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UNDERSTANDING INCOME LIMITS
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UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Jun 11, 2020

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Page 1: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

UNDERSTANDING INCOME LIMITS

Page 2: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Topics We Will Discuss Today • Definition of Project • 8609 Election, Part II Line 8b • Project Configurations • Income Limits

The TheoPRO Group: Setting the Standard of Excellence 2

Page 3: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Definition of a ‘Project’

The TheoPRO Group: Setting the Standard of Excellence

The 8609 documents the definition of Project PART II, Line 8b: either— Each building is its own project, or… Each building is part of a multiple-building project.

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Page 4: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Definition of a ‘Project’

The TheoPRO Group: Setting the Standard of Excellence

Two or more qualified low-income buildings can be included in a project only if the buildings are: 1. located on the same tract* of land, unless all units in in all buildings being aggregated in the

multiple building project are low-income units . See Sec. 42(g)(7), for scattered site projects.

2. owned by the same entity for federal tax purposes.

3. financed under a common plan for financing.

4. similarly constructed housing units.

If any of the above is different, a new project is created

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* “Tract" means any parcel or parcels of land which are contiguous except for the interposition of a road, street, stream or similar property. Otherwise, parcels are contiguous if their boundaries meet at one or more points.”

Page 5: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

8609 Part II

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Page 6: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

Except of Form 8609 Instructions about Building Election 8b.

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Page 7: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

Examples of Possible Projects 1. Single Project Consisting of One Building

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Page 8: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

Examples of Possible Projects 2 . Single Project with Multiple Buildings

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Page 9: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

Examples of Possible Projects 3 . Multiple Projects Under One Project Name

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Page 10: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

Single Project with Multiple Buildings

Parkview Apartments consists of 3 buildings 10 units per Building

Buildings Placed in Service beginning October 2012

Owner elected ‘Yes’ on Forms 8609 Part II 8b, to include

each of the three buildings as part of one ‘project’. All will use the same income and rent limits based on the date the FIRST building in the project is placed in service.

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Page 11: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

Parkview Apartments 2 . Single Project with Multiple Buildings

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Page 12: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

Multiple Projects Under One Project Name

Parkview Apartments consists of 3 separate projects

10 units per project (building)

Buildings Placed in Service October 2012.

40-60 Minimum Set-Aside

Owner elected ‘No’ on Forms 8609 Part II 8b. Thus each building is its own ‘project’ and could have its own separate income and rent limits.

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Page 13: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

Parkview Apartments 3 . Multiple Projects Under One Project Name

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Page 14: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

EACH building is its own project unless the owner elects to make each building part of a multiple building project on the Form 8609, Part II.

All buildings that will be part of a multiple building project must be indentified on an attachment to each Form 8609 for the project.

Failure to add this information results in each building being its own project.

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Page 15: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

LIHTC Income Limits Building versus Project

Choosing ‘Yes’ or ‘No’ on 8609 question 8b.

Can the 8b election make a difference with your apartment complex’s rental revenue?

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Page 16: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

Income Limits Choosing ‘Yes’ to 8b – Multifamily Tax Subsidy Program (MTSP)

hold harmless for income limits is determined by the place in service date of the first building in the project.

Choosing ‘No’ to 8b – MTSP hold harmless limit for each building is determined by the placed in service date of the each building. Consider: Buildings that place in service in the subsequent calendar

year may end up with lower income limits and lower maximum LIHTC rents.

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Page 17: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

Note Sure Which Election to Make on Form 8609?

IRS has issued private letter rulings that permitted late 8609

elections where there was reasonable cause.

Watch 8609s carefully.

You can assist in making the appropriate elections if you

understand the outcome/impact.

Only the project requesting PLR can rely on the ruling.

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Page 18: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence 18

Page 19: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

I. The Latest on

LIHC INCOME LIMITS

STEP 1

Which Income Limit Table Do I Use?

Page 20: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Which Income Limit Do We Use?

Here are the choices: MTSP Dataset Current 50% or 60% Limit

MTSP Dataset HERA 50% or 60% Limit

NNMGI Income Limits?

Page 21: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Which Income Limit Do We Use?

Here are the choices: New Projects placing in service must use the most current year MTSP income limits within 45 DAYS after the date the limits are released.

Gross rent limits are calculated based on income limits for Section 42 projects

More to come re The 45-Day Choice!

Page 22: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Which Income Limit Do We Use?

Here are the choices: MTSP Dataset Current 50% or 60% Limit

MTSP Dataset HERA 50% or 60% Limit

NNMGI Income Limits?

Page 23: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Which Income Limit Do We Use?

Here are the choices: Existing Projects placed in service after 12/31/08 use the HIGHEST ‘Hold Harmless’ income limits since their placed in service date.

Tax credit projects use the accompanying gross rent limits.

More to come on this!

Page 24: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Which Income Limit Do We Use?

