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Non-Retirement Investment Accounts - How to Treat for Affordable Housing Purposes

Most operators of affordable multifamily rental housing know that when regular payments are made from retirement accounts, those payments count as income, and any amounts remaining in the account are not counted as assets. But what about non-retirement investment accounts? How should we treat money that is taken out of those accounts? Is it income, or do we continue to treat the account as an asset? HUD requires that the full amount of periodic payments from annuities, insurance policies, retirement funds, pensions, and disability or death benefits be included in annual income (HUD Handbook 4350.3, 5-6.L.1). This same section refers us to 5-6.O (it s actually 5-6.P) for information on the withdrawal of cash or assets from an investment. 5-6P states that "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." This is the extent of the HUD guidance on how to handle payments being made from investment accounts. To determine what this means, we must look at the precise wording of the guidance. Clearly, any regular (i.e., periodic) payments being made from retirement accounts are counted as income. Many investment accounts are retirement accounts, such as IRAs and 401k accounts. So, if regular payments are made from those accounts the payments are counted as income, and based on the 5-6.P guidance, the balance of the account is disregarded. Another question that must be answered is - what is meant by "periodic?" The standard definition of "periodic" is something that is "occurring or recurring at regular intervals." The term "regular" means "recurring, attending, or functioning at fixed, uniform, or normal intervals." One area of debate in the affordable housing world is whether the required minimum distribution (RMD) from retirement accounts should be counted as income. Based on HUD guidance and the meaning of the words used in that HUD guidance, the answer is clearly - yes. Is a payment that is made once each year a periodic payment? According to the accepted definition of periodic, the answer is - yes. Based on this, RMDs should be counted as income, and in keeping with HUD guidance, we should not count any remaining amounts in the account as an asset. But what about investment accounts that are not retirement accounts? How should money withdrawn from those accounts be treated? There are four basic types of investment accounts: (1) individual brokerage accounts; (2) IRAs {Roth or Traditional}; (3) 401k {and other Corporate Sponsored Accounts}; and (4) 529 College Savings Accounts. Is an investment account the same as a savings account? No - there is a difference between saving and investing. Saving means putting away money for later use in a safe place, such as in a bank account. Investing means taking some risk and buying assets that will hopefully increase in value and provide the investor with more money than originally invested, over the long term. For this reason, money withdrawn from saving and checking accounts is never counted as income. Clearly, retirement accounts can (and do) provide regular periodic payments. The RMD noted above is an example, but the payments may be monthly, quarterly, semi-annually, or based on any other schedule desired by the owner of the account. The key feature though is that periodic payments are being made from the account. Why are payments made from a 529 account not counted as income? Because HUD regulation state that payments made for educational expenses are excluded from income. Therefore, disbursements from these accounts will not be considered income (with the limited exception relating to some Section 8 recipients, where amounts in excess of tuition and mandatory fees are counted as income). So, that leaves us with brokerage accounts. Is money withdrawn from these accounts counted as income? The answer is no - such accounts are treated as assets, and the only income generated by these assets is the interest earned or the dividends paid. Brokerage accounts do not offer a plan of regular recurring payments. While withdrawals from such accounts may be taken at any time, the treatment of these withdrawals is spelled out in 24 CFR, 5.609 (b)(3), "any "withdrawal" of cash or assets from an investment will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested by the family" (emphasis added). A "withdrawal" differs from a "payment" in that it will generally not be periodic and is simply a removal of something that has been deposited. It is worth noting that there is no HUD guidance indicating that "withdrawals" from investment accounts are counted as income unless such withdrawals are made on a periodic basis. In fact, such guidance would directly contradict the Code of Federal Regulations - as noted above. Managers of multifamily housing operated under various federal housing programs, such as Section 8, HOME, RD Section 515, and the LIHTC, should pay close attention to regular payments made from retirement accounts; such payments should be considered income. However, withdrawals made from other investment accounts generally will not be considered income.

HUD Awards $20 Million for Eviction Protection and Diversion

In a first-of-its-kind action, the Department of Housing & Urban Development (HUD) has awarded $20 million in grants from its Eviction Protection Grant Program. These grants are being awarded to legal service providers to assist their efforts in providing legal assistance to low-income tenants at risk or subject to eviction. HUD has selected ten organizations for this first award. Those organizations are - Advocates for Basic Legal Equality - Toledo, OH;Atlanta Volunteer Lawyers Foundation - Atlanta, GA;Community Legal Aid, Inc. - Worcester, MA;Connecticut Fair Housing Center - Hartford, CT;Idaho Legal Aid Services - Boise, ID;Jacksonville Area Legal Aid, Inc. - Jacksonville, FL;Legal Aid Center of Southern Nevada - Las Vegas, NV;Legal Aid Society of Northeastern New York - Albany, NY;Legal Assistance of Western New York, Inc. - Geneva, NY; andLegal Services of Eastern Missouri - St. Louis, MO Individual grants ranged from $1 million to $2.4 million. This program was created due to studies that show a resident s chance of being evicted is much greater if they lack legal representation. A study in Minnesota found that fully represented tenants win or settle cases 96% of the time and clients receiving limited representation win or settle their cases 83% of the time. Tenants without representation win or settle just 62% of the time. Properties in the areas noted above should expect more eviction challenges in the months ahead.

