x New HUD Income Exclusion - Spectrum Enterprises


New HUD Income Exclusion

Written by Lois Churchill, Spectrum Enterprises

HUD published a notice in the Federal Register on 5/20/14. That notice was in regards to income exclusions for HUD programs. It added a new exclusion, re-inserted an inadvertent omission from the notice published on 12/14/12, and corrects two others.

The notice adds exclusion of any amounts in an “individual development account” as provided the the Assets for Independence Act, as amended in 2002 (Pub. L. 107-110, 42 U.S.C. 604 (h)(4))

It includes previously omitted exclusion of any allowance paid under the provisions of 38 U.S. C. 1833(c) to children of Vietnam veterans born with spina bifida (38 U.S.C. 1802-05), children of women Vietnam veterans born with certain birth defects (38 U.S.C 1811-16), and children of certain Korean service veterans born with spina bifida (38 U.S.C. 1821).

It clarifies the criteria for Section 8 participants for scholarships funded under title IV of the Higher Education Act of 1965 (20 U.S.C 1070) including awards under federal work-study programs or under the Bureau of Indian Affairs student assistance programs (20 U.S.C. 1087uu).

It corrects the timeline of exclusion (xxiii) for settlements payments pursuant to the case entitled Elouise Cobell et al. v. Ken Salazar et al.

Individual Development Accounts: Per 42 U.S.C 604 (2)(A) and (B) –

(A) Establishment

Under a State program carried out under paragraph 91), an individual development account may be established by or on behalf of an individual eligible for assistance under the State Program operated under this part for the purpose of enabling the individual to accumulate funds for a qualified purpose described in subparagraph (B).

(B)  Qualified purpose

A qualified purpose described in this subparagraph is 1 or more of the following, as provided by the qualified entity providing assistance to the individual under this subsection:

(i) Postsecondary education expenses

Postsecondary education expenses paid from an individual development account directly to an eligible educational institution.

(ii) First home purchase

Qualified acquisition costs with respect to a qualified principal residence for a qualified first-time homebuyer, if paid from an individual development account directly to the persons to whom the amounts are due

(iii) Business capitalization

Amounts paid from an individual development account directly to a business capitalization account which is established in a federally insured financial institution and is restricted to use solely for qualified business capitalization expenses.

 (4) No reduction in benefits

Notwithstanding any other provision of Federal law (other than the Internal Revenue Code of 1986) that requires consideration of 1 or more financial circumstances of an individual, for the purpose of determining eligibility to receive, or the amount of, any assistance or benefit authorized by such law to be provided to or for the benefit of such an individual, funds (including interest accruing) in an individual development account under this subsection shall be disregarded for such purpose with respect to any period during which such individual maintains or makes contributions into such an account.

To be honest, in all the years I’ve worked in affordable housing I have never seen one of these accounts. However they exist and HUD has added them to the list of excluded income. Should an applicant or a tenant tell you they have such an account you must verify that the funds are from a 42 U.S.C. 604 grant and if they meet the requirements of (2)(A) and (B) you will exclude both the account and the interest it earns from your income calculations.

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