News

Recapture - What it is and When it Occurs

Although taxpayers claim the low-income housing credit over a ten-year period, the owner of a low-income housing tax credit project is required to provide low-income housing in compliance with IRC 42 for 15 years (the compliance period). In effect, the taxpayer is claiming credit in advance of providing housing during the last five years after the credit period has ended. As a result, 1/3 of the credit claimed each year during the ten-year credit period is associated with the provision of housing during years 11 through 15 of the compliance period. The 1/3 portion of the credit claimed each year is known as the "accelerated portion" of the credit. The accelerated portion of the credit subject to recapture decreases during the last five years of the compliance period as the taxpayer provides the housing for which the taxpayer claimed the accelerated credit during the credit period. The recapture of accelerated credit claimed for years prior to the year of an audit is a separate adjustment and is characterized as an addition to the liability of a taxpayer. A taxpayer may self-report a credit recapture amount on IRS Form 8611, Recapture of Low-Income Housing Credit. When is Recapture an Issue? Under IRC 42(j)(1), if the qualified basis of a building at the close of any taxable year in the compliance period is less than the building s qualified basis at the close of the preceding taxable year, then the taxpayer s federal income tax for that year is increased by the credit recapture amount. Recapture may not be an issue if the taxpayer discovers the noncompliance (as opposed to discovery by the State Agency or IRS) and corrects the noncompliance within a reasonable period from when it is discovered or should have been discovered. Recapture is also not required in the event of a casualty loss (to be discussed below). Credit Recapture Amount The credit recapture amount is essentially equal to the accelerated credit claimed for all taxable years prior to the year of noncompliance, plus interest at the IRS established rate. The amount is reduced in the last five years of the compliance period since the accelerated credit is being earned at that point. If the reduction in qualified basis leaves remaining qualified basis in an amount equal to or more than the maximum qualified basis identified by the state agency on Line 3a of the IRS Form 8609, then there is no reduction of credit or corresponding recapture on the decrease. This is due to what is known as "excess basis." Note also that the recapture rules do not apply when a credit is disallowed based on an adjustment to the applicable percentage. Accelerated Portion of the Credit For any year of the ten-year credit period, the accelerated portion of the credit equals one-third of the allowable annual credit. For the first ten years, the entire accelerated portion of the credit, 5/15, is subject to recapture. As the owner provides the low-income housing associated with the accelerated portion of the credit claimed in prior years during the last five years of the compliance period, the accelerated portion of the credit subject to recapture decreases. If there is a decrease in qualified basis during the 11th year of the compliance period, when the accelerated credit has still not been "earned," the recapture rate remains 0.333 or 5/15. Thereafter, the recapture rate decreases 1/15 for every year the owner provides low-income housing after the end of the ten-year credit period. This is reflected as follows: 4/15 or 0.267 for year 12; 3/15 or 0.200 for year 13; 2/15 or 0.133 for year 14; and 1/15 or 0.067 for year 15. The following example illustrates the math: Decrease in qualified basis during the 13th year of the Compliance period. The allocation of credit was based on a qualified basis of $1,000,000 and an applicable percentage of 0.0900 (the 9% credit). The allowable annual credit amount is $90,000. The tax return for the 13th year of the compliance period is audited and the IRS determines that the correct qualified basis was $750,000. The adjustment to qualified basis is $250,000. To calculated the recapture, determine the credit associated with the $250,000 basis reduction. $250,000 X .0900 = $22,500. The recapture rate in year 13 is 3/15 or 0.200. $22,500 X 0.200 = $4,500 in recapture for each year of the ten-year credit period or a total recapture of $45,000. Casualty Losses Under IRC 42(j)(4)(E), the recapture provisions do not apply if the reduction in qualified basis results from a casualty loss if the lost qualified basis is restored by reconstruction or replacement within a reasonable time established by the Secretary of the Treasury. Casualty loss is defined as the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Property damage is not considered a casualty loss if the damage occurred during normal use, the owner willfully caused the damage or was willfully negligent, or was progressive deterioration such as damage caused by termites. If the taxpayer fails to restore or replace the lost qualified basis within a reasonable period, then the recapture provisions are applied for the tax year in which the casualty event occurred. Also, IRC 42(j)(4)(E) only provides recapture relief for casualty events; it does not provide for the allowance of credit during the period of time that the building is being restored (except in the case of a Presidentially Declared Disaster Area). Noncompliance with the Nonprofit Set-Aside - 42(h)(5) The 42 recapture provisions are not applicable when the rules relating to the nonprofit set-aside are violated. However, the credit may be disallowed in its entirety if the nonprofit set-aside rules are violated. For example, if a nonprofit is not materially participating in the ongoing operation of a project for two years of the credit period, the credit for those two years may be disallowed, but there will be no recapture for prior years. Noncompliance with 42(h)(6), Extended Use Agreement Recapture provisions are not applicable due to an owner s violation of the tax credit extended use agreement. Disposition Other than by Foreclosure or Transaction in Lieu of Foreclosure Generally, the disposition of a low-income building (or interest therein) is a credit recapture event. However, the credit recapture provisions are not applicable under specific circumstances if the disposition was not by foreclosure or a transaction in lieu of foreclosure. Credit recapture provisions are not applicable solely by reason of the disposition of a qualified low-income building (or interest therein) if it is reasonably expected that the building will continue to be operated as a qualified low-income building for the remainder of the building s 15-year compliance period. Disposition by Foreclosure or Transaction in Lieu of Foreclosure In the event of a foreclosure (or transaction in lieu of foreclosure), the extended use period is terminated and the building is no longer a qualified low-income building. The termination of the extended use period results in the disallowance of the credit for the year of disposition (unless the new owner enters into a new extended use agreement by the close of the year of disposition), but does not automatically result in recapture. The disposition is treated like any other disposition of the property. The question is whether the taxpayer has a reasonable expectation that the building will continue to be operated as a qualified low-income building for the remainder of the building s 15-year compliance period. Summary The critical issues to determine in order to apply the 42 recapture rules are whether the qualified basis for a building has been reduced, and if so, the applicable year of the compliance period. Not all noncompliance results in a qualified basis reduction (e.g., lack of nonprofit participation). However, much of the noncompliance resulting from management errors will lower qualified basis, such as renting to ineligible residents and charging excess rent. For this reason, the best defense against recapture is sound management and oversight of Section 42 properties.

