete a self affidavit stating what was done with the

proceeds from the sale of the home. The applicant may have used the

profit to buy a car, pay for college for his/her family member, pay medical

bills, etc. Nevertheless, in all cases, the file should reflect what happened

to the money.

Documentation Needed:

All documentation listed must be included in order to properly calculate the cash

value of the assets and income from such assets.

a. Signed Copy of Closing Settlement

b. Signed Copy of Property Appraisal or latest Tax Assessment

(must show fair market value)

Calculating assets disposed of for less than fair market value

For step-by-step calculation instructions, see section A of the Asset Worksheet.

EXAMPLE 8.6.1

The Fair Market Value of the Asset $87,500



Minus the gross amount received $85,000

Add to Total Assets $ 2,500 Less Than Fair Market Value

The $2,500 is considered an asset, and must be shown on the Asset

Affidavit

8.7 DOCUMENTING CDS, MONEY MARKET ACCOUNTS OR TREASURY

BILLS

When working with CDs, money market accounts or treasury bills, you

must determine the cash value of the asset as these assets often have

penalties for early withdrawal of the money. The banking institution

holding these accounts will be able to provide the information needed. You

must also obtain the current annual interest rate on the account. The

banking institution holding these accounts will also be able to provide this

information. It is important to understand that the current interest rate

should be verified, as it is impossible to project what the interest rate will

be over the next 12 months.


All documentation listed must be included in order to properly calculate the cash

value of the assets and income from such assets.

a. Statement from the institution showing the current balance & interest

rate

b. Statement from the institution showing fees or penalties for early

withdrawal

Calculating income and cash value of CDs, Money Market Accounts and

Treasury Bills

EXAMPLE 8.7.1:



a. Calculating Income from the Asset

$3,780 - current value of CD with an interest rate of 2.5%

$3,780 x 2.5% = $94.20 income from asset (must show on

Asset Affidavit)

b. Calculating Cash (Net) Value of the Asset

$3,780 - current value of the CD with a $200 early withdrawal penalty

$3,780 - $200 = $3,580 Net Value of the Asset (show on Asset

Affidavit)

NOTE 8.7.1: Income from the asset should be calculated from the Current Value

of the asset BEFORE subtracting any penalties for early withdrawal.

This is because income from the asset is being earned from the

current value.

8.8 DOCUMENTING STOCKS OR SECURITIES

Value of the Assets

When working with stocks or securities, it is important to determine the

amount of stocks currently held by the applicant/resident. These are often

called “shares.” Again, 1) it is important to verify the number of shares

currently held, as it is impossible to determine the number of shares that

may be held over the next 12 months. 2) The next step is to determine

the current amount each share is worth or the price per share. Again, the

current price per share is determined, as there is no way to determine

the value of the share over the next 12 months. 3) Once both of these

items have been verified, the number of shares is multiplied by the price

per share to determine the value of the asset. 4) It should then be

determined if there are any penalties for converting the shares to cash,

such as broker’s fees or commissions. 5) If such expenses are verified, the

expenses are deducted from the value of the asset to arrive at the cash

value of the stock.



Actual Asset Income

To determine the actual asset income derived from the stock or security, 6)

you must verify the dividends earned per share. Again, it is important to

understand that the current percentage yield dividend per share is

verified, as it is impossible to predict the future of the stock’s dividends.

Note that you should not ignore the dividends even if the amount is

automatically rolled back into the principle portion of the stock. This is a

conscious choice by the stockholder and is still income that the stock is

earning. 7) Once the percentage yield dividend per share is determined,

the total gross value of the shares is multiplied by the percentage yield

dividend to calculate the actual income derived from the stock or security.

Calculating Stocks or Securities

To determine Values follow steps 1 to 5 above

To determine Incomes follow steps 6 to 7 above

EXAMPLE 8.8.1:

100 shares @ $34.50 price per share = $3,450 total gross value of the asset

$3,450 gross value less withdrawal penalties = Net Value (cash value)

$3,450 (gross value) @ 6.58% yield dividend = $227.01 total income

8.9 DOCUMENTING TRUST FUNDS

Explanation of Trusts

A trust is a legal arrangement generally regulated by state law in which one

party (the creator or grantor) transfers property to a second party (the

trustee) who holds the property for the benefit of one or more third parties

(the beneficiaries). A trust can contain cash or other liquid assets or real or

personal property that could be turned into cash. Generally, the assets are

invested for the benefit of the beneficiaries.



Trusts may be revocable or non-revocable. A revocable trust is a trust that

the creator of the trust may amend or end (revoke). When there is a

revocable trust, the creator has access to the funds in the trust account.

When the creator sets up a non-revocable trust, the creator has no access

to the funds in the account.

The beneficiary frequently will be unable to touch any of the trust funds

until a specified date or event (e.g., the beneficiary’s 21st birthday or the

grantor’s death). In some instances, the beneficiary may receive the

regular investment income from the trust but not be able to withdraw any

of the principal.

The beneficiary and the grantor may be members of the same family. A

parent or grandparent may have placed funds in trust to a child. If the

trust is revocable, the funds may be accessible to the parent or

grandparent but not to the child.

How to treat trusts

The basis for determining how to treat trusts relies on information about who

has access to either the principal in the account or the income from the

account.

Revocable Trusts

If any member of the tenant family has the right to withdraw the funds in

the account, the trust is considered to be an asset and is treated as any

other asset. The cash value of the trust (the amount the family member

would receive if he or she withdrew all that could be withdrawn) is added

to total net assets. The actual income received is added to actual income

from assets.



Non-revocable Trusts

If no family member has access to either the principal or income of the

trust at the current time, the trust is not included in the calculation of

income from assets or in annual income.

If only the income (and none of the principal) from the trust is currently

available to a family member, the income is counted in annual income, but

the trust is not included in the calculation of income from assets.

Non-revocable trust as an asset disposed of for less than fair market

value.

If a tenant sets up a non-revocable trust for the benefit of another person

while residing in assisted housing, the trust is considered an asset disposed

of for less than fair market value.

If the trust has been set up so income from the trust is regularly

reinvested in the trust and is not paid back to the creator, the

trust is calculated as any other asset disposed of for less than

fair market value for two years and not taken into consideration

thereafter.

Example – Non-revocable Trust As an

Example – A Trust Accessible to Family Members

Assez Charaf lives alone. He has placed $20,000 in trust to his

grandson to be available to the grandson upon the death of Assez.

The trust is revocable, that is, Assez has control of the principal

and interest in the account and can amend the trust or remove

the funds at any time. In calculating Assez’s income, property

staff will add the $20,000 to Assez’s net family assets and the

actual income received on the trust to actual income from assets.



Asset Disposed of for Less Than Fair Market Value

Sarah Gordy placed $100,000 in a non-revocable

trust for her grandson. Last year, the trust

produced $8,000, which was reinvested into the

trust.

The trust is treated as an asset disposed of for less

than fair market value for two years. (See

paragraph 5.7 G.6.) No actual income from the

trust is included in Sarah’s annual income, but the

value of the asset when it was given away,

$100,000, is included in net family assets for two

years from the date the trust was established.

− Non-revocable trust distributing income. When a tenant places

an asset in a non-revocable trust but continues to receive

income from the trust, the income is added to annual income

and the trust is counted as an asset disposed of for less than

market value for two years. Following the two-year period, the

property staff will count only the actual income distributed from

the trust to the tenant.



Example – Non-revocable Trust Distributing Income to the

Creator/Tenant

Reggie Bouchard has established a non-revocable trust in the

amount of $35,000 that no one in the tenant family controls.

Income from the trust is paid to Reggie. Last year, he

received $3,500.

The property staff will count Reggie’s actual anticipated

income from the trust in next year’s annual income.

Because the asset was disposed of for less than fair market

value (see paragraph 5.7 G.6), the value of the asset given

away, $35,000, is counted as an asset disposed of for less

than fair market value for two years.

Payment of principal from a trust.

The beneficiary of a trust may receive funds from the trust in different

ways. A beneficiary may receive the full value of a trust at one time. In

that instance the funds would be considered a lump sum receipt and would

be treated as an asset. A trust set up to provide support for a person with

disabilities may pay only income from the trust on a periodic basis.

Occasionally, however, a beneficiary may be given a portion of the trust

principal on a periodic basis. When the principal is paid out on a periodic

basis, those payments are considered regular income or gifts and are

counted in annual income.

Example – Payment of Principal Amounts from a Trust

Jared Leland receives funds from a non-revocable trust

established by his parents for his support. Last year he

received $18,000 from the trust. The attorney managing

the trust reported that $3,500 of the funds distributed was

interest income and $14,500 was from principal. Jared

receives a payment of $1,500 each month (an amount that



includes both principal and interest from the trust).

The property staff will count the entire $18,000 Jared

received as annual income.

Special needs trusts

A special needs trust is a trust that may be created under some state laws,

often by family members for disabled persons who are not able to make

financial decisions for themselves. Generally, the assets within the trust are not

accessible to the beneficiary.

Not Counted as Income If the beneficiary does not have access

to income from the trust, then it is not

counted as part of income.

Counted as Income If income from the trust is paid to the

beneficiary regularly, those payments

are counted as income.

Example – Special Needs Trust

Daryl Rockland is a 55-year-old person with

disabilities, living with his elderly parents. The parents

have established a special-needs trust to provide

income for their son after they are gone. The trust is

not revocable; neither the parents nor the son

currently has access to the principal or interest. In

calculating the income of the Rockland’s, the property

staff will disregard the trust.

8.10 DOCUMENTING BONDS

When working with bonds, you must determine the number of bonds of

each type that are held. There are three types of bonds: Series H, Series E

and Series EE. There are numerous denominational values of bonds.

Therefore, you must 1) determine the type of bond and the face value of

the bond first. For example, the applicant/resident may hold a Series EE



bond with a face value of $50. You must also 2) determine the issuing

date of each bond as the value of the bond increases the longer it is held.

3) Once this information is obtained, you must work with a source that has

bond value information. This information can be obtained from a bank or

financial institution or a broker. 4) You need to obtain the cash value of

the bond and the current interest rate. As with many other types of

assets, a penalty is assessed if the bonds are cashed in before they mature.

The financial institution will be able to give us the penalty information and

the current interest rate. 5) Once this is determined, multiply the cash

value of the bond by the current interest rate to calculate the actual asset

income.