Treasury Inspector General Issues Report Critical of IRS LIHTC Oversight

On January 26, 2022, the Treasury Inspector General (IG) for Tax Administration released a report titled, "Oversight of the Low-Income Housing Tax Credit Program Can Be Improved." The audit was initiated at the request of the previous Chairman of the Senate Budget Committee. The review assessed IRS procedures and processes to ensure that Housing Credit Agencies (HCAs), building owners, and taxpayers are compliant with the requirements of the LIHTC program. The report was highly critical of IRS oversight of the program. The Inspector General found that forms submitted for the LIHTC program had significant issues with data reliability, reconciliation discrepancies, and missing first-year elections that increase the risk of undetected errors and noncompliance. In addition, it found nonprofit set-asides were below the minimum requirement, certification discrepancies, and inconsistent reporting of building non-compliance and dispositions. There were potentially large dollar amounts of questionable LIHTC claims based on information from key forms and schedules submitted to the IRS. For example, approximately 67,000 claims for Tax Years 2015 - 2019 totaling almost $15.6 billion lacked or did not match supporting documentation due to potential reporting errors or noncompliance. Recent IRS examination activity has not identified significant noncompliance. Only a small number of tax returns claiming the LIHTC are being selected each year for examination, and 33% of those are closed before an examination was conducted. For those examined, most resulted in no additional tax assessment - i.e., no change in the return. According to the Inspector General, this examination no-change rate is significantly higher than the average of similar taxpayers. For calendar years 2003 - 2019, the IRS conducted compliance reviews on only eight of the 56 HCAs that have tax credit program administrative responsibilities. Inspector General Recommendations The report contains seven recommendations that include implementing additional system validity checks to improve the accuracy and reliability of the information in the LIHTC database; establishing an examination selection process for questionable LIHTC claims and allocating additional resources, when available, to allow for increased compliance monitoring reviews of the HCAs. The IRS agreed with five of the seven recommendations. The IRS disagreed with the recommendation to develop an action plan to identify possible causes and correct reporting errors on LIHTC documents, stating that these reporting errors are corrected through existing procedures. The IRS also did not agree with the recommendation to allocate additional resources to increase HCA compliance monitoring reviews. However, the investigation found that 25 HCAs have been identified for contact, which could take many years based on past resource commitments. Some Observations About the Report The report contained some interesting tidbits that are of interest to the LIHTC community, one being a confirmation that to date, most IRS audits have been triggered by the issuance of 8823s. It is also interesting to note that the low level of findings during IRS audits was a criticism of the IG. No consideration was given to the fact that the possible low rate of negative audit findings is due to the high degree of self-policing within the affordable housing industry. The LIHTC program is the most comprehensively supervised affordable housing program in history, with oversight from management, investors, and State and local agencies. One underlying current running through the report was an indirect criticism of the Housing Credit Agencies. Many cases of state agency failure were noted in the report, which provides the impetus for the recommendation to increase IRS scrutiny of these agencies. Some of the HCA related data includes: The investigation identified 598 of 730 Forms 8823 originally submitted by the HCAs that reported a building disposition were not received by the LIHTC unit within the required 45 days after the event. All 16 of the amended Forms 8823 were received between 701 to 1,645 days after building disposition. To those of us in the industry, these numbers are not surprising. HCAs can only report building dispositions (e.g., sale, foreclosure, destruction) that they are aware of. Property owners often fail to inform the agencies of these events.The investigation revealed a weakness in the Form 8823. It was determined that while the law requires 8823s to be sent by the HCAs to the IRS within 45 days after the deadline for owner correction of noncompliance, there is no way to track the 45-day rule. This is because the 8823 only requires the noncompliance date and the correction date. It does not show the correction deadline date established by the HCA.There were 6,983 original Forms 8823 and 205 amended Forms 8823 with received and building noncompliance dates but no building correction date. Using the noncompliance date when no correction date was provided, the study identified 2,901 of 6,983 original and 100 of 205 amended Forms 8823 that were received over one year from the noncompliance date. For those forms that provided a correction date, the study identified 1,851 of 46,355 original and 37 of 207 amended Forms 8823 that were received over one year from the correction date. It is clear from the data that many HCA are not submitting the 8823s to the IRS in a timely manner.Reports of noncompliance varied greatly between the HCAs. Incredibly, three HCAs (not identified in the report) have never reported building noncompliance, and six HCAs have years-long gaps between reports of building noncompliance.The IRS has no enforcement power against the HCAs that submit untimely 8823s and can only encourage timely reporting.Many HCAs are understaffed and report only egregious noncompliance. While the IRS encourages reporting of all noncompliance, there are no consequences if the HCAs do not report.The investigation also discovered