Fair Housing Trends - 2015

As we approach the end of the year, it is interesting to look back on 2015 and review the trends in fair housing that affect how we manage our properties. 2015 was an extremely active year from a fair housing perspective, and included a landmark Supreme Court Decision. Here are some of the major occurrences in the fair housing field over the past year.   HUD increased its focus on "retaliation" It is important to remember that even if an original claim is dismissed, retaliation is a separate offense. Do not in any way retaliate against a person for lodging a fair housing claim - even if the claim is completely bogus. Legalization of marijuana - both for medicinal and recreational use - is a growing (forgive the pun) trend. However, the use of marijuana for any reason - including medical - violates federal drug laws. This means that for purposes of the federal fair housing act, a reasonable accommodation does not have to be made for a person who wants to use medical marijuana. However, while federal law generally trumps local or state laws, if you manage property in a state that permits the use of medical marijuana, check with your attorney before denying the request of a disabled person to use medically prescribed marijuana. HUD is getting very strict with communities that enforce rules that have the effect of discriminating against families with children. Safety rules for children are fine, but don t single out the behavior of children in your community rules. Also, you must be willing to waive certain rules as a reasonable accommodation to a person with a disability. Documentation continues to be a major weakness in many fair housing cases. Owners and managers should document all interaction with residents and prospects and keep the records until your attorney gives the OK to destroy them. Disparate Impact is no longer a legal "theory;" the Supreme Court ruled in the Summer of 2015 that a case may be brought based on policies that have a discriminatory effect on members of protected classes - even if the discrimination is not intentional. Owners and managers should examine all policies and practices for negative impacts based on protected characteristics. In 2015, HUD strongly reiterated its intention to pursue cases where landlords refuse to grant reasonable accommodations to disabled persons. All owners should have a reasonable accommodation policy. All decisions relative to granting or denying reasonable accommodation requests should be made at the corporate (not property) level. When requests are denied, owners should always work to find a workable alternative. In 2015, many cases involved refusal of landlords to permit assistance animals. Owners must fully understand the difference between the Americans with Disabilities Act and Fair Housing Act definitions of what constitutes an assistance animal.   As we enter 2016, it is good to remember the fair housing basics: Thousands of fair housing complaints are lodged each year. Have a procedure for responding to such complaints - and follow the procedure. Make sure all employees fully understand the procedure. Many states and localities have fair housing laws in addition to the federal laws - know them! Review all written material on a regular basis for potentially discriminatory statements. Train employees regarding what to say - both in person and on the phone, and ensure that email responses to inquiries are consistent and non-discriminatory.

