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Why Anticipated Income is Important to the LIHTC Program

Written by Mike Sprague, Spectrum Enterprises

Qualifying a household to move into a tax credit unit takes more than just looking at their current income status.  To truly be eligible, the household should still be under the income limit at the first annual certification as well.  While a household could still be considered eligible if they are found over income at first recert, a state auditor will need to see that the manager did enough due diligence at move-in to qualify the household.

 Per the HUD 4350.3, annual income is “all amounts anticipated to be received from a source outside the family during the 12 month period following admission or annual recertification effective date.”  This means that an applicant doesn’t have to be receiving income currently to have income reported on the TIC. 

 An adult applicant who is not currently working may be looking for work and may anticipate finding employment in the 12 months following the certification period.  This anticipated income needs to be factored when determining the household’s eligibility.  The use of an Unemployed Status Affidavit (see Spectrum’s forms on our web site for an example) is the best way to determine this income.

 A good Unemployed Status Affidavit will help the manager to answer the following important questions: 

1)       Does the applicant receive any benefits, such as unemployment, disability, or worker’s compensation?  If there is disability or worker’s compensation you will need to follow up to see if there is a known return to work date.

2)      When was the applicant last employed?  This can help to determine the potential of finding new employment.

3)      Does the applicant anticipate becoming employed?  If no, and they haven’t worked for a while, then it is reasonable to believe they will not find employment and there is no reason to go any further.  If they do anticipate finding employment they will need to provide an anticipated amount and document how this amount was determined.  If they have recently been employed and are looking for similar work, then a tax return showing a full year of income is acceptable, as well as pay stubs from previous employment.  If they haven’t worked in a while, have them clarify the pay rate they expect to find and how many hours (good documentation to back this up would be job postings that they have applied for or plan to apply for). 

4)      Is the applicant seasonally employed?  Applicants usually answer questions at face value, and if they are in a lay off period for a seasonal job they may indicate that they are unemployed.  If they do work seasonally, then this income can be 3rd party verified.

5)      Does the applicant have an anticipated start date?  Again, an applicant may not realize that they need to indicate that they are employed if they haven’t actually started working yet. 

 There is another aspect of anticipated income to consider.  Let’s say that you have an adult applicant who is currently enrolled in school and is not currently employed.  This individual is due to graduate within 3 months after move-in.  It is reasonable to think that this applicant will become employed in a field related to the degree that they will obtain.  Potentially, this income could put the household over income at first recert.  The best course of action is to show due diligence by trying to anticipate what this applicant will earn once they graduate.  Using a web site to show a range of salaries in the area for the expected employment is a good way to show potential earnings.

There are some states that do not recognize anticipated income.  For example, California does not count anticipated income unless there is an official job offer.  Their compliance manual also goes on to say that if a household member finds employment within one month after move-in further documentation may be requested to determine income eligibility.  This means that while they do not calculate anticipated income they do expect the manager to show due diligence in case the household does obtain employment and the household is found over income at first recert.  The best way to do this is to address the anticipated income prior to move-in, even if it is not reported on the TIC.

 

 


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