many errors on Forms 8609, which are used to allocate credits and serve as the taxpayers first year certification. Examples include:2,307 without an address for the building;3,384 without a name and date for the HCA signature, which raises questions about whether credits were actually allocated;4,175 without a building owner name and six with "NO NAME" for building owner name;2,617 without an address for the building owner;1,287 with owner signature dates after the date the form was received by the IRS, including future dates (e.g., February 21, 2047 and May 9, 2061);First-year elections are not always being made by owners, including:Election to treat the building as a multiple building project (Line 8b) - 59,867 forms were checked "yes," 4,217 were checked "no," and 4,094 had no box checked.If box 6a or 6d is checked for a newly constructed building (or rehab expenditures), 177 records checked "yes," meaning that the federal proceeds (most likely tax-exempt bonds) would be excluded from eligible basis. 20,239 forms did not contain an election when required and 11,837 contained an answer when not required.Line 10a, Election to begin the credit period the year after the building is placed in service - 21,052 forms had nothing checked.Election for minimum set-aside (Line 10c) - 237 of the forms had no election.Despite all the 8609 errors, the number and types of errors made by building owners are not being identified, corrected, or summarized for analysis. Recommendations & IRS Response Recommendation #1: Ensure that additional system validity checks are implemented to improve the accuracy and reliability of the information in HCA and building owner portions of the LIHTC database. IRS Response: IRS agreed and indicated that a system change request was submitted to enhance data input validity checks for Form 8609. The additional validity checks will result in improve accuracy and completeness of the reports. However, due to budget constraints, competing priorities, and resource allocations, the IRS did not agree to ensure additional validity checks for other forms. Recommendation #2: Establish an effective quality review system for the processing of LIHTC forms received from the HCAs and building owners to identify areas requiring corrective action, employee training, or outreach. IRS Response: The IRS agreed and will provide additional training on forms processing. Recommendation #3: Establish an examination (audit) selection process for business owners submitting questionable Forms 8609-A that do not correspond to Forms 8609. IRS Response: The IRS agreed and indicated that they will develop a process to compare Forms 8609-A with Forms 8609. Recommendation #4: Evaluate possible revisions to Forms 3800, 8586, and 8609-A to remove the option to make a current year LIHTC claim for a pre-2008 building. IRS Response: The IRS agreed and will make the recommended form changes. Recommendation #5: Determine the feasibility of establishing an audit selection process for taxpayers submitting questionable LIHTC claims on Forms 3800 that do not correspond to supporting Forms 8609-A or pass-through Schedules K-1. IRS Response: The IRS agreed and will make recommendations for a selection process to compare information on the forms. Recommendation #6: Develop an action plan to identify possible causes and correct reporting errors on LIHTC documents. IRS Response: The IRS disagreed with this recommendation. The Agency stated that reporting errors on LIHTC documents are corrected through existing processes. Recommendation #7: Allocate additional resources, when available, to allow for increased HCA compliance monitoring reviews. IRS Response: The IRS disagreed with this recommendation. The Agency stated that they recognize an oversight responsibility to review the credit allocation practices and compliance monitoring processes of the HCAs. However, they do not plan to commit additional resources to HCA compliance monitoring reviews due to competing resource needs. Problems with the Report There are a number of issues with the IG report. To begin with, it significantly overstates the extent of current concerns. The analysis includes records dating back eight years, which is prior to the IRS s 2017 implementation of a new LIHTC database, which showed significant improvements in tracking compliance. For example, the IG report indicates a nearly 46% error rate on Forms 8609s submitted by building owners, but only 3% occurred after the 2017 database upgrade. When looking at Forms 8609s submitted by HCAs, the IG identified 13,498 errors, none of which occurred after the new database was in place. When reviewing Form 8823 submissions, the IG reported 2,337 errors, but only 4% happened after the implementation of the new database. What Can LIHTC Owners Expect Based on the Report? As with most reports of this type, it will gather dust on IRS office shelves. However, since it was requested by Congress (who holds the IRS purse strings), the Agency will make moves in certain areas. One will be closer attention to the correlation between 8609-As and 8609s. The IRS is planning on putting procedures in place to improve in this area by February 2023. The Agency made it clear in their response to the report that they will continue to carefully review 8609s and will return incorrectly completed forms to taxpayers for correction. In addition, the service will increase scrutiny on owners who do not comply with IRS requests relative to document completion. Ultimately, the report does serve a purpose in that it points out some of the weaknesses with program administration - both at the state and federal levels. These weaknesses have now been pointed out to Congress. Owners and stakeholders in the LIHTC program will be wise to pay attention to the issues noted in this report and work to improve recordkeeping and reporting at the project level. Housing Credit Agencies should use the report as a blueprint for how they may improve their own procedures - especially with regard to the timely reporting of noncompliance.