NOTE 8.10.1: If you are unable to get the information from a bank or

financial institution, you may get it by calling the toll-free

number, 800-USBONDS or 800-872-6637. This number will

give you a recorded message that contains limited

information. Therefore, always try to get it from a bank

first. If additional information, is needed you can write to

Savings Bonds, Parkersburg, WV 26106-1328 to obtain the

information.

8.11 DOCUMENTING 401K AND RETIREMENT ACCOUNTS

Some retirement accounts are given to the applicant/resident as part of an

employee benefit package such as a 401K program. In this case, the

retirement account may not be accessible to the applicant/resident unless

the applicant/resident retires or quits employment. You must determine

and document the accessibility of the account. If there is no accessibility or

it is only accessible if the person retires, the amount is not counted. If a

portion of the account is accessible, even if withdrawal will result in a

penalty, the accessible portion is used to calculate the actual asset income.

If the applicant/resident only has limited access to the account and must

return any portion used, it should be considered a loan and therefore, not

counted as an asset. However, the file must be documented to support

that only such portion is accessible. The following policy should be followed

when determining whether or not to include a 401k account as an asset:



• For persons under 59 ½ years old and with a 401k account that is

held by their current employer, include only amounts the family can

withdraw without retiring or terminating employment. Count the

whole amount less any penalties or transaction costs. Accessibility

to the account can be certified using a “401k Account Declaration.”

• For persons over 59 ½ years old and with a 401k account that is

held by their current employer, include only amounts the family can

withdraw without retiring or terminating employment. Count the

whole amount less any penalties or transaction costs. Accessibility

to the account must be third party verified using an “Investment

Account 401 IRA Other Verification.”

• For persons who are not currently employed OR the 401k account is

not held by their current employer, the 401k account must be

included as an asset.

When determining asset income from a 401k account, capital gains are

excluded. Capital gains are commonly reflected on a 401k account

statement as a “personal rate of return.” This percentage amount noted as

a personal rate of return or gain on investment should not be included as

asset income. Only true interest and/or dividends will be included as asset

income.

Include in annual income any retirement benefits received through periodic

payments. *Do not count any remaining amounts in the account as an

asset.

EXAMPLE 8.11.1:

Jed Dozier’s 401K account balance is $35,000. He is able to

terminate his participation in the retirement plan without quitting his

job, but if he did so he would lose a part of his employer’s

contribution and would pay a penalty fee. The total cash he could

withdraw, $18,000, is the amount that is counted as an asset.

8.12 DOCUMENTING IRAS, KEOGH OR OTHER RETIREMENT SAVINGS

ACCOUNTS



Retirement savings accounts must be counted toward the total household

income if periodic payments are being received. However, if the money is

held in a lump sum, it is an asset and the asset income must be

determined.

Money held in a retirement savings account, such as an IRA or Keogh

account, is verified by 1) determining the current value of the account, 2)

the penalties or expenses for converting the asset to cash, 3) and the

applicable interest rate or dividends earned.

When determining asset income from IRAs, Keogh or other retirement

savings accounts, capital gains are excluded. Capital gains are commonly

reflected on an account statement as a “personal rate of return.” This

percentage amount noted as a personal rate of return or gain on

investment should not be included as asset income. Only true interest

and/or dividends will be included as asset income.

Calculating IRAs, Keogh or other Retirement Savings Accounts

EXAMPLE 8.12.1:

$3,780 cash value of an IRA account with an interest rate of 2.5%

$3,780 x 2.5% = $94.20 income from asset

8.13 ANNUITIES

Annuity Facts and Terms

An annuity is a contract sold by an insurance company designed to provide

payments, usually to a retired person, at specified intervals. Fixed

annuities guarantee a certain payment amount, while variable annuities do

not, but have the potential for greater returns.



− A hybrid annuity (also called a combination annuity) combines the

features of a fixed annuity and a variable annuity.

− A deferred annuity is an annuity that delays income payments until the

holder chooses to receive them. An immediate annuity is one that

begins payments immediately upon purchase.

− A life annuity continues to pay out as long as the owner is alive. A

single-life annuity provides income benefits for only one person. A joint

life annuity is issued on two individuals, and payments continue in

whole or in part as long as either individual is alive.

Generally, a person who holds an annuity from which he or she is not yet

receiving payments will also be earning income. In most instances, a fixed

annuity will be earning interest at a specified fixed rate similar to interest

earned by a CD. A variable annuity will earn (or lose) based on market

fluctuations, as in a mutual fund.

Most annuities charge surrender or withdrawal fees. In addition, early

withdrawal usually results in tax penalties.

Depending on the type of annuity and the current status of the annuity, the

property staff will need to ask different questions of the verification source,

which will normally be the applicant or tenant’s insurance broker.

Income after the holder begins receiving payments.

When verifying an annuity, property staff should ask the verification source

whether the holder of the annuity has the right to withdraw the balance of

the annuity. For annuities without this right, the annuity is not treated as

an asset.

Generally, when the holder has begun receiving annuity payments, the

holder can no longer convert it to a lump sum of cash. In this situation, the

holder will receive regular payments from the annuity that will be treated

as regular income, and no calculations of income from assets will be made.

Calculations when an annuity is considered an asset



When an applicant or tenant has the option of withdrawing the balance in

an annuity, the annuity will be treated like any other asset. **It will be

necessary to determine the cash value of the annuity in addition to

determining the actual income earned.

In most instances, an annuity from which payments have not yet been

made is earning income on the balance in the annuity. A fixed annuity will

earn income at a fixed rate in the same manner that a CD earns income. A

variable annuity will earn (or lose) based on current market conditions, as

with a mutual fund.

The property staff will need to verify with the insurance agent or other

appropriate source:

− The right of the holder to withdraw the balance (even if penalties are

involved).

− The basis on which the annuity may be expected to grow during the

coming year.

− The surrender or early withdrawal penalty fee.

− The tax rate and the tax penalty that would apply if the family withdrew

the annuity.

The cash value will be the full value of the annuity, less the surrender (or

withdrawal) penalty, and less any taxes and tax penalties that would be

due.

The actual income is the balance in the annuity times the percentage

(either fixed or variable) at which the annuity is expected to grow over the

coming year. (This money will be reinvested into the annuity, but it is still

considered actual income.)

The imputed income from the asset is calculated only after the cash value

of all family assets has been determined. Imputed income from assets is

calculated on the total cash value of all family assets.

TENANT INCOME CERTIFICATION

9.0 TENANT INCOME CERTIFICATION (TIC)

After all income and asset information has been verified and

calculated, the Tenant Income Certification must be completed for all

apartments prior to move-in or at time of recertification.

A unit may not be counted as a low-income unit unless the household has

signed the lease and physically moved into the unit.

The Tenant Income Certification Form:

❖ is a legal document, which must be executed on or before the move-in

or recertification date.

❖ cannot be signed more than 5 days prior to the resident moving in,

and never after.

❖ must never be executed without obtaining ALL income/asset

verification at Move-in and recertification. A resident should NEVER

sign a TIC that has not been completed.

❖ must be signed by all adults 18 years of age or older including all

emancipated minors who will be residing in the apartment. All

occupants of the apartment must be shown on the Lease and TIC

and all occupants must sign page 1 of the TIC beside the same # as

they are shown in Part II.

Chapter

9



❖ must be signed by all adults (as above) and management

representative on the same date.

❖ is a legal document. The use of “white out” on any legal document

automatically voids the document.

Correction to the TIC

When making corrections on the certification, draw one line through the

incorrect information and insert the correct information above or below the

incorrect information. Corrections made on page 1 of the certification must

be initialed and dated by the applicant(s) and management’s agent.

Corrections made on page 2 of the certification must be initialed and dated

by management’s agent.

9.1 LINE-BY-LINE INSTRUCTIONS

This following instructions are for the National Council of State Housing Agencies

(NCSHA) best practices tenant income certification which is most commonly used

by the different state agencies. Please contact our office if your State Agency uses

a different TIC. This form is to be completed by the owner or an authorized

representative.

Part I - Development Data:

Check the appropriate box for certification type:

Initial Certification Move-in

Recertification First anniversary or annual recertification

Other If Other, designate the type of the certification (i.e., a unit

transfer or other state-required certification).

Enter the full date (month/day/year) for the following:



Effective Date Enter effective date of certification. For newly-constructed

developments the Initial Certification shall be the move-in

date. For the first anniversary and subsequent annual

recertification, this shall be no later than one year from

effective date of the previous certification.

Note: The effective date must be entered in order for the

Age as of Effective Date to calculate in Part II – Household

Composition.

Move-in Date Enter the date the household has or will take occupancy of

the unit.

Property Name Enter the name of the development.

County Enter the county in which the building is located.

BIN # If the development is a Housing Credit development, enter

the Building Identification Number (BIN) assigned to the

building (from IRS Form 8609). Leave blank if the

development is not a Housing Credit Development or the

development is a Housing Credit Development but the BIN #

has not yet been assigned.

Address Enter the address of the building.

Unit Number Enter the unit number.

# Bedrooms Enter the number of bedrooms in the unit.

Part II - Household Composition

Enter the information for Part II – Household Composition for all occupants of the

unit:



Relationship to State each occupant’s relationship to the head of household

Head of Household according to one of the following coded definitions:

H - Head of Household S - Spouse

A - Adult co-tenant O - Other family member

C - Child U - Unborn Child

L - Live-in caretaker F - Foster child(ren)/adult(s)

N - None of the above

There must be only one Head of Household; there shall be

only one spouse; list the same person as Head on

subsequent Recertifications as long as that person is a

member of the household. An unborn child appears on the

TIC only if its presence is necessary to qualify the household.

Date of Birth Enter the full date of birth (month/day/year) of the

applicable household member.

Age as of The age that the occupant will be on the date that the

current Effective Date certification is effective. The age of an

unborn child or a child who will not yet have reached the

first birthday on the date that the current certification is

effective shall be considered zero.

Note: This is a formulated field. The Effective Date must

be entered in the TIC Heading in order for the age to

calculate.

Full Time Student Enter Y for Yes or N for No to indicate if the applicable

(Y or N) household member is or will be a full time student. See

section 2.8 for full-time student definition.

If there are more than 7occupants, use an additional sheet of paper to list the

remaining household members and attach it to the certification.



