Blogs| A Guide to LIHTC Compliance and Reporting Essentials
Written by
Priya Gupta
Published
July 28, 2024
Topics
LIHTC
The Low-Income Housing Tax Credit (LIHTC) program is a crucial element in promoting affordable housing for low-income tenants across the United States.
For the LIHTC program to work properly without failing, ensuring compliance and reporting requirements is crucial to maintaining the program’s integrity. But, this job is easier said than done.
This blog provides an overview of LIHTC compliance requirements and reporting needs so that readers can understand how critical it is to maintain the achievements made under this scheme.
The LIHTC program, enacted by the Tax Reform Act of 1986, was designed to give developers and property owners who construct or renovate low-income rental units tax credits.
The federal government’s program is supported by the Internal Revenue Service (IRS) to satisfy the demand for affordable housing, among other roles. This tax program for development serves as a pull factor toward initiating affordable housing projects, which otherwise would not be financially justified.
It is crucial to adhere to LIHTC regulations to ensure that properties continue offering affordable housing to people who qualify as low-income for no less than 15 to 30 years and beyond. If they are not compliant, they are subject to penalties, including recapturing some of the tax credits.
Here are the key compliance requirements:
LIHTC compliance necessitates accurate and timely reporting. Owners and property managers must meet specified reporting requirements to ensure program integrity. The major reporting requirements consist of:
Ensuring LIHTC compliance is a crucial responsibility of Certified Public Accountants (CPAs). They prepare financial statements, conduct audits, and provide exact reporting. This helps them navigate tax regulations’ complexities and detect non-compliance threats in advance. Their participation guarantees that financial practices are consistent with regulations, thereby raising any inconsistencies whenever they occur.
Maintaining compliance with the LIHTC and avoiding risks requires property managers and owners to stick to best practices.
Property managers and staff should strictly follow LIHTC regulations and be regularly trained about them. Consequently, more knowledge and skills can be instilled in the staff through regular in-house training forums and participation in external workshops and seminars.
In addition, LIHTC software with strong recording systems, like digitally based property control technologies, will help make compliance procedures easier. Maintaining properties by conducting inspections and carrying out repairs promptly keeps them habitable and in good condition.
To achieve long-term positive outcomes, it is vital to continually monitor and confirm compliance with the low-income housing tax credit project’s applicable requirements.
It is critical to comply with and follow reporting requirements for tax credit compliance. Understanding what qualifies as an occupant, what rent is charged, and what is meant by habitable rooms enables managers and owners to adhere to this law.
Consistent training, proper LIHTC paperwork, and preventative maintenance are necessary to remain compliant and maintain the program’s goals. CPAs are crucial for supporting these compliance efforts and ensuring that housing for low-income tenants remains effective.
By abiding by the best practices and implementing program integrity measures, stakeholders can ensure the success and sustainability of the LIHTC program, making it an indispensable affordable housing resource throughout the U.S.