A Little Known Employment Tax Credit May Assist Multifamily Owners

Many owners and managers of affordable multifamily housing properties are finding it difficult to find qualified staff to work either at the properties or at the main office. This problem has been around for a long time but has been exacerbated by COVID-19. A new federal tax credit was created last year that provides a potential tool for employers looking for a way to find qualified staff. The Work Opportunity Tax Credit (WOTC) is a little-known federal tax credit available to employers who invest in American job seekers who have consistently faced barriers to employment. Employers can both meet business needs and claim a tax credit by hiring an individual who is in a WOTC targeted group (which will be defined later). Employers must apply for and receive a certification verifying that the new hire is a member of a targeted group before they can claim the tax credit. After the required certification is secured, taxable employers claim the WOTC as a general business credit against their income taxes, and tax-exempt employers claim the WOTC against their payroll taxes. WOTC is authorized until December 31, 2025, and is part of the Consolidated Appropriations Act of 2021. The program is administered jointly by the Department of Labor (DOL) and the IRS. DOL provides grant funding and policy guidance to the State Workforce Development Agencies (State Workforce Agencies) to administer the certification process, while the IRS administers all tax-related provisions and requirements. Targeted Groups WOTC targeted groups include: Qualified IV-A Recipients: These are individuals who are members of a family receiving assistance under a state plan approved under part A of title IV of the Social Security Act relating to Temporary Assistance for Needy Families (TANF). The assistance must be received for any nine-month period during the 18-month period ending on the hiring date;Qualified veterans: a "qualified veteran" is a veteran who is any of the following: (a) a member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) for at least three months during the first 15 months of employment; (b) unemployed for a period totaling at least four weeks [whether or not consecutive] but less than six months in the one-year period ending on the hiring date; (c) unemployed for a period totaling at least six months [whether or not consecutive] in the one-year period ending on the hiring date; (d) a disabled veteran entitled to compensation for a service-connected disability hired not more than one year after being discharged or released from active duty in the U.S. Armed Forces; or (e) a disabled veteran entitled to compensation for a service-connected disability who is unemployed for a period totaling at least six months [whether or not consecutive] in the one-year period ending on the hiring date. Qualified Ex-Felon: a "qualified ex-felon" is a person hired within a year of:Being convicted of a felony, orBeing released from prison for the felony.Designated Community Resident (DCR): A DCR is an individual who, on the date of hiring -Is at least 18 years old but under 40;Resides within one of the following:An Empowerment Zone,An Enterprise community, orA Renewal CommunityAND continues to reside at the locations after employment.Vocational Rehabilitation Referral: A "vocational rehabilitation referral" is a person who has a physical or mental disability and has been referred to the employer while receiving or upon completion of rehabilitative services pursuant to:A state plan approved under the Rehabilitation Act of 1973, orAn Employment Network Plan under the Ticket to Work Program, orA program carried out under the Department of Veterans Affairs.Summer Youth Employee: a "qualified summer youth employee" is one who:Is at least 16 years old, but under 18 on the date of hire on on May 1, whichever is later, ANDIs only employed between May 1 and September 15 (was not employed prior to May 1), ANDResides in an Empowerment Zone (EZ), enterprise community or renewal community.Supplemental Nutrition Assistance Program (SNAP) Recipient: this is an individual who on the date of hire is:At least 18 years old and under 40, ANDA member of a family that received SNAP benefits for:The prior six months, ORAt least three of the previous five months.Supplemental Security Income (SSI) Recipient: in order to qualify under this category, the person must have received SSI benefits within 60 days of the hire date.Long-Term Family Assistance Recipient: this is a member of a family that meets one of the following conditions:Received assistance under an IV-A program for a minimum of the prior 18 consecutive months; ORReceived assistance for 18 months beginning after August 5, 1997 and it has not been more than two years since the end of the earliest of such 18-month period, ORCeased to be eligible for such assistance because a Federal or State law limited the maximum time those payments could be made, and it has been not more than two years since the cessation of the benefits.Qualified Long-Term Unemployment Recipient: this is a person who has been unemployed for not less than 27 consecutive weeks at the time of hiring and received unemployment compensation during some or all of the unemployment period. It will be obvious to many affordable housing operators that a number of these categories of individuals already are found at properties and provide the potential for hiring residents and obtaining a substantial tax benefit for such hiring. Benefits to Employers The credit available ranges from $2,400 up to $9,600, depending on the targeted group and qualified wages paid to the new employee generally during the first year of employment. Generally, the credit is 40% of qualified first-year wages for individuals who work 400+ hours in their first year of employment (an average of just less than eight hours per week). If a new hire meets the eligibility requirements for a  WOTC targeted group, employers will receive a certification (ETA Form 9063) from your state workforce agency. How Can Employers Find Job Candidates in WOTC Targeted Groups? The American Job Centers (AJCs) and partnering agencies and programs can help employers connect with skilled job seekers who may be in a targeted group for the WOTC. AJCs can assist employers in recruiting talent, hosting job fairs, conducting skills assessments, and providing support to workers transitioning to new jobs. A state workforce agency (SWA) can determine whether a job seeker may be in a WOTC targeted group and note this determination with a Conditional Certification, ETA Form 9062. The SWA then gives that pre-certification to the job-ready applicant to use during their job search. The Conditional Certification serves as an official record of WOTC pre-certification by: Alerting prospective employers to the availability of the tax credit if the individual is hired, andProviding a means for employers to request a WOTC certification for the job applicant/new hire. Many owners and managers of affordable multifamily housing properties are finding it difficult to find qualified staff to work either at the properties or at a main office. This problem has