Here are the choices: MTSP Dataset Current 50% or 60% Limit or

MTSP Dataset HERA 50% or 60% Limit

NNMGI Income Limits?

Page 25: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Which Income Limit Do We Use?

Here are the choices: HERA Special income limits (for projects in

HERA-protected Metropolitan Statistical Areas (MSA) placed in service as of 12/31/08).

Gross rent limits are calculated based on income limits for Section 42 projects.

Page 26: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Which Income Limit Do We Use for NNMGIs? National Non-metropolitan Median Gross Income limits (for GO ZONE or RURAL projects)

Definition of ‘RURAL’ has been expanded to keep current NNMGI in place for all areas currently defined as ‘rural’ in spite of population increases up to 35,000 until 2020. More at www.theopro.com/what’snew

Gross rent limits are calculated based on income limits for Section 42 projects.

This just in!

Page 27: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Which Income Limit Do We Use? In some parts of the country National Non-

metropolitan Gross Income limits will be HIGHER than MSA/AMGI income limits.

Tax credit projects in these locations may use

these higher limits as long as the project is defined as ‘rural’.

Page 28: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Which Income Limit Do We Use?

Here are the choices: MTSP Dataset Current 50% or 60% Limit or

MTSP Dataset HERA 50% or 60% Limit or

NNMGI Income Limits?

Page 29: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The Income Limit Is Based On: For acquisition/rehab, generally use the date of acquisition for income limit reference.

More at TheoPRO5!

Page 30: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Remember:

New projects MUST use the current year income/rent limits even if they are LESS THAN prior year income limits.

HERA limits are only for projects already placed in service prior to 12/31/08.

Page 31: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Remember:

Existing projects income/rent limits DO NOT decrease in future years

They INCREASE when limits increase

based on the MTSP data set.

Page 32: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Remember:

What happens to the income limits also affects the rent limits. When MTSP income limits increase,

LIHC RENT limits increase, subject to State approval.

Once a project is placed in service LIHC income and rents DO NOT decrease.

Page 33: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Remember:

Your state housing finance agency or other programs may influence the income and rent limits for your project!

Page 34: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Example: COUNTY X $41900 MTSP 2014 Dataset 1 person 2 person 3 person 4 person 50% $18,150 $20,750 $23,350 $25,900 60% $21,780 $24,900 $28,020 $31,080 HERA 50% $18,800 $21,500 $24,150 $26,850 HERA 60% $22,560 $25,800 $28,920 $32,220

Page 35: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Example A The first building of a project is placed in service on February 14, 2014 4 person HERA 60% limit $32,220 4 person non-HERA 60% limit $31,080 Which income limits must be used for

a family of 4 persons? $31,080

Watch the 8609 Line 8b!!!

Page 36: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Example A Why can’t the HERA income limit be

used? The project was not in service as of

12/31/08!

Page 37: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Example B The first building of a project was placed

in service on July 20, 2011 Required to use 2011 income/rent limits!

Can HERA Limits be used? NO!

Page 38: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Example B If income /rent limits for the MSA

DECREASE in any future year-- Project income/rent limits DO NOT

decrease!

Page 39: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Example: COUNTY X $41900 MTSP Dataset 1 person 2 person 3 person 4 person 60% $21,780 $24,900 $28,020 $31,080

YEAR 1

Page 40: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Example: COUNTY X $41900 MTSP Dataset 1 person 2 person 3 person 4 person 60% $21,780 $24,900 $28,020 $31,080 60% $20,150 $24,750 $27,350 $30,900

YEAR 1

Must an existing project’s income limits decrease? NO!

YEAR 2

Page 41: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Example: COUNTY X $41900 MTSP Dataset 1 person 2 person 3 person 4 person 60% $21,780 $24,900 $28,020 $31,080 60% $20,150 $24,750 $27,350 $30,900 60% $22,780 $25,900 $29,020 $32,080 Which limits can the existing project use?

YEAR 1

YEAR 2

YEAR 3

Page 42: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Example: COUNTY X $41900 MTSP Dataset 1 person 2 person 3 person 4 person 60% $21,780 $24,900 $28,020 $31,080 60% $20,150 $24,750 $27,350 $30,900 60% $22,780 $25,900 $29,020 $32,080 Which limits can the existing project use?

YEAR 1

YEAR 2

YEAR 3

Page 43: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Can the existing project’s income/rent limits increase?

YES YES YES

Page 44: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

Must the existing project’s income/rent limits ever decrease?

NO NO NO

Page 45: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence 45

Page 46: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

The TheoPRO Group: Setting the Standard of Excellence

Phone: (877) 783-1133 Fax: (262) 783-1134 www.theopro.com

“What a difference YOU make!”

Join our LinkedIn Group

TheoPRO Compliance Link

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Page 47: UNDERSTANDING INCOME LIMITS - MHDC - Eligibility with Income Limits.pdfHERA Special income limits (for projects in HERA-protected Metropolitan Statistical Areas (MSA) placed in service

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