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Potential Changes to Compliance Regulations

Erik Whitton, Head of Private Monitoring

During the recent NCSHA Conference in Denver there was some discussion on the proposed changes to compliance monitoring regs. Where properties participate in multiple federal housing programs (combining tax credits with HUD or RD) they are subject to multiple inspections. For instance, a property participating in both the tax credit program and a HUD program are inspected by the state HFA for tax credit compliance and a HUD REAC inspection. The standards are different. Owners, managers, and residents feel burdened by multiple inspections. Government agencies can save money by allowing one inspection to serve the different housing programs. The IRS is requesting feedback on whether a HUD REAC or Rural Development inspection can serve as the state HFA inspection for monitoring tax credit compliance.

State agencies are required to inspect a minimum of 20% of the units. Some HUD REAC inspections may not meet that threshold. The IRS is proposing that the HUD REAC inspection (or RD inspection) serve the 20% requirement despite fewer units actually being inspected.

The IRS is requesting feedback on these issues. Specifically:

• Whether a minimum 20% test for tenant files and dwelling units is appropriate in terms of achieving better efficiency while also working to maintain owner compliance with IRS requirements.

• Whether the 20% minimum should vary based on files vs. units.

• Whether the 20% minimum threshold should be based on the the number of total units in a project or just the number of low income units in the project.

• Whether the 20% minimum should vary based on whether the project is being inspected as a new property for the first time by the state HFA or whether it is an ongoing review (required every 3 years).

• Whether it would be OK to “decouple” the units and files under review (right now HFA staff is required to review the same unit and tenant file).

IRS Notice 2012-18 is the formal outline requesting feedback on these questions. Note that the deadline for comments is listed as 05/3//2012 however IRS personnel at the NCSHA conference are still allowing comments.

NCSHA has already submitted comments to this.

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