Tax Extenders Signed Into Law

Congress has passed and the President has signed the Protecting Americans from Tax Hikes (PATH) Act of 2016. The legislation includes a number of permanent (as opposed to temporary) extensions of expiring tax provisions. Included in these is a permanent extension for the minimum low-income housing tax credit rate for non-Federally subsidized buildings - (the 9%) credit. It also extends the military housing allowance exclusion for determining whether a tenant in certain areas of the country is low-income. Section 131 of the Act makes the 9% tax credit for new LIHTC projects and rehabilitation expenditures permanent. This does not apply to the acquisition cost of existing projects or projects that use tax-exempt bond financing. These projects must still use the floating 4% tax credit percentage. This amendment is retroactively effective as of January 1, 2015. Section 132 of the Act extends permanently the exclusion of the military housing allowance from income for LIHTC purposes for certain areas of the country. Excluded areas include any county which contains a qualified military installation to which the number of members of the Armed Forces assigned to the units based out of such qualified military installation increased by 20% or more as of June 1, 2008 over the personnel level of December 31, 2005 and also includes any adjacent counties. The affected military installations have to have at least 1,000 members of the Armed Forces assigned to it. A list of areas in which the BAH exclusion is applicable can be found here.  

Proposed Bill Would Require Eviction of Over-Income Public Housing Tenants

Representative Bradley Byrne (R-AL) has introduced HR 4133, a bill that would require removal of public housing tenants whose income after move-in exceeds the qualifying income limits. The proposed "Public Housing Accountability Act" was introduced on November 30, 2015 and has been referred to the House Financial Services Committee. If passed the bill would amend the Housing Act of 1937 to require annual income reviews of public housing tenants. Current law limits such reviews to the initial eligibility of the household at move-in. The bill also requires that families notified of income exceeding the limits must file an appeal within 30-days of receipt of the notice and provide documentation that was not included in the income review. If there is no appeal, or if the appeal is denied, over-income families must vacate the housing.   The bill was introduced following a report from the HUD Inspector General that showed there are thousands of residents living in public housing with income in excess of the qualifying limits. Based on the make-up of the House and Senate, there is a reasonable chance that the bill will pass in 2016.   It is worth noting that one of the reasons the law exists in its current form was so that public housing residents would not be discouraged from obtaining better paying jobs out of fear of losing their housing. Passage of this bill would almost certainly lead some public housing residents to avoid better paying jobs due to the cost of market rate housing.