Part III - Annual Income

Enter the information for Part III – Annual Income:

See HUD Handbook 4350.3 for complete instructions on verifying and calculating

income, including acceptable forms of verification.

From third party verification forms obtained from each income source, enter the

gross amount anticipated to be received for the twelve months from the effective

date of the (re)certification. Complete a separate line for each income-earning

member. List the respective household member number from Part II.

Column (A) Exact amount of the annualized gross wages, salaries, tips,

commissions, bonuses, and other income from employment;

distributed profits and/or net income from a business.

Column (B) Exact amount of annualized Social Security, Supplemental Security

Income, pensions, military retirement, etc., payments.

Column (C) Exact amount of annualized income received from public assistance

(i.e., TANF, general assistance, disability, etc.).

Column (D) Exact amount of annualized alimony, child support, and

unemployment benefit payments, or any other income regularly

received by the household.

Column (E) Exact amount of the sum of columns (A) through (D), above.

Part IV - Income from Assets

Enter the information for Part IV – Income from Assets:

See HUD Handbook 4350.3 for complete instructions on verifying and calculating

income from assets, including acceptable forms of verification.



From the third party verification forms obtained from each asset source, list the

gross amount anticipated to be received during the twelve months from the

effective date of the certification. List the respective household member number

from Part II and complete a separate line for each member.

Enter for each household member:

Column (F) List the type of asset (i.e., checking account, savings account, etc.)

Column (G) Select the asset ownership status for each asset/asset type entered

on the TIC:

C - Household currently owns or holds the asset, or

I - Household disposed of the asset for less than fair market value

within two years prior to the effective date of certification.

Column (H) Enter the cash value of the respective asset.

Column (I) Enter the anticipated annual income from the asset (i.e., savings

account balance multiplied by the annual interest rate).

TOTALS Add the total of Column (H) and Column (I), respectively.

If the total in Column (H) is greater than $5,000 you must do an imputed

calculation of asset income. Enter the Total Cash Value, multiply by the current

passbook rate and enter the amount in (J), Imputed Income.

Column (K) Enter the greater of the total in Column (I) or (J).

(L) Total Annual Household Income From all Sources Add (E) and (K) and

enter the total

HOUSEHOLD CERTIFICATION AND SIGNATURES

After all verifications of income and/or assets have been received and calculated,

each household member age 18 or older must sign and date the Tenant Income



Certification. For move-in, it is recommended that the Tenant Income Certification

be signed no earlier than 5 days prior to the effective date of the certification.

Part V- Determination of Income Eligibility

Total Annual Household Income Enter the number from item (L)

from all sources

Current Income Limit per Family Enter the Current Maximum Move-in Income

Size Limit for the household size.

Household income at move-in Fill this in for recertifications, only. Enter the

Household size at move-in move-in certification. On the adjacent line,

enter the number of household members from

the move-in certification.

Household meets Income Check the appropriate box for the income

Restriction at restriction that the household meets according

to what is required by the set-asides(s) for

the project.

Current Income Limit x 140% For recertifications only. Multiply the Current

Maximum Move-in Income Limit by 140% and

enter the total. Below, indicate whether the

household income exceeds that total. If the

Gross Annual Income at recertification is

greater than 140% of the current income

limit, then the available unit rule must be

followed.

Part VI- Rent

Tenant paid Rent Enter the amount the tenant pays toward rent

(not including rent assistance payments such

as Section 8)

Rent Assistance Enter the amount of rent assistance, if any.



Utility Allowance Enter the utility allowance. If the owner pays

all utilities, enter zero.

Other non-optional charges Enter the amount of non-optional charges,

such as mandatory garage rent, storage

lockers, charges for services provided by the

development, etc.

Gross Rent for Unit Enter the total of Tenant Paid Rent plus Utility

Allowance and other non-optional charges.

Maximum Rent Limit for this unit Enter the maximum allowable gross rent for

the unit.

Unit Meets Rent Restriction at Check the appropriate rent restriction that the

unit meets according to what is required by

the set-asides(s) for the project.

Part VII - Student Status

If all household members are full time* students, check “yes”. If at least one

household member is not a full time student, check “no”.

If “yes” is checked, the appropriate exemption must be listed in the box to the

right. If none of the exemptions apply, the household is ineligible to rent the unit.

*Full time is determined by the school the student attends.

Part VIII – Program Type

Mark the program(s) for which this household’s unit will be counted toward the

Property’s occupancy requirements. Under each program marked, indicate the

household’s income status as established by this certification/recertification. If the

property does not participate in the HOME, Tax-Exempt, AHDP or other housing

program, leave those sections blank.

Tax Credit Mark the appropriate box indicating the household’s designation. If

the property does not have an occupancy requirements in addition



to those required by Section 42, mark the box that corresponds to

the property’s minimum set aside. Upon re-certification, if the

household’s income exceeds 140% of the income limitation

imposed by Section 42, mark “OI”.

HOME If the property participates in the HOME program and the unit this

household will occupy will count towards the HOME program set

asides, mark the appropriate box indicating the household’s

designation.

Tax Exempt If the property participates in the Tax Exempt Bond program, mark

the appropriate box indicating the household’s designation.

AHDP If the property participates in the AHDP program, and this

household’s unit will count towards the set aside requirements,

select the appropriate box to indicate if the household is a VLI, LI,

or OI (at re-certification) household.

Other If the property participates in any other affordable housing

program, complete the information as appropriate.

SIGNATURE OF OWNER/REPRESENTATIVE

It is the responsibility of the owner’s representative to sign and date this document

immediately following execution by the household members.

The responsibility of documenting and determining eligibility (including completing

and signing the Tenant Income Certification form) and ensuring such

documentation is kept in the resident file is extremely important and should be

conducted by someone well trained in program compliance.



CHANGE IN STATUS AFTER MOVE IN

10.0 CHANGES IN FAMILY SIZE

Changes in the size of an existing household after the initial tenant income

certification must also be addressed.

10.1 FAMILY SIZE DECREASE

An original household member must be part of the household at all

times.

Original Household No Longer Occupied Unit

A household may continue to add or delete members as long as at least

one member of the original household continues to live in the unit. Once all

the original tenants have moved out of the unit, the remaining tenants

must be certified as a new income-qualified household unless:

1. For mixed-used properties, the newly created household was

income qualified, or the remaining tenants were independently

income qualified at the time they moved into the unit.

2. If all units in the building are 100% LIHTC, and the remaining

tenants were independently income qualified at the time they

moved into the unit.

Chapter

10



NOTE 10.1.1: If 1 or 2 above are not applicable, the remaining household’s

eligibility must be determined based on circumstances and

income limits at the time the original household member

moved out. If they do not qualify, they will have to move-

out as soon as possible or the unit will be noncompliant.

EXAMPLE 10.1.1: Remaining Tenant Must be Income Qualified

Michael, an income-qualified individual, moved into a two

bedroom LIHTC unit in a mixed-used project on May 20,

2006. Jason joined the household in October of 2007. At

that time, Jason’s income was below the limit for a one

person household. In January of 2008, Michael moved out.

It is not necessary for Jason to be certified as a new tenant.

However, if Jason’s income exceeded the income limit for a

one-person household in October 2007, then Jason must be

certified as an income-qualified tenant when Michael moves

out.

10.2 FAMILY SIZE INCREASE

After move-in, the number of occupants in a household may change;

thus, the income of the household may be affected.

Changes in household size are permissible provided they could not

reasonably be anticipated at the time of the application, move-in, and

execution of the Tenant Income Certification and are handled differently

depending on the programs on a property. Any changes in household size

are a question of “intent” at the time of the certification. It is the

responsibility of the Leasing Staff to assess the “intent” of the

applicant and document the file accordingly.

Properties with Home and MMRB

If during an Initial Certification (IC), another person wishes to join the

household, a new TIC must be completed and will only be approved if

household qualifies as an eligible household for income limit purposes.



Interim Certifications (IR) are no longer required to report changes in

household income or status with regard to roommate drops. Additions to

the household must still be reported with an Interim Certification (IR). All

changes should be reflected at time of Annual Recertification (AR).

Properties with LIHTC only

If during an initial certification (IC), another person wishes to join the

household, a new TIC must be completed and will only be approved if

household qualifies as an eligible household. This is not limited to just the

income qualifications, but all other screening requirements as well.

However, if application for increase in household’s size is made 31 days (or

following your state agencies requirements if more stringent) after effective

date of the IC, approval may be issued as long as current procedure for

adding a resident are followed, and it is clear that there was no intent for

future household change at time of IC. For example, if a household

member got married 31 days after move-in, it would have to be

documented that there was no intent for this change at time of IC.

Mixed-Used Properties (Conventional (Market) and LIHTC)

For mixed-use projects, the new tenant’s income is added to the income

disclosed on the existing household’s most recent tenant income

certification. The household continues to be income-qualified, and the

income of the new member is taken into consideration with the income of

the existing household for purposes of the Available Unit Rule.

10.3 UNIT TRANSFERS

Unit transfers are governed by the different affordable housing programs at

your property. Improperly transferring a unit could result in a loss of

credits.

Therefore, in order to ensure compliance with your property’s applicable

affordable housing program all unit transfers, regardless of program, must

be approved by management and/or Preferred Compliance Solutions before

physically making the transfer.

RESIDENT FILES

11.0 RESIDENT FILES

Your property’s program regulations require that the resident’s files

be maintained for a period of time. Our policy and procedure for

setting-up and storing files is as follow:

Original File (FOF)

The original file (the file for the first household that certified the unit as an

eligible unit) has to be kept forever (until the end of time). It is very

important that we keep these files in a safe place at all times. Including

but not limited to storing in a fireproof file cabinet.

The file folder for your original file should be a different color than the file

folder used for each occupant following the original.

Once you have established a FOF file, it must be sent to management.

Once the original resident moves out, the FOF file must be placed into a

fireproof cabinet designated for ALL move-out first occupant files.

Other Resident Files

The file folder for occupants following the original occupant must be a

different color than the original occupant’s file (FOF). Once you place all

documents in the file, it must be placed into a filing cabinet on-site in a safe

location.

Chapter

11



Once the “other resident” moves out and move-out procedures have been

completed by manager, gather all documentation including a copy of the

deposit disposition and all other information in the maintenance file.

Maintenance file must be stored in a safe location for future reference.

