Staying in Compliance With All Your Regulatory Documents

Written by Lois Churchill, Director of Operations for State Monitoring

Good management companies spend a lot of time making sure they stay in compliance with Section 42 requirements. Everyone wants to avoid those nasty 8823s. However there are “other” requirements/promises that must be complied with as well.

Tax credit awards are very competitive and developers/owners make a lot of promises to the State Allocating Agency to obtain awards. It is then up to management to make sure that all promises are kept. Spectrum tells participants during trainings that they need documents to know what those promises are in order to keep them. Management needs copies of the tax credit application, loan agreements, grant documents, as well as the Tax Credit Regulatory Agreement (LURA, EUA, LURC). Then management needs to read those documents to find out what their particular requirements are.

The Tax Credit Regulatory Agreement should be read in its entirety as it will also stipulate what may be requirements for all tax credit properties in that particular state. Remember that State requirements may be more restrictive than Federal requirements. For example, Section 42 regulations state that subsidy received is not to be included in gross rent calculations and also that if a tenant receives subsidy their portion of the rent may exceed tax credit maximum allowable. Does your State Allocating Agency allow that? Some don’t.

While violation of conditions of the Regulatory Agreement or other documents may not result in the issuance of an 8823 it might take the owner out of contention for future credit awards!

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