HUD Final Rule Defining "Chronically Homeless"

  On December 4, 2015, HUD published a final rule titled "Homeless Emergency Assistance and Rapid Transition to Housing: Defining "Chronically Homeless." This final rule establishes the definition of "chronically homeless" that will be used in HUD s Continuum of Care Program, and in the Consolidated Submissions for Community Planning and Development Programs. The final rule also establishes the necessary recordkeeping requirements that correspond to the definition of "chronically homeless" for the Continuum of Care Program.   This rule is effective on January 4, 2016. Continuum of Care recipients must comply with this rule as of January 15, 2016. The rule will apply to all program participants admitted after January 15, 2016. The rule does not apply retroactively to program participants admitted to a Continuum of Care program project prior to January 15, 2016.   Definition of "Chronically Homeless"   A "chronically homeless" individual is defined to mean a homeless individual with a disability who lives either in a place not meant for human habitation, a safe haven, or in an emergency shelter, or in an institutional care facility if the individual has been living in the facility for fewer than 90 days and had been living in a place not meant for human habitation, a safe haven, or in an emergency shelter immediately before entering the institutional care facility. The individual also must have been living as described above continuously for at least 12 months, or on at least four separate occasions in the last three years, where the combined occasions total a length of time of at least 12 months. Each period separating the occasions must include at least seven nights of living in a situation other than a place not meant for human habitation, a safe haven, or in an emergency shelter.   Stays in institutional care facilities for fewer than 90 days will not constitute a break in homelessness, but rather such stays are included in the 12-month total, as long as the individual was living or residing in a place not meant for human habitation, a safe haven, or in an emergency shelter immediately before entering the institutional care facility.   Chronically homeless families are families with adult heads of household who meet the definition of a chronically homeless individual. If there is no adult in the family, the family would still be considered chronically homeless if a minor head of household meets all the criteria of a chronically homeless individual. A chronically homeless family includes those whose composition has fluctuated while the head of household has been homeless.   Recipients and subrecipients of Continuum of Care program funds are required to maintain and follow written intake procedures to ensure compliance with the "chronically homeless" definition. The procedures must establish the order of priority for obtaining evidence as third party documentation first, intake worker observations second, and certification from the individual seeking assistance third.   Benefit of New Definition   This final definition is designed to ensure that communities are consistently using the same criteria when considering whether a person is chronically homeless.   Failure to maintain appropriate documentation of a household s eligibility is the monitoring finding that most often requires recipients of HUD funds to repay grant funds. This rule establishes recordkeeping requirements.   Recordkeeping Requirements   The recipient must maintain and follow written intake procedures to ensure compliance with the chronically homeless definition. The procedures must require documentation at intake of the evidence relied upon to establish and verify chronically homeless status.   In addition to the documentation required to demonstrate homelessness, the procedures must require documentation at intake of the evidence relied upon to establish and verify the disability of the person applying for homeless assistance. The recipient must keep these records for five years after the end of the grant term. Acceptable evidence of disability includes: Written verification of the disability from a professional licensed by the state to diagnose and treat the disability and his or her certification that the disability is expected to be long-term or of indefinite duration and substantially impedes the individual s ability to live independently; Written verification from the Social Security Administration; The receipt of a disability check (e.g., Social Security Disability Insurance check or Veteran Disability Compensation); Intake staff recorded observation of disability that, no later than 45 days from the application for assistance, is confirmed and accompanied by evidence as noted above.   The final rule is long and complex and recipients or subrecipients of Continuum of Care grants should obtain and carefully review a copy of the rule.  