11.1 CORRESPONDANCE FILE SET-UP

In addition to the resident (compliance file) you should also have a File that

will include the following:

❖ Resident Correspondence

❖ Full Copy of the Credit Report(s)

❖ Welcome Card

❖ Pre-qualifying information

❖ Resident Correspondence

❖ Resident Notices

❖ Unit Information

❖ Maintenance Requests

❖ Applicant’s compliance approval sheet

11.2 FILE DIVIDERS

In order to distinguish the initial certification of a household from the

annual recertifications it is required that a color paper be use as a divider

and be placed in the file on top of each certification. Color paper must be

placed on top of each side of the file folder of each initial certification.

Different color paper than what is used at time of initial certification must

be used for annual recertfications. Same color patterns should be followed

on the lease, and other side and sections of the file folder.

11.3 COMPLIANCE FILE SET-UP

Resident file should be arranged so that information is easy to locate. The

following page shows recommended order in which resident files can be set

up for ease in auditing and locating information.

11.4 RECOMMENDED FILE SET-UP



11.5 EMPLOYEE RESIDENT FILE

Management must screen, review, and approve all employees wanting to move

into one of our communities; this applies to those who will be moving into an

Exempt/Non-Certified unit as well as Certified units.

Exempt/Non-Certified Employee Unit

In order for a unit to be considered an Exempt/Non-Certified Employee Unit, it

must be pre-approved by the State Agency. Requests can only, and must, be

made by management prior to the person moving in. In order for management

to request pre-approval on a Courtesy Officer unit, copies of a police grid for the

last six (6) months and job description must be sent to compliance.

Always remember, that approval comes from the State Agency and it cannot be

requested and received in one or two days, it normally takes a week. Therefore,

requests must be made at least five working days before anticipated move in

date.

Management will notify manager of unit approval. Only after receiving this

notification, he/she will allow the employee’s move-in. Reports will have to be

updated to show unit as Exempt (EM).

Employee Certified Unit

In order for an employee unit to be considered an employee certified unit, the

household must meet all credit, criminal, minimum and maximum income

guidelines. Please note that these employees are considered applicants and per

Fair Housing Law cannot be treated any differently than a regular applicant. The

employee applicant’s household must complete an application, sign all applicable

addendums or affidavits, and provide verifications of income and identifications

just like any other applicant.

Taking and Processing Employee Applicant Household’s Application

As mentioned in Chapter 2.2 all household members must be listed on the

application(s), and all applicants 18 years and older must sign. In order to keep

the privacy of the employee applicant’s household, the manager must take and

process the application.



Requesting Verification of Income

As mentioned in Chapter 3.0, all of the household’s income and assets must be

verified and documented using 3rd party verification. Property must receive all

applicable employment verification forms prior to sending application for

approval. All rent concessions must be included as household’s income and

documented in the verification of income form completed by the employer.

Files submitted where information is missing will not be reviewed.

Final Approval

Employee applicants must not move in, unless approved by management.

If the application is approved, the manager only, will then fully complete a

Tenant Income Certification (TIC) using instructions found in Chapter 9.1.

Employee Resident Files

The original file SHOULD remain in a locked drawer under the manager’s

supervision.

Employee Certified Unit Annual Recertification

Just like at time of move-in when getting close to time for AR, this household

cannot be treated any differently than any other household. Notices must be

sent and AR fully completed no later than the first of the month that the

household was initially certified.

All household members, as applicable, must also complete the AR application,

addendums, and affidavits. In addition, income must be verified using

verification of income form completed by the employer’s HR Department for

the employee and documented for all other household members as required per

Chapter 4.0. All rent concessions must be included as household’s income and

documented in the verification of income form completed by the employer.

RECORD KEEPING

12.0 REPORTING REQUIREMENTS

As mentioned in section 1.1, your community is required to prove

compliance with program requirements at all times. The state and its

monitoring agencies have designed numerous reports that show the

occupancy of your property, as well as that each household residing at your

community is qualified. These reports may also be required by the owners,

syndicators and/or investors depending upon your individual property.

Reports are completed/reviewed by the compliance staff. The compliance

staff will notify property staff of corrections needed in order to complete the

report and will send to agencies once all requested corrections have been

completed.

NOTE 12.0.1: All properties must send their rent roll at the beginning of every

month so that we can check to make sure all move-ins and

recertification’s are being approved by management. If we find any

files that were not approved, then a report will be sent to your

regional.

12.1 PROGRAM REPORT

This report is required by all Florida properties that have any Housing

Credit units in their community. It is required that the activity during the

report period be reported by including a copy of the Tenant Income

Certification (TIC).

Chapter

12



Reports are completed/reviewed by the compliance staff. If the report is

completed by the Preferred’s compliance staff, property staff must send

copies of all TICs completed during the report period. Report periods are

from the first of the month to the last day of the same month.

The compliance staff will notify property staff of corrections needed in order

to complete the report and will send to agencies once all requested

corrections have been completed. Reports are due to the state agency by a

specific date. Not reporting on time is non-compliance.

Compliance Reporting Property Due Dates

Due Date Copies of TIC Required

16th each month TICs Completed 01-15 of the month

2nd each month TICs Completed 16-to last day of the previous month

12.2 NEXT AVAILABLE UNIT AND VACANT UNIT RULE

Regulations state that properties “are required to maintain records

identifying vacant low-income units and information that shows, when, and

to whom, the next available unit was rented.” This is why a record of the

Next Available Unit (NAU) and Vacant Unit Rule (VUR) documentation must

be maintained on an ongoing basis for move-outs and for households

exceeding 140 percent of the applicable income limit at recertification, as

well as the next available unit rented. Copies of this log can be requested

by contacting management.

This is applicable only to mixed used properties, in other words,

properties that are not 100% set-aside and have noncertified/market

units.

Records of the NAU should be kept on a building-by-building basis and

maintained at the properties. This is necessary in order to document that



the next available unit in the building of comparable or smaller size is

rented to qualified lower-income tenants in the following situations:

a. In the event that a lower-income tenant’s income increases to a

level greater than 140 percent of the applicable income limit at

annual or interim certification, the tenant may continue to be

counted towards satisfaction of the lower-income requirements as

long as the unit continues to be rent-restricted and the next

available unit in the building of comparable or smaller size is rented

to a qualified lower-income tenant.

b. Vacant units whose most recent tenants were certified as lower

income and who occupied the unit at least 31 days may continue to

count toward the federal lower-income requirements as long as the

next unit in the building of comparable or smaller size is rented to a

qualified lower-income tenant.

REASONABLE ATTEMPTS

As long as reasonable attempts are being made to rent to qualified low-

income households before renting units to nonqualifying tenants, vacant

LIHTC units will continue to be included as qualified low-income units for

purposes of determining the minimum set-aside and calculating the

applicable fraction. What constitutes reasonable attempts to rent a vacant

unit is based on facts and circumstances and may differ from project to

project depending on factors such as the size and location of the project,

tenant turnover rates, and market conditions. Also, the different advertising

methods that are accessible to owners and prospective tenants would affect

what would be considered reasonable.

A state agency’s responsibility for reviewing the owner’s compliance with

the Vacant Unit Rule include a review of the owner’s advertising practices;

i.e., a project will be considered in compliance when the owner makes

reasonable efforts to rent vacant units to qualified low income households

before renting any vacant units to nonqualifying tenants.

EXAMPLE 12.2.0: Renting Market Rate Unit Before Low-Income Units



Twenty market rate units and ten low-income units

previously occupied by income-qualified tenants in a 200-

unit mixed-use housing project are vacant. None of the low-

income units are over-income units. The owner displayed a

banner and for rent signs at the entrance to the project,

placed classified advertisements in two local newspapers,

and contacted prospective low-income tenants on a waiting

list for the project and on a local public housing authority’s

list of section 8 voucher holders. These are customary

advertising methods for apartment vacancies in the area

where the project is located. Subsequent to the low-income

unit vacancies, a market rate unit of comparable size to the

low-income units became vacant. The owner rents five

market rate units before any of the ten vacant low-income

units.

The owner is in compliance with the Vacant Unit Rule. The

owner has used reasonable methods of advertising an

apartment vacancy in the area of the project before renting

a market rate unit. In addition, the Available Unit Rule is not

violated by renting the market rate unit because there are no

over-income units in the building.

A unit is not available for purposes of the vacant unit rule when the unit is

no longer available to rent due to contractual arrangements that are

binding under local law, such as a reservation entered into between a

building owner and a prospective tenant.

EXAMPLE 12.2.1: Low-Income Unit Not Available

A building has 10 units, consisting of 7 low-income units

(none were over-income units) and 3 market rate units. All

units in the building were occupied except for one market

rate unit.



A low-income unit became vacant on March 15, 2004, so the

owner started advertising to rent the unit to an income-

qualified tenant. On March 29, 2004, the owner agreed to

rent the unit to an income qualified household and the

parties signed a reservation binding on both parties. The

owner ceased advertising efforts for the low-income unit.

The vacant market rate unit was rented on April 15, 2004.

The low-income household signed their lease on April 30,

2004 and moved in on May 1, 2004.

Since a reservation had been signed for the vacant low-

income unit at the time the market unit was rented, the low-

income unit was not available for rent and, therefore, the

owner no longer needed to make reasonable efforts to rent

the low-income unit.

Noncompliance occurs when the owner does not make reasonable attempts

to rent vacant low-income units and rents units to nonqualifying tenants. If

the Vacant Unit Rule is violated, all vacant units previously occupied by

qualified households lose their low-income status and are not considered

qualified units. The date of noncompliance is the date the first low-income

tenant moved out of the now vacant units.

EXAMPLE 12.2.2: Owner Stopped Making Reasonable Efforts to Rent Low-

Income Housing Units

The owner of a mixed-use LIHC project with 100 units

stopped advertising efforts to attract low-income tenants on

January 15, 2004. 15 of the 25 market rate units are vacant

and 25 of the 75 low-income units are vacant at the time the

state agency conducts a tenant file review. The LIHC units

were vacated between September 25, 2003 and March 31,

2004.

The project is out of compliance on September 25, 2003,

when the first currently vacant low-income unit was vacated.



12.3 LINE-BY-LINE INSTRUCTIONS (Preferred’s NAU Log)

This log is to be completed on a Building-by-Building basis within each

property. Each individual Building Identification Number (BIN) should have

a separate page.