been around for a long time but has been exacerbated by COVID-19. A new federal tax credit was created last year that provides a potential tool for employers looking for a way to find qualified staff. The Work Opportunity Tax Credit (WOTC) is a little-known federal tax credit available to employers who invest in American job seekers who have consistently faced barriers to employment. Employers can both meet business needs and claim a tax credit by hiring an individual who is in a WOTC targeted group (which will be defined later). Employers must apply for and receive a certification verifying that the new hire is a member of a targeted group before they can claim the tax credit. After the required certification is secured, taxable employers claim the WOTC as a general business credit against their income taxes, and tax-exempt employers claim the WOTC against their payroll taxes. WOTC is authorized until December 31, 2025 and is part of the Consolidated Appropriations Act of 2021. The program is administered jointly by the Department of Labor (DOL) and the IRS. DOL provides grant funding and policy guidance to the State Workforce Development Agencies (State Workforce Agencies) to administer the certification process, while the IRS administers all tax-related provisions and requirements. Targeted Groups WOTC targeted groups include: Qualified IV-A Recipients: These are individuals who are members of a family receiving assistance under a state plan approved under part A of title IV of the Social Security Act relating to Temporary Assistance for Needy Families (TANF). The assistance must be received for any nine-month period during the 18-month period ending on the hiring date;Qualified veterans: a "qualified veteran" is a veteran who is any of the following: (a) a member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) for at least three months during the first 15 months of employment; (b) unemployed for a period totaling at least four weeks [whether or not consecutive] but less than six months in the one-year period ending on the hiring date; (c) unemployed for a period totaling at least six months [whether or not consecutive] in the one-year period ending on the hiring date; (d) a disabled veteran entitled to compensation for a service-connected disability hired not more than one year after being discharged or released from active duty in the U.S. Armed Forces; or (e) a disabled veteran entitled to compensation for a service-connected disability who is unemployed for a period totaling at least six months [whether or not consecutive] in the one-year period ending on the hiring date. Qualified Ex-Felon: a "qualified ex-felon" is a person hired within a year of:Being convicted of a felony, orBeing released from prison for the felony.Designated Community Resident (DCR): A DCR is an individual who, on the date of hiring -Is at least 18 years old but under 40;Resides within one of the following:An Empowerment Zone,An Enterprise community, orA Renewal CommunityAND continues to reside at the locations after employment.Vocational Rehabilitation Referral: A "vocational rehabilitation referral" is a person who has a physical or mental disability and has been referred to the employer while receiving or upon completion of rehabilitative services pursuant to:A state plan approved under the Rehabilitation Act of 1973, orAn Employment Network Plan under the Ticket to Work Program, orA program carried out under the Department of Veterans Affairs.Summer Youth Employee: a "qualified summer youth employee" is one who:Is at least 16 years old, but under 18 on the date of hire on on May 1, whichever is later, ANDIs only employed between May 1 and September 15 (was not employed prior to May 1), ANDResides in an Empowerment Zone (EZ), enterprise community or renewal community.Supplemental Nutrition Assistance Program (SNAP) Recipient: this is an individual who on the date of hire is:At least 18 years old and under 40, ANDA member of a family that received SNAP benefits for:The prior six months, ORAt least three of the previous five months.Supplemental Security Income (SSI) Recipient: in order to qualify under this category, the person must have received SSI benefits within 60 days of the hire date.Long-Term Family Assistance Recipient: this is a member of a family that meets one of the following conditions:Received assistance under an IV-A program for a minimum of the prior 18 consecutive months; ORReceived assistance for 18 months beginning after August 5, 1997 and it has not been more than two years since the end of the earliest of such 18-month period, ORCeased to be eligible for such assistance because a Federal or State law limited the maximum time those payments could be made, and it has been not more than two years since the cessation of the benefits. Qualified Long-Term Unemployment Recipient: this is a person who has been unemployed for not less than 27 consecutive weeks at the time of hiring and received unemployment compensation during some or all of the unemployment period. It will be obvious to many affordable housing operators that a number of these categories already are found at properties and provide the potential for hiring residents and obtaining a substantial tax benefit for such hiring. Benefits to Employers The credit available ranges from $2,400 up to $9,600, depending on the targeted group and qualified wages paid to the new employee generally during the first year of employment. Generally, the credit is 40% of qualified first-year wages for individuals who work 400+ hours in their first year of employment (an average of just less than eight hours per week). If a new hire meets the eligibility requirements for a  WOTC targeted group, employers will receive a certification (ETA Form 9063) from your state workforce agency. How Can Employers Find Job Candidates in WOTC Targeted Groups? The American Job Centers (AJCs) and partnering agencies and programs can help employers connect with skilled job seekers who may be in a targeted group for the WOTC. AJCs can assist employers in recruiting talent, hosting job fairs, conducting skills assessment, and providing support to workers transitioning to new jobs. A state workforce agency (SWA) can determine whether a job seeker may be in a WOTC targeted group, and note this determination with a Conditional Certification, ETA Form 9062. The SWA then gives that pre-certification to the job-ready applicant to use during their job search. The Conditional Certification serves as an official record of WOTC pre-certification by: Alerting prospective employers to the availability of the tax credit if the individual is hired, andProviding a means for employers to request a WOTC certification for the job applicant/new hire. How Can Employers Get Started with WOTC? Employers who are interested in this tax credit should visit the DOL WOTC website at www.dol.gov/agencies/eta/wotc. A list of SWAs is available at www.dol.gov/agencies/eta/wotc/contact/state-workforce-agencies. Employers who are interested in this tax credit should visit the DOL WOTC website at www.dol.gov/agencies/eta/wotc. A list of SWAs is available at www.dol.gov/agencies/eta/wotc/contact/state-workforce-agencies.

