MSHDA LIHTC Compliance Manual Table of Contents

1 Part #Michigan Compliance Manual - Table of ContentsINTRODUCTIONC hapter 1 - THE LIHTC PROGRAMS ection 1A - LIHTC Overview100 What is the Low Income Housing Tax Credit ( LIHTC )?102 Creation of the LIHTC Program104 overview of the LIHTC Program106 Amount of Credit Available for Michigan108 Qualified Allocation Plan110 The LIHTC Allocation Process112 IRS 8609 (Low-Income Housing Credit Allocation Certification)114 Major Regulations and Legislation Impacting LIHTC Compliance Monitoring116 Regulations for Various Tax Credit YearsSection 1B - LIHTC Allocation Basics118 Eligible Basis120 Federal Grants122 Minimum Set-aside124 Applicable Fraction126 Qualified Basis128 The Annual Tax Credit Amount130 Applicable Credit Percentage132 Year of the Credit (Allocation Year)

2 134 Placing a LIHTC Project in Service136 Credit Period138 First Year of the Credit Period - New Construction Projects140 First Year of the Credit Period - Acquisition / Rehabilitation Projects142 First Year of the Credit Period Multiple Government Programs144 First Year Credit Statement form146 Claiming the LIHTC in Years Two Through Ten148 Units that Have Never Been Occupied by a Qualified Resident150 The Two-Thirds (2/3) Rule152 Definition of a Low Income Unit154 Project Numbers156 Important Periods for LIHTC ProjectsSection 1C - Compliance overview for LIHTC Projects158 IRC Section 42 Compliance and Monitoring Requirement for LIHTC160 The Compliance Period162 overview of Compliance Requirements164 Regulatory Agreement166 Year 15 and After the LIHTC Compliance Period EndsChapter 2 - RESPONSIBILITIESS ection 2A - Michigan State Housing Development Authority200 The Michigan State Housing Development Authority202 MSHDA Website204 Michigan Housing LocatorSection 2B - Owners and Managers of Projects206 Owner of LIHTC Project - Responsibilities208 LIHTC

3 Record-keeping Requirements for OwnersPage 1 of 11 Printout Date: 4/29/2013 Part #Michigan Compliance Manual - Table of Contents210 LIHTC Record Retention Requirements for Owners212 Management Company and On-site Personnel - Responsibilities214 Development File for LIHTC Projects216 Contact Information Must Be Up-To-Date218 Nonprofit ParticipationSection 2C - Owners and Managers of Projects220 Michigan Qualified Allocation PlanSection 2D - Other222 National Council of State Housing AgenciesChapter 3 - INCOME QUALIFYING TENANTSS ection 3A - overview of Tenant Certification Process300 General overview of Tenant Certification Procedures302 HUD Handbook 3B - Income304 Income.

4 Definition of306 Gross Income versus Net or Adjusted Income308 Projected Income vs. Actual Past Income310 Calculating Total Household IncomeSection 3C - Mathematical Considerations312 Rounding314 Ranges and Averaging316 Income Projections and ComputationsSection 3D - Assets318 Assets320 Example of Calculating Income from Assets322 Net Family Assets Less than or Equal to $5,000324 Asset Certification Form326 Disposal (Divestiture) of AssetsSection 3E - Verifications328 overview of Verification Methods330 Third Party Written Verification332 Electronic Verification334 Oral Verifications336 Documenting Why Third Party Verification Is Not Possible338 Review of Documents Provided by the Tenant/Applicant340 Self-Affiidavit / Sworn Statement342 Notifications and Expiration of Verifications / 120 DaysSection 3F - Certification Dates344 Dates and Deadlines are Important346 Move-in Dates and Effective Dates of Initial Certifications348 Acq/Rehab Projects Certifying Existing Tenants350 Signature Date on Certifications and RecertificationsSection 3G - Recertifications352 overview

5 Of Annual RecertificationsPage 2 of 11 Printout Date: 4/29/2013 Part #Michigan Compliance Manual - Table of Contents354 Procedures for Recertification356 Recertification Effective Dates358 Mass Recertifications360 Interim Recertifications362 Elimination of Recertification Requirement364 Annual Self-Certification366 Review of Documents with Self-Certification of Income368 Recertification Waiver - old procedureSection 3H - Income Qualifying Particular Classes of Residents370 Income Qualifying a Development's Employees372 Income and Assets of Students374 Participant's in Michigan's No Worker Left Behind Program376 Certifying Tenants with Zero Income378 Unemployed Adult Household Members380 Income and