Complete the Project Name, LIHTC Project Number, and the BIN Number,

for each page utilized and then show the following information for each

building for the entire compliance period (see chapter 1) of the property:

1. Unit Number:

Enter the unit number only. Do not include BIN Number here.

2. Unit Size:

a. Number of Bedrooms:

Enter the number of bedrooms of the NAU rented (i.e. 1, 2, 3.)

b. Square Feet:

Enter the total square footage of the NAU rented.

3. Tenant Name:

Enter the tenant name as it appears on the Recap and/or Program

Report. Include both first and last name if possible.

4. Unit Activity

Enter applicable activity:

Move-out date if unit was vacated

Effective date if household income exceeded 140% of the

AMI

5. Unit Number (NAU rented):

Enter the unit number only. Do not include BIN Number here.

6. Unit Size (of the NAU rented):

a. Number of Bedrooms:

Enter the number of bedrooms of the NAU rented (i.e. 1, 2, 3.)

b. Square Feet:

Enter the total square footage of the NAU rented.

7. Tenant Name (of the NAU rented):

Enter the tenant name as it appears on the Recap and/or Program

Report. Include both first and last name if possible.

8. Move-In Date (NAU rented only):

Enter move-in date of household that certified the NAU rented.



12.4 Special Needs/Link Tracking

Regulation states that properties with Special needs/Link requirements are

required to maintain records identifying vacant low-income units and information

that show referral, when, and to whom, the next available unit was rented.

The Owner (or the Management under a management agreement with the Owner)

shall be responsible for the following:

a) Holding Link units available for Special Needs Households sent to

property by Referral Agency. Link Unit vacancies must be held open for

referrals for, at least, a period of 30 calendar days starting from the date

the unit is vacant and ready to lease. Please note that the sites specific

regulatory agreements may state a different requirement. The Owner must

notify the Referral Agency(s) that the Link Unit is available on or before the

unit becomes vacant and ready to lease.

i. If a Special Needs Household referral is denied, Owner must notify

the Referral Agency when that denial is made and continue to hold

the Link unit available to allow the Referral Agency to make referrals

within the 30 calendar day-hold period.

b) Notifying the Referral Agency as to the disposition of applications for Link

Units and consider requests for Reasonable Accommodations for those not

accepted.

c) Working with Referral Agency to coordinate the first contact with the

Special Needs Working with Referral Agency to coordinate the first contact

with the Special Needs Household and to initiate the application process;

d) Designating a point person on-site at the Development to send notice of

unit availability to the designated point person from the Referral Agency

and to work with the Referral Agency during the leasing and occupancy

period for all referred Special Needs Household residents.

i. Employ and maintain a communications plan between

Management and Referral Agency that will accommodate staff

turnover and assure continuing linkages for the duration of the

compliance period.

e) Collaborating with the Referral Agency as appropriate and applicable, to

address the household’s needs for assistance at application;



f) Notifying the Referral Agency regarding anticipated and actual vacancies

in Link Units.

g) Notifying the Referral Agency, in a timely manner, of issues or concerns

that may adversely affect the tenancy of the household;

h) Contacting Referral Agency if there are any issues or concerns that have

not been satisfactorily resolved with the household.

i) Informing the Referral Agency about the property and unit characteristics

and features, rents and related costs, household income limits or

restrictions, resident rights and responsibilities, the resident application

process, as well as the information and documents each household will

need when applying for the reserved unit.

j) Developing and maintaining a written policy and procedures information

document to be given to the Referral Agency that describes the procedures

to be used to help referred households apply for, get accepted, and

maintain tenancy in a Link Unit. Owner shall inform the Referral Agency of

any changes in these procedures. Owner shall include a section on

Reasonable Accommodation under the federal Fair Housing Act in this

document and the property’s process for applying for a Reasonable

Accommodation.

LEASE AGREEMENT VS. ANNUAL

RECERTIFICATION

13.0 LEASE AGREEMENT

Residential units must be for use by the general public and all of the units

in a project must be used on a nontransient basis. Generally, a unit is

considered to be used on a nontransient basis if the initial lease term is six

months or greater.

A unit is in compliance with this requirement if the initial lease term for

each tenant is at least six months. The presence of a six month initial lease

is the customary evidence used to document the property and tenant’s

intent to enter into a nontransient rental agreement.

EXAMPLE 13.0.1: Tenant Vacates Before End of the Lease

A couple vacates their unit before fulfilling their initial six-month lease

because the husband accepted a job in another state. Because the couple

was subject to a valid six-month lease and vacated the unit for a valid

reason, the low-income unit was not used on a transient basis.

13.1 LEASE AGREEMENT VS. ANNUAL RECERTIFICATION (AR)

A unit is not considered a program qualified unit until the qualified resident

actually takes physical occupancy. The Internal Revenue Code does not

define physical occupancy, but for management, a unit is considered

physically occupied when the residents have been given legal access to the

Chapter

13



unit. This should not be confused with entering into a lease agreement.

“Legal access” means the applicant has been given the keys to a unit that is

legally available for occupancy. However, please note that at no time a

resident should be given the keys to a unit until all residents 18 years of

age and older have signed the TIC, lease, and all other applicable

addendums.

The move-in date is used as the initial certification effective date. In order

for a unit to continue to be counted as a lower-income unit, the household

must annually recertify eligibility no later than twelve months after the

latest certification. However, some states require these be completed by

the 1st day of the month that the household initially certified.

Normally a lease ending date will be close to the annual recertification due

date. However, the AR should not be confused with the lease renewal.

Note, if the resident does not renew the lease, it may automatically renew

itself on a month-to-month basis. However, if the resident does not

recertify by the due date, the unit will be in non-compliance and cannot be

counted towards your property set-aside. To avoid this, it is the policy of

management that AR notices be sent to the residents no later than the date

shown on the “AR NOTICE SCHEDULE” (see section 13.3). In addition, that

all residents recertify no later than 30 days prior to AR due date or resident

will be served with a non-renewal notice.

13.2 ANNUAL RECERTIFICATION (AR)

After move-in, residents must be recertified annually. Although, not

required to meet income guidelines at time of AR, the “resident” is

considered an applicant for continual residency. Continual residency is

determined based on the household’s current eligibility. Resident must

complete a questionnaire and provide supporting documentation no

different than what was done at time of initial certification.

Regulations for documenting eligibility at time of AR are the same, with no

exceptions, as those for the initial certification. There are no special

considerations in documenting household eligibility at time of AR, the

process is the same as IC.



Even if the residents are moving out in the month recertification is

due, they must recertify if they will occupy the unit on or after the

first day of the month of their move-in date.

The key to completing annual recertifications is to develop and maintain an

accurate tracking system of the units due for recertification. Always use

the household move-in date not the lease expiration date to properly

develop your tracking system. Notices should be sent to residents

beginning 120 days before the recertification due date. Staff must follow-

up on these notices to ensure the households are recertified on time.

In section 13.2 is a required schedule of progressive recertification notices

for reminding residents that recertifications are due. Although this

schedule sets the minimum amount of notices to be given to the residents,

communities may use a more stringent schedule depending on the

individual community.

AR EXEMPTION

Although the IRS does not require 100% LIHTC properties to complete

annual recertification of the household’s income, some properties that do

not have HOME units, may qualify to not be required to complete annual

recertification of households’ income or to complete only the first year

recertification. Please note that in most cases, properties are not exempt

from having to determine households’ student eligibility.

Prior to adapting a no recertification procedure, you must have compliance

approval and written policies and procedures to follow.

13.3 AR NOTICE SCHEDULE

The following is an AR schedule that has been proven to eliminate the so

often referred to as “Late AR Syndrome.” Clients of Preferred Compliance

Solutions have stated they have been able to completely eliminate late

recertifications when implementing this schedule consistently.



120 days prior to Recertification due date 1st Notice to recertify

90 days prior to Recertification due date 2nd Notice to recertify

60 days prior to Recertification due date 3rd Notice to recertify

45 days prior to Recertification due date Final recertification notice

40 days prior to recertification due date 7 days to cure non-compliance

30 days prior to Recertification due date Non-Renewal Notice

RESIDENT PROGRAMS (TENANT SERVICES)

14.0 RESIDENT PROGRAMS

During the funding application process the owner of your community

agreed to provide some if not all of the following resident programs (tenant

services):

❖ Welfare to Work or Self Sufficiency Program

❖ Home Ownership Incentives to residents

❖ Educational Courses

❖ Health Screening

❖ After-school Program for Children

❖ First Time Homebuyers Seminars

❖ Literacy Training

❖ Job Training

❖ Resident Activities

❖ Private Transportation

❖ Resident Assurance Checklist Program

❖ Nutrition Classes

❖ Financial Counseling

❖ English as a Second Language

❖ Computer Lab

❖ Resident Assistance Referral Program

❖ Swimming Lessons

❖ Life Safety Training

❖ Mentoring

❖ Others

Chapter

14



14.1 FREQUENCY

Applicable resident programs/tenant services required to be provided in

your community are listed in the regulatory agreements. Frequency

required to provide programs/services listed in section 14.0 will vary from

property to property.

In addition, your community has a “Resident Programs” schedule that

details requirements and frequency in which the programs/services are

required to be offered.

14.2 RECORD KEEPING

The “Resident Services Log” and “Resident Programs” binder must be

updated as services are provided. The “Resident Program” binder must

never be destroyed or discarded. The binder must be stored in a safe

location. It must be stored based on the year services were provided.

Documentation entered in the log and stored in the binder must include the

following:

1. Date of service

2. Type of Service

3. Name of entity that provided the service

4. Detailed information of the person and entity that provided the

service. Preferably a business card.

5. Copies of ways in which residents were notified (flyers) of the

location, date, time, and providers name of programs/services

provided in your community.

6. In addition, it is required that sign-in logs be completed for each

program/service and stored in the “Resident Programs” binder.



7. There is NO need to keep pictures of the activity in the binder.

These are not required nor needed.

14.3 COMPLIANCE INVOLVEMENT

The compliance staff will monitor that your community is providing

programs/services as required per the LURA and as instructed in the

“Resident Programs” binder. Management may request at any time proof

of services completed. Proof must be in the form of flyers, sign-in logs and

provider’s business cards and literature.