Massive Pandemic Evictions Fail to Materialize

When the COVID-19 pandemic began in March 2020, many housing experts predicted a wave of pandemic-related evictions from our nation s apartments. There were predictions that as many as 40 million people would be put out of their homes. The wait continues - because evictions have not been nearly as high as predicted. The early dire predictions prompted federal, state, and local governments to enact emergency policies to temporarily ban evictions. Two national eviction moratoriums lasted nearly uninterrupted for 17 months, until August 2021, and some states and cities still have eviction and other tenant protections in place today. When the national moratorium ended, housing experts, renter groups, and elected officials expected a surge of evictions. Now, five months later, evictions have increased, but nowhere near the level expected. Does that mean the crisis has passed? Not necessarily. Courts are now working their way through a backlog of eviction filings, but according to Eviction Lab, the nation s most comprehensive tracker of eviction data, evictions in most places are nearly 40 percent below the historical average. The question is, after all the "expert" predictions, why did the flood of evictions not occur? One possibility is that the predictions caught the attention of policymakers. This led to the eviction moratorium, stimulus payments, extended unemployment insurance, and rental assistance. Another reason is that smaller landlords - the "mom and pops" - have been more accommodating with tenants, since losing a tenant would not guarantee a replacement household. Of course, it is always possible that the flood of evictions is actually taking place, and we just can t see it. Even though courts prohibited formal evictions, millions of tenants face "informal evictions," with landlords refusing to make necessary repairs or changing the locks without notice. It is likely that all of these factors play a role in there being fewer evictions than predicted. It is also true that despite the outstanding efforts of the Eviction Lab, there is no national eviction database. More than 30% of U.S. counties do not even report eviction data. And informal evictions - which are not tracked at all - occur 500% more than court-ordered evictions. It is clear that the doomsayers who predicted 40 million evictions were wrong. That is because the data that was used in coming up with that number was a poor barometer of likely evictions. Beginning in April 2020, a survey by the U.S. Census Bureau asked thousands of renters how confident they were in their ability to pay rent the following month. Week after week, a quarter to a third of all renters interviewed said that they were not confident in their ability to pay rent for the upcoming month. The weakness in this data is obvious. People are scared in times of crisis and are not likely to be the best predictors of whether they will be able to pay their rent. Early in the pandemic, there was a great deal of stress about food insecurity, anxiety, and depression. This automatically led to stress about the ability to pay rent. General anxiety leads to housing anxiety. Based on these surveys, a consortium of researchers and organizations projected that up to 40 million renters were at risk of eviction. This led to the headlines citing the 40 million figure. Housing advocates used this to their advantage in pushing the federal government to extend the eviction moratorium and securing almost $50 billion in rental assistance. There is no question that the dire predictions saved many Americans from eviction. The number of evictions was clearly over-estimated, but perhaps that is better than an underestimation. Had the government not been terrified of a flood of evictions, it is unlikely they would have acted in the aggressive manner they did to prevent those evictions. Ultimately, however, accurate surveys relating to potential evictions during national emergencies - of which there will be more - will be needed. Public policy relies on sound information. Today, the Eviction Tracking System established by the Eviction Lab is the best tool we have for tracking evictions in the United States. It covers six states and 31 major cities, but it is only able to track eviction filings for one-quarter of the nation s renters and does not track actual eviction judgments. Most local governments do not report annual eviction statistics, much less where evictions are concentrated or the amount of back rent that is prompting evictions. 38% of rural officials and 22% of city officials told the National League of Cities that they did not know whether evictions have increased or decreased from last year. To truly understand evictions and make informed decisions to prevent them, states and counties need the resources to track and share their own eviction data, and that data needs to be part of a government database. With such a system, researchers will be better positioned to provide legislators with accurate estimates.