6 Assets of Children382 Foster Children and Foster AdultsSection 3I - Particular Types of Income Sources384 Part II of the HUD Student Rule: Student Financial Assistance in Excess of Tuition386 Child Support Income388 Funds Paid to A Former Spouse390 Income from Self-Employment or Business Ownership392 Anticipated Income394 Military Basic Housing AllowanceSection 3J - Select Assets396 Reverse MortgagesChapter 4 - INCOME LIMITS, RENT RESTRICTIONS, AND UTILITY ALLOWANCESS ection 4A - Income Limits400 overview of Income Limits402 Impact of HERA on LIHTC Income Limit Tables404 Which Income Limits to Use406 Multifamily Tax Subsidy Projects (MTSP) Income Limits408 HERA Special Rates / HUD Hold Harmless410 Income Limits for Projects located in Rural Areas (National Nonmetropolitan Median Income)

7 412 Section 8 Income Limits414 Effective Date of Income Limits and Annual Adjustments416 Sample Income Limit Table418 Income Limits Are Adjusted for Family Size420 Minimum Income RequirementsSection 4B - Maximum Gross Rent422 Maximum Gross Rent424 Projects Allocated Credit in 1987, 1988, and 1989426 Projects Allocated Credit After January 1, 1990428 Changes in Rent Limits and Rent Amounts4305% Cap on Rent Increases for Residents432 Other Leases Fees and Charges to Residents of LIHTC Units434 Gross Rent Floor Election436 Rents in MSHDA Direct Loan ProjectsPage 3 of 11 Printout Date: 4/29/2013 Part #Michigan Compliance Manual - Table of ContentsSection 4C - Utility Allowances in LIHTC Projects438 overview of Utility Allowances440 Utility Allowance Regulations and Policies442 Sources of Utility Allowances for LIHTC Projects444 Determining the Appropriate Utility Allowance Source446 Utiltiy Allowances for Rural Housing Services Projects (Method #1)448 Utility Allowances for HUD Regulated Buildings with LIHTC (Method #2)450 Public Housing Authority Estimate (Method #3)452 Local Utility Company Estimate (Method #4)454 Actual Consumption Method (Method #5)456 HUD Utility Schedule Model (Method #6)

8 458 Energy Consumption Model (Method #7)460 Utility Allowances for MSHDA -Financed LIHTC Projects462 Updating Utility Allowances464 Adjusting Tenant Rents When Utility Allowances Change466 Notification Requirements and Effective Dates468 Record Retention and Availability Requirements for Utility Allowance Documentation470 Utility Allowance Documentation Form472 Sub-metered Units474 Additional Notes about Utility AllowancesSection 4C - Rental Assistance476 Section 8 / Rental Assistance478 Rural Housing Services - Rental Assistance and Rent OverageChapter 5 - HOUSEHOLD COMPOSITION AND DEMOGRAPHICSS ection 5A - overview of Household Composition and Demographics500 Determining Household

9 Composition502 Changes in Household Composition504 The "Totem Pole" Rule506 Occupancy GuidelinesSection 5B - Students508 overview of Students510 Definition of a Full-time Student512 Definition of an Educational Institution514 Exceptions to the Full-time Student Exclusion in LIHTC Projects516 Student Exception A (Title IV of the Social Security Act) 518 Student Exception B (Job Training Program)520 Student Exception C (Student Previously in Foster Care)522 Student Exception D (Single Parent Receiving Welfare Benefits) 524 Student Exception E (Single Parent with Dependent Children) 526 Student Exception F (Married Persons who File a Joint Tax Return) 528 Student Eligibility Certification Form530 Part I of the HUD Student Rule - Student Eligibility GuidelinesSection 5C - Elderly532 LIHTC - Definition of Elderly534 Fair Housing Act - Defintion of elderly536 Elderly Projects - Unique AspectsSection 5D - Special Needs / Developmentally Disabled538 Persons with Special Needs and Developmental DisabilitiesPage 4 of 11 Printout Date.

10 4/29/2013 Part #Michigan Compliance Manual - Table of Contents540 Permanent Supportive HousingSection 5E - Section 8 and Housing Choice Voucher Recipients542 Discrimination Against Section 8 and HCV Participants is ProhibitedSection 5F - Citizenship / Legal Residency Requirements544 Citizenship / Legal Residency RequirementsSection 5G - Transient Persons546 Transient Persons548 Primary ResidenceSection 5H - Other Demographics and Household Composition Issues550 Tenants Must Be Member of the General Public552 Managers/Employees as Tenants554 Live-In Care Attendants556 Married Persons Not Living With Spouse558 Pregnant Women, Unborn Children, and Children in the Process of Being Adopted560 Non-custodial Children / Guests as Occupants562 Market-Rate Tenants564 Other Demographic and Composition TopicsSection 5I - Other Demographics and Household Composition Issues566 Fair Housing, Anti-Discrimination.