Understanding Tax Credit Units and Partnerships

Questions and Answers

What are the requirements for units that support tax credits?

Income limits

Rent limits

Safe and sanitary

All of the above (correct)

What is a general partner?

An owner (partner) who has unlimited liability and is active in managing the firm.

What is a limited partnership (LP)?

A partnership where one or more partners have limited liability and at least one (the general partner) has unlimited liability.

What is the role of a syndicator?

Facilitates the GP and LP relationship and combines multiple projects into a single fund. Signup and view all the answers

What are State HFAs often called?

State agencies or state allocating agencies. Signup and view all the answers

What are the two primary functions of State HFAs as used by the IRS?

The allocation of credits and compliance monitoring. Signup and view all the answers

How is the ceiling on the allocation amount determined?

Adjusted for inflation each year and based on a state's population. Signup and view all the answers

What document contains the allocation rules?

Qualified Allocation Plan (QAP). Signup and view all the answers

How are applications scored for tax credits?

According to the QAP, and credits are awarded accordingly. Signup and view all the answers

What form is used for reporting non-compliance to the IRS?

Form 8823. Signup and view all the answers

The states use ______ for local code for physical inspections.

Uniform Physical Conditions Standards (UPCS). Signup and view all the answers

How is household income for tax credit properties determined?

In a manner consistent with Section 8 housing rules. Signup and view all the answers

What changes when HUD modifies the document?

The tax credit income and asset rules change with it. Signup and view all the answers

What documents must be included for tenant income certification?

Household application, verification of income and assets, student status, tenant income certification (TIC). Signup and view all the answers

Student status exemptions include conditions like ______.

Married adults entitled to file jointly, single parents with minor children, receiving TANF, former foster care assistance, assistance from similar programs. Signup and view all the answers

When must student status be verified?

Move-in and annually. Signup and view all the answers

Who is counted in the household?

Children temporarily absent, in joint custody, away at school, unborn, members temporarily away, members in rehab, future spouse or roommate, foster children and adults. Signup and view all the answers

Who is NOT included in the household?

Live-in attendants. Signup and view all the answers

Define a live-in attendant.

A person who resides with elderly persons or persons with disabilities, essential for their care but not obligated to support them. Signup and view all the answers

What constitutes annual income?

Earned income + unearned income + income from assets before any deductions. Signup and view all the answers

What is considered unearned income?

Benefit income, unemployment income. Signup and view all the answers

What is earned income?

Income from jobs or wages. Signup and view all the answers

What should be done when subtracting members?

Wait until the next recertification date. Signup and view all the answers

What should be done when adding new members?

Verify and add the new members' income to the most recent certification. Signup and view all the answers

What are the three basic types of verification available in order of preference?

<ol> <li>Third party verification from the source, 2. Review of documentation from the applicant, 3. Family certification by household statement.</li> </ol> Signup and view all the answers

What to do if third party verification cannot be gathered?

Current, complete, and unaltered original documents are allowed. Signup and view all the answers

40 hours a week, hourly pay equals what total hours in a year?

2,080. Signup and view all the answers

How many weeks are in a year?

<ol start="52"> <li></li> </ol> Signup and view all the answers

How many pay periods are there in a bi-weekly pay schedule?

<ol start="26"> <li></li> </ol> Signup and view all the answers

How many pay periods are in a semi-monthly pay schedule?

<ol start="24"> <li></li> </ol> Signup and view all the answers

How many pay periods are in a monthly pay schedule?

<ol start="12"> <li></li> </ol> Signup and view all the answers

What to do when a raise is indicated on the verification of employment?

Use the effective date of the raise and the date of the certification in the calculation. Signup and view all the answers

What are the IRS 1040 schedules C, E, F for?

C: business income, E: rental income, F: farm income. Signup and view all the answers

Study Notes

Tax Credit Units Requirements

Income limits, rent limits, and safe and sanitary conditions are essential for tax credit units.

General Partner

Owners with unlimited liability.
Actively involved in managing the firm.

Limited Partnership (LP)

Composed of at least one general partner with unlimited liability.
Limited partners are passive investors without management roles.

Syndicator

Facilitates the relationship between general partners (GP) and limited partners (LP).
Combines multiple projects into a single fund, offering shares to individual investors.

State HFAs

Also known as state agencies or state allocating agencies.

Functions of State HFAs

Responsible for allocation of tax credits.
Conduct compliance monitoring according to IRS requirements.

Allocation Ceiling

Adjusted yearly for inflation, based on state population.

Allocation Rules

Detailed in the Qualified Allocation Plan (QAP).

Application Scoring

Applications are scored based on the QAP; credits are awarded accordingly.

Noncompliance Reporting

Reported to the IRS using Form 8823.

Physical Inspection Standards

Uniform Physical Condition Standards (UPCS) are used for local code inspections.

Household Income Determination

Consistent with Section 8 housing rules.

HUD Handbook Impact

Changes in HUD handbook 4350.3 affect tax credit income and asset rules.

Required Tenant Documentation

Must include household application, income verification, student status, and Tenant Income Certification (TIC).

Exemptions for Student Status

Exemptions apply for married couples, single parents with minors, TANF recipients, former foster care recipients, and individuals receiving similar assistance.

Student Status Verification

Required at move-in and annually thereafter.

Household Member Inclusion

Includes temporarily absent children, joint custody children, foster children, unborn children, and other family members temporarily away.

Exclusion from Household Count

Live-in attendants are not included.

Definition of Live-In Attendant

Resides with elderly or disabled persons for essential care, not obligated for their support.

Annual Income Definition

Total of earned income, unearned income, and income from assets before deductions (gross income).

Types of Income

Unearned Income: Benefits and unemployment income.
Earned Income: Income from jobs or wages.

Member Adjustment Policy

Subtract members at the next recertification; verify and add income of new members immediately.

Verification Types Preference

Third-party verification from the source is preferred, followed by documentation review, then family certification.

Document Use When Verification Fails

Original documents are accepted if third-party verification is unattainable.

Weekly Income Calculation

40 hours per week equals 2,080 hours annually (52 weeks).

Pay Periods

Weekly wages calculated over 52 weeks.
Bi-weekly wages calculated over 26 pay periods.
Semi-monthly wages calculated over 24 pay periods.
Monthly wages calculated over 12 pay periods.

Raise Impact on Calculations

Use the effective raise date for income calculations during certification.

IRS Schedules for Income Reporting

Schedule C for business income, Schedule E for rental income, Schedule F for farm income.

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Description

This quiz covers the requirements and components of tax credit units, including the roles of general partners, limited partnerships, and syndicators. Additionally, it explains the functions of state housing finance agencies (HFAs) in allocating tax credits and compliance monitoring. Test your knowledge of these essential concepts in affordable housing finance.