A. J. Johnson Partners with Mid-Atlantic AHMA for February Training on Affordable Housing

During the month of February 2022, A. J. Johnson will be partnering with the MidAtlantic Affordable Housing Management Association for three live webinars intended for real estate professionals, particularly those in the affordable multifamily housing field. The following live webinars will be presented: February 15: Basic LIHTC Compliance - This training is designed primarily for site managers and investment asset managers responsible for site-related asset management and is especially beneficial to those managers who are relatively inexperienced in the tax credit program. It covers all aspects of credit related to on-site management, including the applicant interview process, the determination of resident eligibility (income and student issues), handling recertification, setting rents - including a full review of utility allowance requirements - lease issues, and the importance of maintaining the property. The training includes problems and questions designed to ensure that students are fully comprehending the material. February 16: Dealing with Tenant-on-Tenant & Workplace Harassment - Dealing with tenant-on-tenant harassment is an evolving area of fair housing law. Landlords are generally familiar with how their actions can be construed as discriminatory. But how should landlords react when one resident is violating the fair housing rights of another resident? Title VII of the Civil Rights Act of 1964 prohibits discrimination based on sex in the workplace - including sexual harassment. The law applies to employers with 15 or more employees. In addition to having a written sexual harassment policy, companies should also have an effective complaint procedure. Many businesses in the United States have no policies regarding sexual harassment, and such harassment occurs in the highest levels of corporate management. However, the risk of not having such a policy far outweighs the effort required to implement one. These risks are greater now than ever before. Victims of sexual harassment may now recover damages (including punitive damages) and the Supreme Court has made it easier to prove injury. This Three-hour training is designed to help property owners and managers understand the current legal state of these two issues and to establish policies to limit potential liability. The session will include a discussion of the two most relevant court cases relating to tenant-on-tenant harassment as well as cases that outline employer risk regarding harassment in the workplace. Participants will also be provided with recommended policies to limit potential liability. February 23: The Verification and Calculation of Income and Assets on Affordable Housing Properties - This five-hour course (there will be a one-hour lunch break) provides concentrated instruction on the required methodology for calculating and verifying income, and for determining the value of assets and income generated by those assets. The first section of the course involves a comprehensive discussion of employment income, along with military pay, pensions/social security, self-employment income, and child support. It concludes with workshop problems designed to test what the student has learned during the discussion phase of the training and serve to reinforce HUD required techniques for the determination of income. The second component of the training focuses on a detailed discussion of requirements related to the determination of asset value and income and is applicable to all federal housing programs, including the low-income housing tax credit, tax-exempt bonds, Section 8, Section 515, HOME, and HOPE VI. Multiple types of assets are covered, both in terms of what constitutes an asset and how must they are verified. This section also concludes with a series of problems, designed to test the student s understanding of the basic requirements relative to assets. These sessions are part of the year-long collaboration between A. J. Johnson and MidAtlantic AHMA and are designed to provide affordable housing professionals with the knowledge needed to effectively manage the complex requirements of the various agencies overseeing these programs. Persons interested in any (or all) of these training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

A. J. Johnson to Offer Average Income Live Webinar

A. J. Johnson will be conducting a webinar on January 26, 2022, on Requirements & Best Practices Relating to the Average Income Minimum Set-Aside for LIHTC properties. The Webinar will be held at 1:00 PM Eastern Time. The Average Income Minimum Set-Aside Test ("AI") was added to the LIHTC program in March 2018. While it is being implemented successfully on many properties, there remains a good deal of industry-wide confusion about the use of the AI set-aside and the risks involved. This one-hour live webinar will review the requirements of the AI, discuss the risks of this set-aside, and provide best practice recommendations for the implementation of the Average Income test. We will also cover the current IRS guidance relating to the AI set-aside and recent industry requests made to the IRS. The Webinar will be presented by A. J. Johnson, a nationally recognized expert on affordable housing who has already provided compliance oversight on multiple properties using the AI set-aside. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training."

