A.1. Exception for Certain Buildings — IRS Publication 5913 — Low-Income Housing Credit: Guide for Completing Form 8823 (Jan. 2024)

(1) Under Treas. Reg. §1.42-5(c)(4), a state agency may except buildings financed by the Rural Housing Service (RHS) under the section 515 program and buildings financed with tax- exempt bonds (50% or more of the aggregate basis of the building and land) from the annual income recertification as part of its certification and review provisions. To qualify for this exception, the state agency must enter into an agreement with the RHS or tax- exempt bond issuer. Under the agreement, RHS or the bond issuer must agree to provide information concerning the income and rent of the tenants in the building to the state agency. The state agency may assume the accuracy of the information provided without further verification.
- (2) Under this exception, owners are not required to perform annual income recertifications specific to IRC §42, and the state agencies are not required to review, tenant income recertifications, supporting documentation, and rent records. Instead, the state agency must review the information provided by RHS or the bond issuer and determine whether the owner is in compliance with the income limitations and rent restrictions in IRC §42(g)(1) and (2). If the information provided by RHS or the bond issuer is not sufficient for the state agency to make a determination, the state agency must request the necessary additional income or rent information from the owner of the buildings.
- (3) NOTE: RHS determines tenant eligibility based on its definition of “adjusted annual income,” rather than “annual income” as defined under the Section 8 program. Therefore, the state agency may be required to calculate the tenant’s income for IRC §42 purposes and may need to request additional income information from the owner.
A.2. Noncompliance Corrected by Owner Prior to Notification of State Agency’s Compliance Review
- (1) Noncompliance with the annual income recertification requirements that is identified and corrected by the owner prior to notification of the compliance review by the state agency need not be reported; i.e., the owner has

demonstrated due diligence by addressing noncompliance issues independently. See Chapter 3.

(2) Example 1: Noncompliance Corrected Before Notification of Compliance Review
- On January 15, 2004, the owner of a LIHC building incorrectly completed a household’s income recertification. The owner identified the problem and corrected the documentation deficiency on March 30, 2004. The owner was notified on April 20, 2004, that the state agency would be conducting a tenant file review on May 1, 2004.
- The state agency selected Unit A as part of the 20% sample and reviewed the household’s income certification and noted the corrections. Because the owner corrected the noncompliance before the April 20, 2004, notification date, the owner is in compliance.
A.3. 100 Percent LIHC Projects – Tax Years Ending Before July 31, 2008
(1) An owner may have received a waiver of the annual income recertification requirements under Rev. Proc. 2004-38, 2004-2 C.B. 10 or Rev. Proc. 94-64, 1994-2 C.B. 797, which applied to owners of qualified low-income housing projects that consist entirely of 100 percent low-income buildings. If noncompliance with the tenant income certification requirements was sufficiently serious, consideration was given to revoking the waiver. Revocation was not required, but the Service would revoke the waiver at the state agency’s request.
A.4. 100 Percent LIHC Projects – Tax Years Ending After July 30, 2008
- (1) Under IRC §142(d)(3)(A), if all the low-income buildings in the project are 100% low- income buildings, owners are not required to complete annual tenant income recertifications.2 “Projects” are identified based on the owner’s election as documented on Form 8609, line 8b.3 Previously approved Income recertification waivers are subsumed by the new law and are no longer in force.