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Where We Get Direction
A key to references used in this manual
Tax Credit
Format used in the references :_________
1. Legal Authority
1.
Section 42, Internal Revenue
Code (IRC).
§ 42
Additional Formal IRS Guidance:
2. Treasury Regulations
IRS1.42 ( -1 to -17)
3.
Revenue Rulings
Rev Rul (yr - #)
4.
Revenue Procedures
Rev Proc (yr - #)
5.
IRS Notices
IRS Notice (yr-#)
6.
HUD 4350.3
4350.3 (paragraph/page#)
2. Additional interpretive resources:

8823 Guide (rev 10-09)
8823 Guide (chapter-page #)
Additional minor revisions 3-2011
Now available online at www.IRS.gov

IRS Newsletters
IRS Newsletter (#)
Private Letter Rulings
PLR (#)
(provide further guidance)

(cannot be cited as precedent)
HUD
___
Formal guidance:
 HUD Handbook 4350.3
4350.3 (paragraph/page#)
"Occupancy Requirements of Subsidized
Multifamily Housing Programs"


HUD Notices
HUD RHIIP Listserv
_____________________
Notice H (year/#)
RHIIP Listserv (Posting #)
Rural Development
__
Formal guidance:
 HB-2-3560
"Multi-Family Housing Asset
Management Handbook"
_ ___________________
HB-2-3560 (paragraph/page#)
HOME___________________
Formal guidance:
 24 CFR Part



"Compliance in HOME Rental Projects:
A Guide for Property Owners"
HOME &the Low-Income Housing Tax Credit
Guidebook
“Technical Guide for Determining
Income and Allowances for HOME program” (2005)
Online tool:
 A web-based income calculator:
_
24 CFR Part 92 (section)
HOME Guide
HOME Tech Guide (page)
HUD.gov
Keyword search –
“HOME Income calculator”
BOND_____________________________________________________________________________
_
Legal authority and formal guidance:
 Section 142, Internal Revenue
Code (IRC).
 Various revenue rulings, procedures,
 IRS Notices and others.
© Zeffert & Associates
§ 142
See LIHTC Section above for reference key to
IRS publications
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Students in Affordable Housing - 2015
Introduction
The Goal of this Training
The purpose of this training is to provide information for interested personnel to understand the student
rules that apply to the different affordable housing programs.
LIHTC
§ 42 (i)(3)(D) & 8823 Guide Chapter 17
The Code forbids units being used for dormitories. How do we avoid this use at LIHTC projects?
Generally, households made up entirely of full-time students do not qualify.
The 1st Question that we must ask: is everyone a FT student?
Full-Time Students…