FORMS

15.0 COMPLIANCE FORMS

Preferred Compliance Solutions will continually work with management to

custom create and update compliance forms. These will increase the

marketability of the properties and also assist properties when determining

households’ eligibility to reside in an affordable housing unit.

Users of NextGen eFile have access to all our recommended compliance

forms. Many use these forms when determining households’ eligibility.

Because compliance regulations and best practices change from day to day

forms are updated regularly. In order to ensure that properties are using

the latest forms, it is management’s policy that these be printed directly

and not at any time copied.

Chapter

15



MAINTENANCE STAFF COMPLIANCE POLICIES AND

PROCEDURES

16.0 MAINTENANCE STAFF AND STATE AUDITS

The following policies and procedures have been created to assist all

maintenance staff responsible for preparing properties for a state physical

inspection and representing management during the date of such inspection.

Guidance to state agencies requires that noncompliance finding corrected by the

owner after notification of a state inspection be reported by issuing IRS Form

8823. All findings on the date of the inspection, regardless to their corrected

status at the completion of the inspection, must be reported as noncompliance.

Therefore, property staff must do all they can to identify and correct any

noncompliance prior to receiving notification of a state audit and/or inspection.

State agencies must inspect LIHTC properties to ensure that LIHTC buildings

and units are suitable for occupancy. During their visit they must assess

whether low-income housing tax credit properties are in safe, decent, sanitary

condition and in good repair, according to either the Uniform Physical Conditions

Standards (UPCS) established by HUD, or local inspection standards. See

section 16.2 for detailed description of major areas outlined in the UPCS.

A building is in compliance if, during an inspection of the building, it meets the

requirements of the UPCS or local code.

Chapter

16



16.1 PREPARING FOR A PHYSICAL INSPECTION

Before

Audits are normally scheduled in the same month year after year. As the

month the property was last audited approaches, but always before

receiving notification of a state audit to be conducted by a monitoring

agency and/or the state, under the direction of the property manager the

maintenance staff should:

Property Walk - Walk the property and create a list of all safety or health

hazards to the residents. This list should include, but not be limited to:

❖ Exposed electrical wiring and/or equipment

❖ Broken and/or missing emergency lighting and/or signs

❖ Broken windows and/or missing window screens

❖ Broken or missing window coverings (blinds) regardless to whether or

not the unit will be inspected

❖ Chipped paint on building exterior including rails

❖ Loose staircases and hand rails, including exposed rebar and stair tread

❖ Dumpsters and compactor areas free of garbage and/or debris

❖ Unused and unlicensed vehicles

❖ Oil stains in need of cleaning and treatment

❖ Vandalized buildings, equipment, and amenities with graffiti or other

type of damage

❖ Missing or expired fire extinguishers in common areas

NOTE 16.1.1: Guidance to state agencies requires that noncompliance finding corrected

by the owner after notification of a state inspection be reported by

issuing IRS Form 8823. All findings, regardless of the corrected status at

the end of the inspection must be reported.

Unit Walk – Walk all units and create a list of all safety or health hazards

to the residents. This list should include, but not be limited to:

❖ All rooms being accessible

❖ Broken and/or missing smoke detector(s)

❖ Broken and/or missing electrical and cable cover(s)

❖ Broken and/or exposed lighting fixture(s)



❖ Inoperable stove exhaust fan (hood) and light

❖ Inoperable stove elements (including oven)

❖ Inoperable garbage disposal

❖ Broken refrigerator gaskets (door seals)

❖ Burned counter top

❖ Leaking faucets (including those in the bathroom(s))

❖ Broken vanity mirror(s)

❖ Broken and/or loose toilet and toilet seat(s)

❖ Broken and/or missing towel bar(s)

❖ Missing water stopper(s)

❖ Broken and/or unplugged bathroom exhaust fan

❖ Blocked windows and doors

❖ Broken windows and/or missing window screens

❖ Broken or missing window coverings (blinds)

❖ Broken carpet

❖ Excess storage in living areas

❖ Water heater closet used as storage

❖ Unsanitary living conditions

❖ Missing or expired fire extinguishers

❖ Paint on the sprinkler head

❖ Broken or inoperable GFCI

❖ Infestations or signs of an infestation

Vacant Unit Walk – Walk all vacant units by no later than the day before

the state physical inspection.

30 Days or more - All units that have been vacant for more than 30 days

must be rent ready by no later than the day before the state physical

inspection.

30 Days or less All units that have been vacant for less than 30 days must

meet safety and hazard standards based on an inspection no different than

of an occupied unit. Particularly, all appliances must be present in the

vacant unit.

State agencies are instructed to consider as inhabitable, and are

required to report as noncompliant using IRS Form 8823, all units

that have been vacant for more than 30 days (may be different in



your state) that are not ready and suitable for occupancy on the date

of inspection.

Action List

Once the above reference list is created, and under the direction of the

property manager the maintenance supervisor should:

1. Create punch out list and when applicable, work orders to correct and/or

repair all findings from each walk mentioned above

2. Correct and/or repair all findings by no later than the day before the

state physical inspection

3. Report to the property manager once all findings have been corrected

and/or repaired

At least 24 hours prior to the date of the state inspection all tenants should

be notified that their unit may be selected as part of the physical inspection.

During

Upon arrival, the person completing the state audit and physical

inspection will provide management a list of the units to be inspected.

Immediately upon receiving this list, maintenance must:

❖ Pull the key for each one of the selected units

❖ Prepare a box to include smoke detectors and batteries, screw drivers,

electrical covers, garbage disposal wrench, and other tools or replacements

that may be needed

❖ Have available a stick or pole to test smoke detectors

❖ Immediately send someone from the maintenance team, prior to

the inspector going, to quickly inspect all selected units to ensure all

of the following are in working order and free from major damages or

defects:

▪ Smoke detectors

▪ Stove elements

▪ Garbage disposal

▪ Lights



There is no excuse as to why any of the above would be found

inoperable when the inspector arrives into the unit.

Maintenance must work with the property manager in the event that

anything is found inoperable, and these must do whatever it takes to

ensure issues are corrected before the inspector arrived in the unit.

❖ Maintenance staff must assist during the physical inspection. This shall

include, but not be limited to:

▪ Opening and closing entrance doors

▪ Opening all interior doors

▪ Smoke detector testing

▪ Turning on and off stove elements

▪ Testing garbage disposal

▪ Turning on and off lights

❖ All physical deficiencies should be corrected and/or repaired immediately

upon finding

❖ All communication with the auditor will be made by the property

manager or other management representative only

After

It is anticipated not to happen if maintenance staff carefully follows the

above policy and procedure, but in the event that any deficiencies could not

be addressed prior or during the physical inspection, the maintenance

supervisor should correct and/or repair these immediately upon completion

of the inspection. Maintenance staff should not be allowed to take breaks

and/or lunch prior to correction or repair of any pending deficiencies. A

completed work order must be provided prior to inspector’s departure on

the same day.

16.2 MAJOR AREAS OF FOCUS

State agencies must inspect LIHTC properties to ensure that LIHTC

buildings and units are suitable for occupancy using UPCS or local codes.

The following outlines major areas of consideration:



1. Site: The site components such as fencing and retaining walls,

grounds, lighting, mailboxes/project signs, parking lots

and driveways, play areas and equipment, refuse disposal,

roads storm drainage, and walkways must be free of

health and safety hazards and in good repair. The site

must not be subject to material adverse conditions, such

as abandoned vehicles, dangerous walks or steps, poor

drainage, septic tank back-ups, sewer hazards, excess

accumulations of trash, vermin or rodent infestation, or

fire hazards.

2. Exterior: Each building on the site must be structurally sound,

secure, habitable, and in good repair. Each building’s

doors, fire escapes, foundations, lighting, roofs, walls, and

windows, *where applicable,* must be free of health and

safety hazards, operable, and in good repair.

3. Building Systems: Each building’s domestic water, electrical systems,

elevators, emergency power, fire protection, HVAC, and

sanitary system must be free from health and safety

hazards, functionally adequate, operable and in good

repair.

4. Dwelling Units: Each dwelling unit within a building must be

structurally sound, habitable, and in good repair. The

dwelling unit must be free from health and safety hazards,

functionally adequate, operable and in good repair. This

includes all areas and aspects of the dwelling unit; i.e.,

bathroom, call-for-aid (if applicable), ceiling, doors,

electrical systems, floors, hot water heater, HVAC,

kitchen, lighting, outlets/switches, patio/ porch/balcony,

smoke detectors, stairs, walls and windows.

Where applicable, the *dwelling* unit must have hot and cold running

water, including an adequate source of *potable* water. If the unit

includes its own sanitary facility, it must be in *proper* operating

condition, usable in privacy and adequate for personal hygiene and the

disposal of human waste. The unit must include at least one battery-

operated or hard-wired smoke detector in proper working condition on

each level of the unit.



5. Common Areas: The common areas must be structurally sound,

secure, and functionally adequate for the purposes

intended, including meeting all ADA requirements. The

basement/garage/carport, restrooms, closets, utility,

mechanical, community rooms, day care, halls and

corridors, stairs, kitchens, laundry rooms, office, porch,

patio, balcony and trash collection areas, if applicable,

must be free from health and safety hazards, operable,

and in good repair. All common area ceilings, doors,

floors, HVAC, lighting, outlets/switches, smoke detectors,

stairs, walls, and windows, *to the extent applicable,*

must be free of health and safety hazards, operable, and

in good repair.

6. Health/Safety: All areas and components of the housing must be

free of health and safety hazards. These areas include, but

are not limited to, air quality, electrical hazards, elevators,

emergency/fire exits, flammable materials, garbage and

debris, handrail hazards, infestation and lead based paint.

For example, buildings must have fire exits that are not blocked and have

hand rails that are not damaged, loose, missing portions, or otherwise

unusable. The housing must have no evidence of infestation by rats,

mice, vermin, *or garbage and debris.* The housing must have no

evidence of electrical hazards, natural hazards, or fire hazards. The

dwelling units and common areas must have proper ventilation and be

free of mold as well as odor (e.g., propane, natural, sewer or methane

gas) or other observable deficiencies. The housing must comply with all

requirements related to the evaluation and reduction of lead-based paint

hazards and have available proper certifications of such.