Computing Adjustments to the Allowable Annual Credit for LIHTC Properties

  At the conclusion of an audit of a Low-Income Housing Tax Credit (LIHTC) taxpayer, the IRS will determine whether any adjustments to the amount of annual credit are appropriate. This will be done after auditing the eligible basis, applicable fraction, and applicable percentage. In many cases, it is as simple as computing the correct allowable credit and comparing it to the credit claimed by the taxpayer. Following is an example: Eligible basis: $8,753,000 Applicable fraction: .7500 Qualified basis: $6,564,750 Applicable percentage: .0900 IRC 42 Credit per Audit: $590,828 Credit per Tax Return: $810,000 Adjustment: (219,172)   In other cases, more complex computations will be needed to account for:   Excess Qualified Basis; Disposition or Acquisition of a Low-Income Building; or Increases in Qualified Basis.   It is strongly recommended that adjustments to the credit be calculated using the format presented on Form 8609-A Part II, Computation of Credit.   Following is a summary of possible issues relating to the computation of credits.   Adjustments to Eligible Basis   The examination of eligible basis fundamentally requires consideration of five issues: Character of the assets; Cost of the assets; When the cost was paid or incurred; Whether costs were reasonably allocated among the assets; and Whether the asset is continuously placed in service during the entire 15-year compliance period. Based on the results of this analysis, the actual dollar value of assets includable in eligible basis will be adjusted as needed. Adjustments or limitations are applicable for: Disproportionate standards; Federal grants; 47 rehabilitation credits; 48 energy credits; Supportive services for the homeless; and Tax-exempt bond financing. Eligible basis may also be affected by (1) the limitations on the cost of a community service facility, or (2) the increase for buildings located in high cost areas.   Adjustments to the Applicable Fraction   The IRS will examine four issues when determining whether or not to adjust the applicable fraction of a building: Whether the units were occupied by an income qualified household; Whether the rent for the units is correctly restricted; Whether the units are suitable for occupancy; and Whether the units are used on a transient basis (unless the units are SRO or housing for the homeless). The applicable fraction is always determined on the last day of the taxable year.   Qualified Basis   Once adjustments to eligible basis and the applicable fraction have been made, adjustments and limitations applicable to qualified basis are considered. Issues here include: Nonrecourse debt; A building s qualified basis is reduced by the amount of any nonqualified nonrecourse financing Qualified basis deemed to be zero; Ten-Year Credit Period has ended; Generally, no credit is allowable for the 11th through the 15th year of the compliance period, with two exceptions: Any credit not allowable because of the special rule for computing the applicable fraction for the first year of the credit period is allowable in the 11th year of the compliance period; and The taxpayer may claim credit based on the "increase" in qualified basis associated with a low-income unit first qualifying for the credit after the first year of the credit period (the "2/3 credit"). Any decrease in qualified basis after the end of the ten-year credit is still subject to recapture, even though the taxpayer did not claim credit. The potential for recapture disappears at the end of the 15th year of the compliance period. Disposition or Acquisition of a Low-Income Building During the Taxable Year; Under IRC 42(f)(4), if a low-income building is disposed of during any year for which credit is allowable, the credit shall be allocated between the parties on the basis of the number of days during such year the building was held by each. As explained in Revenue Ruling 91-38, the owner who has held the property for the longest period during the month in which a transfer occurs is deemed to have held the property for the entire month and may claim credit accordingly. If both the buyer and seller have held the property for the same amount of time during the month of transfer, the seller (transferor) is deemed to have held the property for the entire month. Adjustments are not made when there is a change in the interests of the partners in the partnership. The partnership will reflect such changes in the amount of credit passed through to the partners.   Applicable Percentage   The examination of the applicable percentage requires consideration of the following: When the low-income building was placed in service; Whether the building is new or acquired; and Whether the housing is financed with federal funding.   Accounting for Maximum Qualified Basis   As already noted, the law requires state housing agencies to limit the amount of credit allocated to a building so that it does not exceed the amount necessary to ensure the building s financial feasibility as a qualified low-income housing project throughout the credit period. To accomplish this, state agencies usually limit the amount of qualified basis that will be permitted. This is reflected on line 3a of the 8609 "Maximum Qualified Basis."   If the actual qualified basis is more than the maximum qualified basis, then the state agency has allocated credit to support only a portion of the assets included in eligible basis. This limit on the allowable credit is accounted for on Form 8609-A, line 15. The taxpayer must compare the allowable credit as computed on the form to the amount actually allocated on Form 8609, line 1b. The amount claimed cannot exceed the amount allocated. The following example illustrates the circumstance when actual qualified basis exceeds the maximum qualified basis:   New building with cost certified eligible basis of $10,000,000; Applicable fraction = 100%, meaning that actual qualified basis is also $10,000,000 ($10,000,000 X 100%); State agency limited qualified basis on line 3a of the 8609 to $9,000,000; The taxpayer has "excess" qualified basis of $1,000,000. For audit purposes, any decrease in qualified basis must first be applied against the excess qualified basis. If there is enough excess basis, this can result in no negative tax consequences for the taxpayer. No adjustment is made to the allowable credit if the actual qualified basis after adjustment is equal to or more than the maximum qualified basis.   Noncompliance with Extended Use Agreement   Even though noncompliance may not result in a reduction of allowable credit, state agencies are expected to enforce the terms of the extended use agreement to the extent a taxpayer does not provide the low-income housing as agreed.   In summary, the calculation of allowable credit is based on eligible basis, applicable fraction, qualified basis and the applicable percentage. It is important that taxpayers include all eligible and qualified basis on Part II of 8609s, since excess basis may prevent a reduction in annual credits - even in the event of building noncompliance.  

