§ 1.42-5T - Monitoring compliance with low-income housing credit requirements (temporary).

§ 1.42-5T Monitoring compliance with low-income housing credit requirements (temporary).

(a)

(1) through(a)(2)(ii) [Reserved]. For further guidance, see § 1.42-5(a)(1) through (a)(2)(ii).

(iii) Effect of guidance published in the Internal Revenue Bulletin. Guidance published in the Internal Revenue Bulletin (see § 601.601(d)(2)(ii)(b) of this chapter) may provide -

(A) Exceptions to the requirements referred to in § 1.42-5(a)(2)(i) and the requirements described in this section; or

(B) Alternative means of satisfying those requirements.

(b) through (c) (2)(i) [Reserved]. For further guidance, see § 1.42-5(b) through (c)

(2)

(i) .

(ii) Require that, with respect to each low-income housing project, the Agency conduct on-site inspections and review low-income certifications (including in that term the documentation supporting the low-income certifications and the rent records for tenants).

(iii) Require that the on-site inspections that the Agency must conduct satisfy both the requirements of § 1.42-5(d) and the requirements in paragraph (c)(2)(iii)(A) through (D) of this section, and require that the low-income certification review that the Agency must perform satisfies the requirements in paragraphs (c)(2)(iii)(A) through (D) of this section. Paragraph (c)(2)(iii)(A) through (D) of this section provides rules determining how these on-site inspection requirements and how these low-income certification review requirements may be satisfied by an inspection or review, as the case may be, that includes only a sample of the low-income units.

(A) Timing. The Agency must conduct on-site inspections of all buildings in the low-income housing project and must review low-income certifications of the low-income housing project -

(1) By the end of the second calendar year following the year the last building in the low-income housing project is placed in service; and

(2) At least once every 3 years thereafter.

(B) Number of low-income units. The Agency must conduct on-site inspections and low-income certification review of not fewer than the minimum number of low-income units required by guidance published in the Internal Revenue Bulletin. See § 601.601(d)(2)(ii)(b) of this chapter.

(C) Selection of low-income units for inspection and low-income certifications for review -

(1) Random selection. The Agency must select in a random manner the low-income units to be inspected and the units whose low-income certifications are to be reviewed. The Agency is not required to select the same low-income units of a low-income housing project for on-site inspections and low-income certification review, and an Agency may choose a different number of units for on-site inspections and for low-income certification review, provided the Agency chooses at least the minimum number of low-income units in each case. If the Agency chooses to select different low-income units for on-site inspections and low-income certification review, the Agency must select the units for on-site inspections or low-income certification review separately and in a random manner.

(2) Advance notification limited to reasonable notice. The Agency must select the low-income units to inspect and low-income certifications to review in a manner that will not give advance notice that a particular low-income unit (or low-income certifications for a particular low-income unit) for a particular year will or will not be inspected (or reviewed). However, the Agency may give an owner reasonable notice that an inspection of the building and low-income units or review of low-income certifications will occur. The notice is to enable the owner to notify tenants of the inspection or to assemble low-income certifications for review.

(3) Meaning of reasonable notice. For purposes of paragraph (c)(2)(iii)(C)(ii) of this section, reasonable notice is generally no more than 30 days. The notice period begins on the date the Agency informs the owner of the identity of the units for which on-site inspections or low-income certification review will or will not occur. Notice of more than 30 days, however, may be reasonable in extraordinary circumstances that are beyond an Agency's control and that prevent an Agency from carrying out within 30 days an on-site inspection or low-income certification review. Extraordinary circumstances include, but are not limited to, natural disasters and severe weather conditions. In the event of extraordinary circumstances that result in a reasonable-notice period longer than 30 days, an Agency must conduct the on-site inspection or low-income certification review as soon as practicable.

(4) Applicability of reasonable notice limitation when the same units are chosen for inspection and file review. If the Agency chooses to select the same units for on-site inspections and low-income certification review, the Agency may conduct on-site inspections and low-income certification review either at the same time or separately. The Agency, however, must conduct both the inspections and review within the reasonable-notice period described in paragraph (c)(2)(iii)(C)(2) and (3) of this section.

(D) Method of low-income certification review. The Agency may review the low-income certifications wherever the owner maintains or stores the records (either on-site or off-site).

(3) Frequency and form of certification. A monitoring procedure must require that the certifications and reviews of § 1.42-5(c)(1) and (c)(2)(i) be made at least annually covering each year of the 15-year compliance period under section 42(i)(1). The certifications must be made under penalty of perjury. A monitoring procedure may require certifications and reviews more frequently than every 12 months, provided that all months within each 12-month period are subject to certification.

(c) (4) through (h)(1) [Reserved]. For further guidance, see § 1.42-5(c)(4) through (h)

(1) .

(2) Effective/applicability dates of the REAC inspection protocol. The requirements in paragraphs (a)(2)(iii), (c)(2)(ii) and (iii), and (c)(3) of this section apply beginning on February 25, 2016. Agencies using the REAC inspection protocol of the Department of Housing and Urban Development as part of the Physical Inspections Pilot Program may rely on these provisions for on-site inspections and low-income certification review occurring between January 1, 2015 and February 25, 2016. Otherwise, for the rules that apply before February 25, 2016, see § 1.42-5 as contained in 26 CFR part 1 revised as of April 1, 2015.

(i) Expiration date. The applicability of this section expires on February 22, 2019.

[T.D. 9753, 81 FR 9337, Feb. 25, 2016]