IRS Extends COVID-19 Relief for LIHTC and Tax-Exempt Bond Properties

On Friday, January 14, 2022, the IRS will release a notice (2022-05) extending widespread temporary relief from certain requirements for low-income housing tax credit (LIHTC) financed and private activity tax-exempt bond-financed properties due to the COVID-19 pandemic. Extended relief will include: Relief for the 10% test for carryover allocations. If the original deadline for an owner to meet the 10% test for carryover allocations is on or after April 1, 2020 and on or before December 31, 2020, the deadline is extended to the original deadline plus two years. If the original deadline is on or after January 1, 2021 and before December 31, 2022, the deadline is extended to December 31, 2022;The 24-month minimum rehabilitation period. If  the original  deadline for  the 24-month minimum  rehabilitation  expenditure period for  a building  originally  is  on or  after April  1,  2020,  and is  on  or  before December  31,  2021,  then  that  deadline is extended  to  the  original  date  plus  18  months. If  the original  deadline  for  this  requirement  is  on or  after  January  1,  2022,  and on or  before June  30,  2022,  then  that  deadline is  extended to June 30,  2023. If  the original  deadline  for  this  requirement  is  on or  after  July  1,  2022,  and on or before  December  31,  2022,  then that  deadline  is  extended to the original  date plus  12 months. If  the original  deadline  for  this  requirement  is  on or  after  January  1,  2023,  and on or  before December  30,  2023,  then  that  deadline is  extended  to December  31, 2023;The placed-in-service deadline.   If  the  original  deadline for  a low-income  building to be placed in  service  was  the close of  calendar  year  2020,  the new  deadline is  the close of  calendar  year  2022  (that  is,  December  31,  2022). If  the original  placed-in-service deadline was  the  close of  calendar  year  2021 and the  original  deadline for  the 10-percent  test  in  42(h)(1)(E)(ii)  was  before  April  1, 2020,  the  new  placed-in-service deadline  is  the close  of  calendar  year  2022  (that is,  December  31,  2022). If  the original  placed-in-service deadline is  the  close of  calendar  year  2021 and the  original  deadline for  the 10-percent  test  in  42(h)(1)(E)(ii)  was  on or  after April  1,  2020,  and  on  or  before  December  31,  2020,  then the new  placed-in service deadline  is  the  close of  calendar  year  2023  (that  is,  December  31,  2023). If  the original  placed-in-service deadline is  the  close of  calendar  year  2022 (and thus  the  original  deadline for  the  10-percent  test  was  in  2021),  then  the new placed-in-service  deadline is  the close  of  calendar  year  2023  (that is, December  31,  2023);The reasonable restoration period in the event of casualty loss. For  purposes  of    42(j)(4)(E)  both in  the case  of  a casualty  loss  not  due to a  pre-COVID-19-pandemic  Major  Disaster  and in situations  governed by  section  8.02 of  Rev. Proc.  2014-49 in  the  case of  a casualty  loss  due  to  a pre-COVID-19-pandemic  Major Disaster,  if  a low-income  building s  qualified  basis  is  reduced  by  reason  of  the casualty loss  and the reasonable period to  restore  the  loss  by  reconstruction  or  replacement  that was  originally  set  by  the HCA  (original  Reasonable  Restoration  Period)  ends  on or  after April  1,  2020,  then  the  last  day  of  the  Reasonable Restoration Period is  postponed  by eighteen  months  but  not  beyond December  31,  2022.   Notwithstanding the  preceding sentence,  the Agency  may  require  a shorter  extension,  or  no  extension at  all; andAgency correction periods. if  a correction  period that  was  set  by  the Agency  ended on or  after  April  1,  2020,  and  before December  31,  2021,  then the  end of  the correction period  (including as  already  extended,  if  applicable)  is  extended  by  a year,  but  not beyond December  31,  2022.   If  the correction  period  originally  set  by  the Agency  ends during  2022,  the  end  of  the  period is  extended to December  31,  2022.   Notwithstanding the  preceding sentences,  the Agency  may  require a shorter  extension,  or  no  extension at  all. The notice also provides an extension to satisfy occupancy obligations. If the close of the first year of the credit period with respect to a building was on or after April 1, 2020, and on or before December 31, 2022, then, for purposes of 42(f)(3)(A)(ii), the qualified basis for the building for the first year of the credit period is calculated by taking into account any increase in the number of low-income units by the close of the 6-month period following the close of that first year. This provides an additional six months after the first year of the credit period to qualify units in order to avoid the 2/3-unit rule. Concerning compliance, the notice will provide an extension to the requirement for a 30-day notice for HFA reviews of tenant files through the end of 2022 and will permit HFAs to defer physical inspections through June 30, 2022, with the option to extend the deferral to the end of 2022 in consultation with local public health experts. An Agency was not required to review tenant files in the period beginning on April 1, 2020, and ending on December 31, 2021. The Agency must have resumed tenant-file review as due under 1.42-5 as of January 1, 2022. For purposes of 1.42-5(c)(2)(iii)(C)(3), between April 1, 2020, and the end of 2022, when the Agency gives an Owner reasonable notice that it will review low-income certifications of not-yet-identified low-income units, it may treat the reasonable notice as being up to 30 days. Beginning on January 1, 2023, for this purpose reasonable notice again is generally no more than 15 days. An Agency is not required to conduct compliance monitoring physical inspections in the period beginning on April 1, 2020, and ending on June 30, 2022. Because of the high State-to-State and intra-State variability of COVID-19 transmission, an Agency, in consultation with public health experts, may extend the waiver in the preceding sentence if the level of transmission makes such an extension appropriate. Depending on varying rates of transmission, the extension may be Statewide, may be limited to specific locales, or maybe on a project-by-project basis. No such extension may go beyond December 31, 2022. The Agency must resume compliance-monitoring reviews as due under 1.42-5 once the waiver expires. For purposes of 1.42-5(c)(2)(iii)(C)(3), between April 1, 2020, and the end of 2022 only, when the Agency gives an Owner reasonable notice that it will physically inspect not-yet-identified low-income units, it may treat the reasonable notice as being up to 30 days. Beginning on January 1, 2023, for this purpose reasonable notice again is generally no more than 15 days. The closure of amenities or common areas in LIHTC properties due to COVID-19 will not result in a reduction of eligible basis and essential workers may be provided emergency housing in LIHTC properties. This will apply until December 31, 2022. During the above period, an HFA may deny any application of the above waiver or, based on public health criteria, may limit the waiver to partial closure, or to limited or conditional access of an amenity or common area. (For example, the Agency may apply the waiver to access an amenity or common area that is limited to persons wearing masks or to persons fully vaccinated against COVID-19.) The following relief is provided for tax-exempt bond properties: THE 12-MONTH TRANSITION PERIOD TO MEET SET-ASIDES FOR QUALIFIED RESIDENTIAL RENTAL PROJECTS. For purposes of section 5.02 of Rev. Proc. 2004-39, if the last day of a 12-month transition period for a qualified residential rental project originally was on or after April 1, 2020, and before December 31, 2022, then that last day is postponed to December 31, 2022. B THE 147(d) 2-YEAR REHABILITATION EXPENDITURE PERIOD FOR BONDS USED TO PROVIDE QUALIFIED RESIDENTIAL RENTAL PROJECTS. If a bond is used to provide a qualified residential rental project and if the last day of the 147(d) 2-year rehabilitation expenditure period for the bond originally was on or after April 1, 2020, and before December 31, 2023, then that last day is postponed to the earlier of eighteen months from the original due date or December 31, 2023. Owners of LIHTC or tax-exempt bond properties that may be affected by this relief should obtain a copy of the IRS Notice when published on January 14.