Low Income Housing Tax Credit Compliance

The Low Income Housing Tax Credit (LIHTC), also known as Section 42, was developed to provide incentives for private sector production of low-to-moderate income housing. The credits provide a mechanism for funding a wide range of developments, including new construction, substantial rehabilitation, moderate rehabilitation, acquisition, and repair by existing owners.

In Minnesota, the Minnesota Housing Finance Agency (MHFA) is the primary apportionment Agency of Housing Tax Credits. Qualified local cities and counties also have been designated by the Legislature as Suballocators of the tax credit. Affordable Housing Connections, Inc. has been designated as the agent to perform certain compliance monitoring functions by these Suballocators:

  • Minneapolis CPED
  • Saint Paul PED
  • City of Rochester
  • Saint Cloud HRA
  • Washington County CDA

Each Suballocator develops and implements a Qualified Allocation Plan (QAP) for its portion of tax credits and issues a Tax Credit Compliance Monitoring Manual to direct owners and managing agents in tax credit policies and procedures. Suballocators directly notify the IRS about project noncompliance and corrective action taken using form 8823.

Section 42 Suballocator Contact Information & Manuals

New to the Low Income Housing Tax Credit?

The LIHTC program began in 1986 as part of the 1986 Tax Reform Act and provides a tax incentive to either construct or rehab affordable rental housing.ย  You may have heard this program referred to using many different names/acronyms such as: HTC (Housing Tax Credit), Section 42, LIHTC (Low Income Housing Tax Credit), and Tax Credit to name a few.

This funding requires affordable housing projects to comply with income and rent restrictions, student rules and maintain the physical property.ย  The LIHTC program requires annual monitoring for compliance with these federal regulations.ย  To learn more about the LIHTC program please check out our available training courses.

LIHTC Compliance Forms & Reporting Tools

GRH Verification Form

Minnesota Housing developed a new form called Housing Support and Rental Assistance Calculation Worksheet, along with guidance, to use for households receiving Housing Support (formerly known as Group Residential Housing or GRH).ย  The worksheet will help identify whether the Housing Support received by the household should be included as income, and when or if, the Housing Support should be treated as rent assistance.ย  The guidance provided by Minnesota Housing includes two examples of calculations and a sample copy of a Housing Support acceptance letter.

AHC suggests completing this worksheet for all households receiving Housing Support to check for correct rent calculations and public assistance income, especially if you have been cited for rent noncompliance.ย  If the calculation proves out that the Housing Support can not be considered rent assistance, rent must be adjusted to comply with applicable rent limits.ย  A copy of the completed form should be retained in the tenant file.

Section 42 Income & Rent Limits

2024 Section 42 limits have been published and are effective April 1, 2024.

There is a forty-five (45) day grace period from the effective date to when the limits must be implemented.ย  That grace period ends on May 16, 2024.

AHC Tenant Demographic Form
AHC does not have a โ€œrequiredโ€ version. Owners may use the formย MN Housing has developed.

Owners also may use their own form or a form required by another program that collects the same information.

Frequently Asked Questions

Additional Resources

(Handbook 4350.3) Rev 1. Change 4. Chapter 5 of the HUD Occupancy Manual Requirements of Subsidized Multifamily Housing Programs is used for determining income from income sources and assets. Information on deductions, allowances, and calculating rent does not apply to Section 42.

Please note that AHC does not provide housing locator services to the public. If you are looking for housing, contact HousingLink.