Amendment to the HUD Definition of Tuition, Notice H 2015-12

Amendment to the HUD Definition of Tuition, Notice H 2015-12   HUD published Notice H 2015-12 on November 18, 2015, amending the definition of tuition as it relates to both HUD Multifamily Housing programs and Public and Indian Housing (PIH) programs. The new guidance also applies to the Low-Income Housing Tax Credit (LIHTC) Program since that program follows HUD Section 8 rules in the determination of tenant income. The stated reason for the change is to promote consistency across HUD s programs by providing a standard definition of tuition and fees. The Notice is effective immediately.   Background   Many institutions of higher education have moved from a traditional tuition-only structure to a tuition and fee structure. Fees often include, but are not limited to, student service fees, student association fees, student activities fees, and laboratory fees. HUD believes the inclusion of many of these required fees within the definition of tuition will increase opportunities for its participants to further their education.   The definitional change was brought about by the language contained in Section 215(b) of the Fiscal Year 2012 appropriations legislation, which requires that the amount of any financial assistance an individual receives in excess of amounts received for tuition and "other required fees and charges" be considered when determining an applicant s or participant s annual income. This same section of the law states that when a person receives Section 8 assistance, any financial assistance (in excess of amounts received for tuition and other required fees and charges) that an individual receives under the Higher Education Act of 1965, from private sources, or an institution of higher education, shall be considered income to that individual, except for a person over the age of 23 with dependent children.   Applicability   All provisions of the Notice apply to Project-Based Section 8 and the Section 8 Housing Choice Voucher (including Project-Based Vouchers and Project-Based Certificates).   In programs, other than HUD s Section 8 program, that follow the definition of annual income in 24 CFR Part 5 (e.g., Public Housing and LIHTC), the full amount of student financial assistance is excluded from a person s annual income (see 24 CFR 5.609(c)(6)).   The Amended Definition   The Department of Education (DOE) defines tuition as the amount of money charged to students for instructional services that may be charged per term, per course, or per credit. The DOE further defines tuition and fees as the amount of tuition and required fees covering a full academic year most frequently charged to students. Examples of required fees include, but are not limited to, writing and science lab fees and fees specific to the student s major or program (e.g., nursing program).   Expenses relating to attending an institution of higher learning must not be included as tuition. Examples of these expenses include room and board, books, supplies, meal plans, transportation and parking, student health insurance plans, and other non-fixed sum charges.   Income Determination   For Section 8 programs only, the amount of financial assistance received in excess of tuition and other required fees must be included as income (except as noted above). For all other programs, the full amount of educational assistance is exempted from income.   Verification of Tuition & Fees   The amount of tuition and fees charged by the school must be verified when determining annual income for Section 8 purposes. Accepted verification methods include: Student s bill or account statement as provided by the school s bursar s office; or Direct contact with the bursar s office. Owners are also encouraged to the school s website since many provide an itemized list covering tuition and fees.