Attend a school with facilities and regular student body
Attend all or parts of any 5 months out of the year (not necessarily
consecutively)
Are considered full-time by school that they attend
Include students in elementary, junior and senior high school as well as
institutes of higher learning.
8823 Guide 17-2 & Exhibit 17-1 on page 17-5
Verification
Student status questions must be asked at move-in (and status verified, if necessary). It also must be re-
examined annually. The IRS has provided a sample form in the revised 8823 Guide.
Student Status Exceptions
FT Student Households must meet one of five exceptions continually to live in an LIHTC Unit
For these exceptions, all members must meet the exception:
1. All adults are married and ENTITLED TO file a joint tax return.
Verification: copy of return or marriage certificate.
Rev Rul 2013-17
NOTE: same-sex couples married in ANY state that recognizes same-sex marriage, meet this exception in all states
2. All adult members are single parents with minor children, the adult is not a dependent
of any third party, and the children are only claimed by a parent.
Verification: copy of tax return (if possible) or a signed affidavit that the adult in the household is a
not a dependent of anyone outside the household and the children are claimed only by a parent.
For these exceptions, one member qualifies a household:
3. The household includes a member who receives Title IV welfare (TANF in many states).
Verification: TANF award letter or 3rd-party verification.
4. The household includes a member who formerly received foster care assistance.
Verification: foster paperwork from welfare agency
HERA added this exception [Effective for eligibility determinations after 7/30/08].
5. The household contains a member who gets assistance from the Job Training
Partnership Act (JTPA) or similar program.
Note: the “Workforce Investment Act” has replaced JTPA
How to identify “similar” programs:
The program must:
1. Get federal, state or local government funding and
2. Have a mission similar to the on for the JTPA program:
JTPA as amended by the Job Training Reform Amendments of 1992 and the School-to-Work Opportunities Act of 1994. Sec. 2
“It is the purpose of this Act to establish programs to prepare youth and adults facing serious barriers to employment for participation in the labor force
by providing job training and other services that will result in increased employment and earnings, increased educational and occupational skills, and
decreased welfare dependence, thereby improving the quality of the work force and enhancing the productivity and competitiveness of the Nation.”
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Students in Affordable Housing - 2015
§ 142(d)(2)(C) & 42(i)(3)(D)
In general, households made up of full-time students of any age do not qualify.
Prior to HERA, the only exception that qualified a full-time student household was ‘married, entitled to file a
joint tax return’. Per HERA, the same five student exceptions that apply for LIHTC apply to bond
qualification.
Workshop:
LIHTC /BOND Eligibility
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Students in Affordable Housing - 2015
States Vary: Questions for your state LIHTC Monitor
Some state agencies are stricter than the IRS on some issues
 Do married students have to be “filing” a joint return, or simply be “entitled” to do so
o For several years, the IRS has stated that the couple must simply be “entitled”, but some
states retain an older definition, that required a couple to have actually filed a tax return.
 Does one person entitled to file a joint return qualify the household, even if there are other nonmarried household members?
 Does one parent with a child in the household qualify the household, even if there are other nonparent/child members?
o The IRS sample form indicates ‘yes”, but opinions on the actual wording of the Code differ.
 Do unborn children qualify for “dependent” exception?
o The IRS has unofficially indicated “yes” but this is not in writing.
 What constitutes the “welfare” exception in your state?
o TANF in most states.
 Are there any time limits on how long it has been since a former foster household member was in
the foster system
o The law puts no time restrictions on this matter, so strictly speaking, former foster
members are non-students for life. A few states put a limit on how long in the past a foster
could have been in the system and qualify.
 Are there any specific programs in our state that are JTPA-similar
o “Workforce Investment Act” programs clearly qualify, but other state and local programs
may as well.
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Students in Affordable Housing - 2015
Student Eligibility: HUD
HUD
Student Eligibility: General
4350.3 3-13 B / 3-39 & 40
For ALL HUD programs, to prove that an adult student is eligible, we must verify (and document) that they:
1. Are of legal contract age under state law, AND
2. Have established a separate household from parents for at least a year OR meet the U.S.
Dept of Education definition of an independent student, AND
3. Are not claimed on parent’s tax return, AND
4. Get (or do not get) financial help from parents
Change 3
HUD has clarified that the above applies to all non-section 8 housing. It also makes
clear that, except for Section 8 assistance recipients, all student financial
assistance is excluded.
Student Eligibility: Section 8
4350.3 3-13 / 3-40 to 41
Assistance cannot be pro-rated. If an in-place household becomes ineligible, they cannot be evicted, but
they will lose assistance.
To be eligible for assistance, any adult who attends an institute of higher learning (full- OR part-time) must
be one of the following (Note that the focus is on adults age 18-23):
 A dependent of the household living with parent
 Over age 23
 A veteran
 Married
 A parent with dependent child(ren)
 A disabled individual who was receiving assistance prior to November 30, 2005