LAS POLÍTICAS Y PROCEDIMIENTOS DE

CUMPLIMIENTO DEL PERSONAL DE

MANTENIMIENTO

17.0 EL PERSONAL DE MANTENIMIENTO Y LAS AUDITORIAS DEL ESTADO

Las siguientes políticas y procedimientos han sido creadas para asistir a todo el

personal de mantenimiento que sea responsable en preparar las propiedades

para una inspección física del estado y para representar la administración

durante el día de tal inspección.

El seguimiento a las agencias estatales requiere que los incumplimientos

encontrados y corregidos por el dueño después de la notificación en la

inspección estatal sean reportados con el uso del Formulario 8823 del IRS.

Todos los descubrimientos en la fecha de la inspección, sin tener en cuenta que

hayan sido corregidos al final de la inspección, deben ser reportados como

incumplimientos. Por lo tanto, el personal de la propiedad debe hacer todo lo

posible en identificar y corregir cualquier incumplimiento antes de recibir una

notificación de la auditoria estatal y/o inspección.

Las agencias estatales deben inspeccionar las propiedades de LIHTC para

asegurarse que los edificios de LIHTC y las unidades sean adecuadas para

ocupación. Durante su visita, ellos deben evaluar si las propiedades con crédito

fiscal y de bajos ingresos sean seguras, decentes, en condición higiénica y de

buen estado, acuerdo al estándar del Uniform Physical Conditions Standards

(UPCS) establecido por el HUD o el estándar de inspección local.

Vea la sección 17.2 para una descripción detallada sobre las áreas

mayores subrayadas en el UPCS.

Chapter

17



Un edificio está en cumplimiento si durante una inspección cumple con los

requerimientos del UPCS o los del código local.

17.1 PREPARAMIENTO PARA UNA INSPECCIÓN FÍSICA.

Antes

Las auditorias son normalmente programadas en el mismo mes, año tras año.

Cuando el mes que la propiedad fue auditada anteriormente se aproxime, pero

siempre antes de haber recibido una notificación de una auditoría estatal que va

ser completada por una agencia y/o el estado, bajo la dirección del

administrador de la propiedad el personal de mantenimiento debe:

Caminata de la propiedad - Camine la propiedad y haga una lista de peligros

de seguridad o salud a los residentes. La lista debe incluir, pero no ser limitada

a:

❖ Cables y/o equipos eléctricos expuestos

❖ Luces y/o letreros de emergencia dañados y/o extraviados

❖ Ventanas rotas y/o pantallas de ventanas extraviadas

❖ Cobertores de ventanas (persianas) rotas y/o extraviadas, sin tener en

cuenta que la unidad será inspeccionada

❖ Pintura descascarada en el exterior del edificio; incluyendo las rieles

❖ Escaleras y pasamanos sueltas

❖ Las aéreas de los contenedores de basura y compactadores que estén

libre de basura y/o escombros

❖ Vehículos que no estén en uso o no estén registrados

❖ Manchas de aceite que necesiten una limpieza y/o un tratamiento

❖ Edificios, equipos, y comodidades que haya sido dañadas por grafitis y

otros tipos de vandalismo

NOTA 17.1.1: El seguimiento a las agencias estatales requiere que los incumplimientos

encontrados y corregidos por el dueño después de una notificación de

inspección por el estado sean reportados con la emisión del Formulario

8823 del IRS.

Caminata de las unidades - Camine todas las unidades y haga una lista de

peligros de seguridad o salud a los residentes. La lista debe incluir, pero no ser

limitada a:

❖ Todos los dormitorios deben ser accesibles



❖ Detectores de humo dañados y/o extraviados

❖ Tapas de electricidad y cables dañadas y/o extraviadas

❖ Artefactos de luz dañados y/o expuestos

❖ Extractores de aire de las estufas inoperables

❖ Elementos de las estufas inoperables (incluyendo la estufa)

❖ Trituradores de basura inoperables

❖ Juntas de refrigerador rotas

❖ Encimeras quemadas

❖ Llaves que goteen (incluyendo las de los baños)

❖ Espejos de vanidad rotos

❖ Inodoros y asientos de inodoro rotos y/o flojos

❖ Toallero(s) rotos y/o extraviados

❖ Tapones de agua extraviados

❖ Extractores de baño que estén rotos y/o desenchufados

❖ Ventanas y puertas obstruidas

❖ Pantallas de ventana rotas y/o extraviadas

❖ Persianas rotas y/o extraviadas

❖ Alfombra dañada

❖ Exceso de almacenamiento en las salas de estar

❖ Armario del calentador de agua que se use como almacén

❖ Condiciones de vivienda antigénicas

Caminar las unidades vacantes - Camine todas las unidades vacantes a mas

tardar el día antes de la inspección física del estado.

30 Días o más - Todas las unidades que han estado vacantes por más de 30

días deben estar listas para alquilar a más tardar el día antes de la inspección

física del estado.

30 Días o menos - Todas las unidades que han estado vacantes por menos de

30 días deben cumplir con las normas de seguridad y peligro sobre la base de

una inspección que no se diferencie a la de una de unidad ocupada. En

particular, todos los electrodomésticos deben estar presentes en la unidad

vacante.

Las agencias estatales están instruidas a considerarlas como habitables, y

están requeridas a reportarlas como incumplimientos usando el

Formulario 8823 del IRS, todas las unidades que hayan estado vacantes



por más de 30 días (puede diferir en su estado) que no estén listas ni

adecuadas para ocupación en la fecha de la inspección.

Lista de Acción

Una vez que la lista referenciada arriba este creada, y bajo la dirección del

administrador de la propiedad, el supervisor de mantenimiento debe:

1. Crear una lista de verificación y cuando aplique, las ordenes de trabajos

para corregir y/o reparar todo lo encontrado de cada caminata

referenciada arriba.

2. Corregir y/o reparar todo lo encontrado a más tardar el día antes de la

inspección física del estado.

3. Reporte al administrador de la propiedad una vez que todo lo encontrado

que haya sido corregido y/o reparado.

Durante

A su llegada, la persona completando la revisión estatal y la inspección

física proporcionara a la administración una lista de todas las unidades

que van a ser inspeccionadas. Inmediatamente al recibir esta lista, el

personal de mantenimiento debe:

❖ Sacar la llave para cada una de las unidades seleccionadas

❖ Preparar una caja que incluya detectores de humo y baterías,

desarmadores, tapas eléctricas, llave inglesa de triturador de basura, y

otras herramientas o reemplazos que se puedan necesitar.

❖ Tener disponible un palo o barra para probar los detectores de humo

❖ Inmediatamente mandar a alguien del personal de mantenimiento

a rápidamente y antes que el inspector llegue a esa unidad, a

inspeccionar todas las unidades seleccionadas para asegurarse que

todo lo siguiente este funcionando y libre de daños o defectos

mayores:

❖ Detectores de humo

❖ Elementos de la estufa

❖ Trituradores de basura

❖ Luces

No debe haber excusas de por que ninguna de las cosas mencionadas

arriba se encuentren inoperables cuando el inspector llegue a la unidad.



El personal del mantenimiento debe trabajar con el administrador de la

propiedad en el evento que cualquier cosa se encuentre inoperable, y debe de

hacer lo que sea necesario para asegurarse que los problemas sean corregidos

antes que el inspector llegue a la unidad.

❖ El personal de mantenimiento debe asistir durante la inspección física.

Esto incluye pero no se limita a:

▪ Abrir y cerrar la puerta de entrada

▪ Abrir todas las puertas interiores

▪ Probar los detectores de humo

▪ Prender y apagar los elementos de las estufas

▪ Probar los trituradores de basura

▪ Prender y apagar las luces

❖ Todas las deficiencias se deben corregir y/o reparar inmediatamente al

ser encontradas.

❖ Toda comunicación con el revisor se hará por el administrador de la

propiedad u otro representativo de la administración solamente.

Después

Se prevé que no ocurriría si el personal de mantenimiento siga atentamente las

anteriores políticas y procedimientos, pero en el evento que cualquier deficiencia

no se pueda tratar antes o durante la inspección física, el supervisor de

mantenimiento debe corregir y/o reparar estas inmediatamente después de la

inspección. El personal de mantenimiento no debe ser permitido a tomar

descansos ni/o almuerzo antes de la corrección o reparación de las deficiencias

pendientes. Una orden de trabajo completa debe ser proporcionada antes de la

salida del inspector en el mismo día.

17.2 ÁREAS PRINCIPALES DE ATENCIÓN

Agencias estatales deben inspeccionar propiedades de LIHTC para asegurarse

que los edificios de LIHTC y sus unidades sean adecuados para ser ocupadas

usando códigos de UPCS o códigos locales.

1. Sitio: Los componentes del sitio, tales como cercas, muros de

contención, todo lo expuesto, la iluminación, letreros de

buzones y proyectos, plazas de estacionamiento y vías de

acceso, áreas y equipos de recreación, la eliminación de

residuos, vías de drenaje pluvial, y las aceras deben estar



libres de riesgos de salud y seguridad y en buen estado.

El sitio no debe estar sujeto a condiciones de materiales

adversos, tales como vehículos abandonados, aceras o

gradas peligrosas, mal drenaje, atascos de tanques

sépticos, riesgos de drenaje, acumulaciones de basura

excesivas, infestaciones de insectos o roedores, o riesgos

de incendios.

2. Exterior: Todos los edificios en el sitio deben estar estructuralmente

firmes, seguros, habitables, y en buen estado. Las

puertas, escaleras de incendios, cimientos, la iluminación,

techos, paredes, y ventanas, *los que apliquen* de cada

edifico deben estar libres de riesgos de salud y seguridad,

ser operables y estar en buen estado.

3. Sistemas del Edificio: Los sistemas de agua de uso domestico,

sistemas de electricidad, elevadores, energía de

emergencia, protección contra incendios, HVAC, y el

sistema de sanidad deben estar libres de riesgos de salud

y seguridad, estar funcionando adecuadamente, ser

operables y estar en buen estado.

4. Unidades de Vivienda: Cada unidad de vivienda dentro de cada edifico

deben estar estructuralmente firmes, seguros, habitables,

y en buen estado. La unidad de vivienda debe estar libre

de riesgos de salud y seguridad, estar funcionando

adecuadamente, ser operables y estar en buen estado.

Esto incluye todas las áreas y aspectos de la unidad de

vivienda; es decir, los baños, convocatorias de ayuda (si

aplica), techos, puertas, sistemas electicos, pisos,

calentadores de agua, HVAC, cocinas, luces, toma

corrientes / interruptores, patios/ balcones/terrazas,

detectores de humo, escaleras, paredes y ventanas.

