When you start managing a tax credit site, you’ll need to get certain information from the owner to manage the site effectively. Getting this information before renting units to qualified low-income households is essential. Without it, you won’t know what’s required to keep your site in compliance—or even to get it to qualify for the tax credit program in the first place. The following slides present eight key questions to ask the owner to get this information. In case the owner isn’t sure of some of the answers, what is presented here also tells you where the information is likely to be found.

1. Ask Eight Questions
When Starting to Manage
a New Tax Credit Site
From Tax Credit Housing Management Insider
A monthly subscription that helps you avoid compliance
mistakes that could jeopardize some—or even all—of your
site’s tax credits.
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2. Ask Eight Questions When Starting to
Manage a New Tax Credit Site
When you start managing a tax credit site, you’ll need to get certain
information from the owner to manage the site effectively. Getting
this information before renting units to qualified low-income
households is essential. Without it, you won’t know what’s required
to keep your site in compliance—or even to get it to qualify for the
tax credit program in the first place.
Following are eight key questions to ask the owner to get this
information. In case the owner isn’t sure of some of the answers,
we’ll also tell you where the information is likely to be found.
Vendome Real Estate Media |
www.taxcredithousinginsider.com
2

3. Ask Eight Questions When Starting to
Manage a New Tax Credit Site
1.
What Facilities Are Included in Eligible Basis?
“Eligible basis” is a dollar amount that reflects certain tax credit site
development costs. This figure helps the state housing agency determine how
many credits to allocate. If you don’t maintain the eligible basis, the IRS may
recapture some of the owner’s tax credits. Another reason to ask about
eligible basis is that if the cost of a facility is included in the site’s eligible
basis, you can’t charge residents fees for its use. For instance, if the owner
tells you that your site’s swimming pool is included in its eligible basis, you
must let residents use the pool at no cost. If the owner isn’t sure what’s
included in your site’s eligible basis, ask it to check its tax credit application
for the answer.
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4. Ask Eight Questions When Starting to
Manage a New Tax Credit Site
2. When Will the Owner Begin Claiming Credits?
Knowing when the owner plans to begin claiming credits is important for tax
credit management because it determines when your site’s compliance
period begins and ends. The year credits were or will be claimed opens the
15-year window during which you must keep your site in compliance. The
owner can elect to begin the credit period either in the placed-in-service (PIS)
year or in the following year. The owner doesn’t commit to an election until it
files IRS Form 8609 (line 10a) along with its tax return for the first year of the
compliance period. But the owner should be able to tell you its plans before
lease-up.
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5. Ask Eight Questions When Starting to
Manage a New Tax Credit Site
3. What’s the Minimum Set-Aside for the Building or Site?
Your building or site must maintain a minimum set-aside to be qualified for the tax
credit program. To meet the set-aside, you must rent a certain percentage of your
units to qualified low-income households.
The minimum set-aside is expressed as two numbers separated by a hyphen (for
instance, 20-50 or 40-60). The first number tells the minimum percentage of units you
must rent to qualified low-income households. The second number tells the highest
income a qualified household can earn, expressed as a percentage of HUD area
median gross income (AMGI). So if your site’s set-aside is 20-50, you must rent at least
20 percent of your site’s units to households earning no more than 50 percent of
AMGI.
Owners must elect the minimum set-aside for their building or site when they file
Form 8609 (line 10c). But the owner may already have committed to the set-aside in
its tax credit application.
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6. Ask Eight Questions When Starting to
Manage a New Tax Credit Site
4. Must the Minimum Set-Aside Be Met on a Per-Building or Per-Site Basis?
If you have more than one building at your site, find out whether the owner
wants you to meet the set-aside on a per-site or per-building basis. The
owner must tell the IRS of its decision on Form 8609 (line 8b).
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7. Ask Eight Questions When Starting to
Manage a New Tax Credit Site
5. When Is the Deadline for Meeting the Minimum Set-Aside?
For a site to qualify to claim credits, the minimum set-aside must be met by a
deadline. If the deadline isn’t met, your site may not qualify to claim credits.
For allocations made after 1990, initial compliance has to be met no later
than Dec. 31 of the second year.
In other words, the deadline for meeting the set-aside is the last day of the
first taxable year the owner claims its tax credits. This is either the placed-inservice year or the following year. The owner must tell the IRS, on Form 8609
(line 10a), when it will begin claiming credits.
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8. Ask Eight Questions When Starting to
Manage a New Tax Credit Site
6. Is the Site Deep Rent-Skewed?
Deep rent-skewing is an attractive option for sites in cities where market-rate
rents are high. If the owner tells you the site will be deep rent-skewed, you’ll
need to meet an additional set-aside for all your low-income units. This “deep
rent-skewed set-aside” is 15-40, which means you must rent 15 percent of all
your low-income units—including any extra units—to households earning no
more than 40 percent of AMGI. Owners elect to make their sites deep rentskewed on Form 8609 (line 10d).
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9. Ask Eight Questions When Starting to
Manage a New Tax Credit Site
7. What’s the Target Fraction for the Building?
For an owner to be entitled to claim all the tax credits it was allocated for
your site, you must rent enough units to low-income households to bring your
building’s first-year fraction up to the owner’s target. It’s essential to know
the target fraction before you begin renting your units. If you end the year by
falling short of the first-year fraction, you jeopardize the owner’s credits.
Owners set the target for the first-year fraction with the state housing agency
during the development phase of a tax credit site.
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10. Ask Eight Questions When Starting to
Manage a New Tax Credit Site
8. Have You Made Any Other Promises to the State Housing Agency?
The owner may have promised to comply with additional state housing
agency requirements when it applied for credits. For instance, it may
have agreed to charge rent at certain levels, meet set-asides for special
population groups such as the homeless or the elderly, or provide
social services or special amenities such as day care or transportation
to medical appointments.
Tell the owner to check both its application for credits and the
extended use agreement it signed with your state housing agency to
find out what promises it made.
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