HUD Notice on Designation of Difficult Development Areas and Qualified Census Tracts for 2016

  On November 24, 2015, HUD issued a Notice in the Federal Register designating "Difficult Development Areas" (DDAs) and "Qualified Census Tracts" (QCTs) for purposes of the Low-Income Housing Tax Credit Program (LIHTC). For the first time, HUD is using Small Area Fair Market Rents (SAFMRs), rather than metropolitan area Fair Market Rents (FMRs) for the designation of metropolitan DDAs. The notice extends from 365 days to 730 days the period for which the 2016 list of QCTs and DDAs are effective for projects located in areas not on a subsequent list of DDAs or QCTs, but having submitted applications while the area was a 2016 QCT or DDA. The effective date of the new QCTs and DDAs will be July 1, 2016.   The notice designates DDAs for each of the 50 states, the District of Columbia, Puerto Rico, American Samoa. Guam, the Northern Mariana Islands, and the U.S. Virgin Islands.   The notice outlines the methodology used in determining the DDAs and QCTs, which include 2010 Census population counts, and American Community Survey data.   Determining whether a LIHTC project is located in a DDA or QCT may be critical to project feasibility, since buildings located in designated DDAs or QCTs may receive an increase in eligible basis of up to 30% over the cost certified eligible basis of the building.   IRC Section 42 defines a DDA as an area designated by the Secretary of HUD that has high construction, land and utility costs relative to the median income in the area.   To be designated as a QCT, a census tract must have 50% of its households with incomes below 60% of the Area Median Gross Income (AMGI) or have a poverty rate of 25% or more. One of these two conditions must be met in at least two of the three evaluation years for a tract to be considered eligible for QCT designation.   Future Designations   DDAs are designated annually as updated income and FMR data are made public. QCTs are designated annually as new income and poverty rate data are released.   The 2016 lists of QCTs and DDAs are effective: For allocations of credit after June 30, 2016; or For purposes of IRC 42(h)(4), if the tax-exempt bonds are issued and the building is placed in service after June 30, 2016. If an area is not on a subsequent list of QCTs or DDAs, the 2016 lists are effective for the area if: The allocation of credit to an applicant is made no later than the end of the 730-day period after the applicant submits a complete application to the LIHTC-allocating agency, and the submission is made before the effective date of the subsequent lists; or For purposes of IRC 42(h)(4), if: The bonds are issued or the building is placed in service no later than the end of the 730-day period after the applicant submits a complete application to the bond-issuing agency, and The submission is made before the effective date of the subsequent lists, provided that both the issuance of the bonds and the placement in service of the building occur after the application is submitted.   In the case of a "multiphase project," the DDA or QCT status of the site of the project that applies for all phases of the project is that which applied when the project received its first allocation of credits. For purposes of IRC 42(h)(4), the DDA or QCT status of the project that applies for all phases of the project is that which applied when the first of the following occurred: (a) the building(s) in the first phase were placed in service, or (b) the bonds were issued.   A "multiphase project" must be made known by the applicant in the first application of credit for any building in the project, and the applicant must identify the buildings in the project for which credit is (or will be) sought. Also, the aggregate amount of credit applied for on behalf of, or that would eventually be allocated to, the buildings on the site must exceed the one-year limitation on credits per applicant (as defined in the Qualified Allocation Plan), or the annual per-capital credit authority of the state agency. This must also be the reason the applicant must request multiple allocations over two or more years, and the applications for credit must be made in immediately consecutive years.   The notice provides interpretive examples of how the effective date will work based on various scenarios, and owners that may be affected by a change in DDA or QCT designation should become familiar with how the effective dates will work.   The actual list of HUD DDAs and QCTs may be found at HUDUSER.ORG.