La unidad de vivienda debe tener agua corriente (caliente y fría), incluyendo una

fuente adecuada de agua potable. Si la unidad incluye sus propias instalaciones

sanitarias, deben estar en buenas condiciones de funcionamiento, utilizables en



la intimidad y adecuadas para la higiene personal y la eliminación de residuos

humanos. La unidad debe incluir por lo menos un detector de humo que

funcione con batería o electricidad corriente en cada nivel de la unidad y deben

estar en buenas condiciones de funcionamiento.

5. Áreas Comunes: Las áreas comunes deben estar estructuralmente

firmes, seguras, y funcionalmente adecuadas paro los

fines previstos. El sótano/garaje/plaza de

estacionamiento, baños, armarios, utilidades, cuartos de

comunidad, guarderías, pasillos y corredores, escaleras,

cocinas, cuartos de lavandería, oficinas, porches, patios,

balcones, y áreas de colección de basura, si es aplicable,

debe estar libres de riesgos de salud y seguridad, ser

operables y estar en buen estado. Todos los techos,

puertas, pisos, HVAC, luces, toma corrientes /

interruptores, detectores de humo, escaleras, paredes y

ventanas de las áreas comunes, *hasta la medida que

sean aplicables*, deben estar libres de riesgos de salud y

seguridad, ser operables y estar en buen estado.

6. Salud / Seguridad: Todas las áreas y sus componentes de la vivienda

deben estar libres de riesgos de salud y seguridad. Estas

áreas incluyen, pero no están limitadas a, la calidad de

aire, riesgos de electricidad, elevadores, salidas de

emergencia/incendios, materiales inflamables, basura y

escombros, riesgos de los pasamanos, infestación y

pinturas basadas en plomo.

Por ejemplo, los edificios deben tener salidas de emergencia que no estén

obstruidas y que tengan pasamanos que no estén dañadas, flojas, tengan

partes que falten, o de otro modo inusable. Las vivienda no deben tener

evidencia de infestaciones de ratas, ratones, bichos, *o basura y escombros*.

La vivienda no debe tener evidencia de peligros de electricidad, peligros de

naturaleza, o peligros de incendios. Las unidades de vivienda y áreas comunes

deben tener ventilación apropiada y estar libres de moho así como olores (de

propano, naturales, de cloaca, o de metano) y otras deficiencias observables.

La vivienda debe cumplir con todos los requerimientos relacionados a la

evaluación y reducción de los peligros de pinturas basadas en plomo y tener

disponible certificaciones adecuadas para lo tal.



ACQUISITION AND REHABILITATION

18.0 ACQUISITION AND REHABILITATION

In January of 2007, The IRS released the Guide to Completing Form 8823.

Within the guide, Chapter 4 contains a section on Income Certifications when

completing an Acquisition / Rehab property. The chapter states that a unit

occupied before the beginning of the credit period will be considered to be a

low-income unit at the beginning of the credit period, even if the household

income exceeds the income limit at the beginning of the first year of the credit

period, if two conditions related to income qualifications are met and the units

remain rent restricted:

• The household must be income qualified at the time of Acquisition or the

date the household started occupying the unit, whichever is later.

• Properties must maintain documentation of the income qualification

If a household is already occupying a unit at the time of Acquisition, the initial

Income Certification must be completed within 120 days before or after the

date of the acquisition using the current income limits in effect on the day of

acquisition. The effective “move-in” date would be the date of acquisition since

the household is already occupying the unit. All required and updated

documentation must be in the file as well as an updated Application showing the

current household composition. However, unless there is a management

change, it is not required a new lease to be signed, providing there is already a

valid lease in effect and a copy of that lease is in the file.

If a household is already occupying a unit at the time of acquisition, but the

Income Certification is completed more than 120 days from the Acquisition date,

Chapter

18



the household must be treated as a new move-in. A new lease and all required

documentation must show the household is income eligible. The property would

use the income limits in effect at the time of certification, and the effective date

would be the date the last adult household member signs the TIC.

18.1 APPLICABLE FRACTION

Section 42 requires that the Applicable Fraction for the first year of the credit

period be calculated based on a month-to-month accounting of units or floor

space occupied by income qualified households. For Acquisition/Rehab projects

there are two separate allocations of credits – one for Acquisition, one for

Rehabilitation. However, there does not need to be a separate calculation for

the applicable fraction of both credit allocations. The IRS mandates that

the Applicable Fraction for the Rehabilitation will be the same as the

Acquisition.

The Applicable Fraction calculation is based off of the status of eligible

Households on the last day of each month and includes:

• Units that are occupied before the beginning of the credit period

providing they are income qualified at the start of the credit period.

• Units that become occupied by a qualified household after the beginning

of the credit period (regardless of rehabilitation costs)

• Units that are occupied by a qualified household that transferred from

another unit in the project. Please note – a household can only be used

to qualify a unit once in the 1st year period. If, during the 1st year

period, a household transfers from one unit to a vacant unit that had

never been occupied, the units swap status. (see IRS Guide to Form

8823 for rules on Tenant transfers)

• Vacant units that are suitable for occupancy AND were previously

occupied by an income qualified household.

Households that are not eligible for the Applicable Fraction calculation are:

• Units occupied by nonqualified households

• Vacant unit last occupied by a nonqualified household

• Units not suitable for occupancy – including units that are undergoing

Rehabilitation.

18.2 TRACKING THE APPLICABLE FRACTION DURING THE FIRST YEAR OF THE

CREDIT PERIOD



The following serves as an example on how to best keep track of eligible and

noncertified units when units are rehabilitated during the first year of the credit

period.

An owner acquired a building with 10 units and determined that 6 of the units

(1-6) were occupied by nonqualifying households at the beginning of the first

year of the credit period on January 1, 2005. Four units (7-10) were occupied

by income-qualified households. The nonqualifying households moved out and

the owner rehabilitated the six vacant units. Five of the rehabilitated units (1-5)

were rented to new households that moved into the units in August of 2005.

The sixth rehabilitated unit (6) was rented in August to an existing tenant who

transferred from unit 7, one of the four units qualifying on January 1, 2005.

1. The owner may include units 1-5, the rehabilitated units occupied by

new low-income tenants in the applicable fraction computation under

IRC §42(f)(2) for August, September, October, November, and

December of 2005

2. For the tenant who transferred between units within the building, the

owner may include the unrehabilitated unit 7 that the tenant

occupied from January through July in the computation of the

applicable fractions for those months, but the unit is no longer a low-

income unit when the household moves to the rehabilitated unit 6 in

August; Unit 6 is a low-income unit for August through December.

Therefore, for purposes of computing the applicable fraction for August 2005,

there are three low-income units that have not been rehabilitated (units 8, 9,

and 10) and six low-income units that have been rehabilitated (units 1-6). Unit

7 is not a low-income unit.

During September, unit 7 was rehabilitated and the tenant from unit 8 moved

in; therefore, unit 8 is now considered a vacant market-rate unit. To expedite

completion of the rehabilitation of the remaining units, the property also

temporarily located the households in 9 and 10 in off-site quarters (and paid all

expenses) and started rehabilitation of units 8, 9, and 10. For purposes of

determining the applicable fraction for September, units 1-7 are low-income

units and units 9, and 10 are out of compliance low-income unit. Unit 8 is a

market-rate unit that is being rehabilitated in September.

The owner completed the rehabilitation of the final three units (8, 9, and 10) in

October and moved the two temporarily displaced households back into units 9

and 10 during October 2005. Unit 8 remains an unoccupied market rate unit



through December. For purposes of computing the applicable fraction for

October, units 1-7, 9, and 10 are all low-income units. The same is true for

November and December.

The following chart summarized the status of each unit for each month during

2005. The columns (left to right) represent the individual months and the rows

(top to bottom) represent Units 1 through 10. The field where a row and column

intersect indicates the unit’s status as either “LIHTC” for a low-income unit or is

left blank if the unit is not a low-income unit.

18.3 TESTING FOR PURPOSES OF THE NEXT AVAILABLE UNIT RULE DURING

REHABILITATION

For purposes of Rev. Proc. 2003-82, the income of the individuals occupying a

unit occupied before the beginning to the first credit year are first tested for

purposes of the Next Available Unit Rule at the beginning of the first year of the

building’s credit period (January 1st of the first year of the credit period).

1. The test must be completed within 120 days before the beginning of the

first year of the credit period.

2. The “test” consists of confirming with the household that sources and

amounts of anticipated income included on the tenant income

certification are still current. If additional sources or amounts of income

are identified, the tenant income certification will be updated based on

the household’s documentation. It is not necessary to complete third

party verifications.



3. If the household is over-income based on current income limits, the Next

Available Unit Rule is applied.

If the effective date of the initial tenant income certification is 120 days or less

before the required “test” (January 1st of the first year of the credit period), it is

not necessary to “test” for purposes of the Next Available Unit Rule because the

time period for completing the initial tenant income certification and the time

period for completing the “test” is the same. The annual tenant income

recertification will be completed each year on the anniversary of the original

tenant income certification’s effective date.

EXAMPLE 18.3.0: The Effective Date of Initial Tenant Income Certification is 120

Days or Less Before the Test Date

An owner purchased an existing building on September 1, 2004

and anticipated beginning the credit period on January 1, 2005.

Household A occupied a unit at the time of the purchase and was

determined to be income qualified on September 22, 2004.

Because the household was determined to be income-qualified

within 120 days of January 1, 2005, it is not necessary to “test”

for purposes of the Next Available Unit Rule.

If the effective date of the original tenant income certification is more than 120

days before the required “test,” the household’s income must be tested within

120 days before the beginning of the first year of the credit period.

EXAMPLE 18.3.1: The Effective Date of Original Tenant Income Certification is More

Than 120 Days Before the Beginning of the First Year of the

Credit Period

An owner purchased an existing building on March 1, 2004 and

anticipated beginning the credit period on January 1, 2005.

Household A, an income qualified household, moved into a rent-

restricted unit on April 1, 2004. Because the household was

determined to be income qualified more than 120 days before the

beginning of the credit period on January 1, 2005, the

household’s income must be tested no earlier than 120 days

before January 1, 2005 to determine whether the Next Applicable

Unit Rule should be applied.