 1. Be Independent from parents OR 2. Have parents who are income-eligible
1. To prove that a person age 18-23 is “independent” owners must verify (and document) that
they:
A. Are of legal contract age under state law, AND
B. Have established a separate residence ** from parents for at least a year OR meet the
U.S. Dept. of Education definition of an independent student ***, AND
C. Are not claimed on parents tax return, AND
D. Get (or do not get) financial help from parents
**Dorms and other student housing do not qualify as a separate residences
2.
***U.S. Department Definition of “independent student” is one who:
 Is age 24+ old by December 31 of year
 Is an orphan or ward of state through age 18
 Is a veteran
 Has a legal dependent – (example: child or parent)
 Is a graduate or professional student
 Is married
Exceptions that are not already covered above: b, d (parent) & e
If the student is NOT “independent”, then the parents must be income-eligible. The parents
may sign a declaration and certification of income. They must be below the HUD LOW income
limit
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Students in Affordable Housing - 2015
 The income limit that will be used:
 If parents live in U.S. – LOW income limit for the county that the parents live in
 If parents live outside U.S. – LOW income limit where the property is.
 If parents are not living together:
 If widowed or single – get declaration from the single parent
 If divorced or separated – get declaration from both parents.
 If one parent’s location is unknown – get declaration from the single parent along with
explanation of situation and statement that no financial assistance is received from the
absent parent.
An owner may verify further (tax returns, etc.) if the parents certification is questionable.
The student is not eligible if the parents refuse to provide a:
 Declaration of their income, AND
 Statement of whether they provide student financial assistance or not.
RD
HB-2-3560 6.5 A on page 6-4
Unnumbered letters dated 1/11/2007 & 11/3/2011
While the RD Handbook applies the non-Section 8 HUD rules to RD properties, RD adopted HUD’s Section 8
student eligibility and income rules in early 2007. A clarifying letter in 2011 adjusted the student income
rules, but did not change the eligibility policy.
HOME
24 CFR 92.2 and 5.612
HOME adopted the Section 8 student rules in the 2013 regulation revision.
Effective: August 23, 2013
As this is a new provision, there are some questions yet to clarify with HUD. Among them are:
1. Do the new restrictions apply to new projects only (ones committed HOME funds after August 23,
2013, which is the stated effective date of the regulation), or is this a general provision to be
applied to all HOME projects after the effective date?
2. What happens with a household that is eligible at move-in but later becomes student-ineligible?
There is no assistance to take away HOME multi-family housing. It appears possible that they may
be treated similarly to over-income households, with the resulting action depending on if the unit is
fixed or floating HOME.
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Students in Affordable Housing - 2015
Completing the “Puzzle”… in General
It is important to understand all the rules for each program at a property in order to
complete the “puzzle”. There are several possible ways that rules from different programs
will relate to one another at a property that has multiple programs. These include:
1. Programs adjust be design. Apply rules as designed.
2. There is no corresponding rule. Apply the rule.
3. There are corresponding rules:
a. The rules are different. Apply both rules independently.
b. One program rule is more restrictive than the other. Apply the most restrictive rule that satisfies
both programs.
4. The rules conflict. Talk to the important players (owner, investors and compliance monitoring
agencies) to establish an approach.
Completing the Puzzle…Student Eligibility
LIHTC or Bond with other programs:
The tax credit and tax exempt bond student eligibility rules are completely different than
the HUD/RD/HOME rules. For instance, the Tax Credit & Bond program eligibility rules
focus on households made up of FULL-TIME students of any age, while HUD rules apply
to individual PART-TIME AND FULL-TIME students through age 23. Therefore there is no
practical way to combine the rules, and households or individuals that meet one set of
rules may be completely ineligible under the other.
A household in a unit affected by MTSP and HUD-type rules must meet BOTH
requirements.
Workshop:
HUD/RD/HOME
Eligibility
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Students in Affordable Housing - 2015
A Few Words of Encouragement…
We Do this Job Well…
Recent government reviews of the various programs have been good or show improvement. It is a
challenge to learn these programs well, but the more effort something takes, the more gain is realized.
These programs are active in all states, and qualified personnel are in demand. Not all jobs provide a
certain amount of personal security and are also beneficial to our communities. We strongly feel that
affordable housing-related jobs are.
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Page 7
Students in Affordable Housing - 2015
Supplemental Information
Non-Section 8 HUD Student Flow Chart…
Is anyone in the household a student at an
institute of higher learning?
YES
This is an eligible
household
Is one of the following true regarding the
student?
- S/he is legal contract age under state law
- S/he is not claimed on parent’s tax return
- Parents have supplied a certification regarding
financial help provided
YES
Is the following true regarding the student?
- S/he has established a separate household
from parents for at least a year
NO
Are any of the following true regarding the
student. S/he:
-Is age 24+ old by December 31 of year
-Is an orphan or ward of state through age 18
-Is a veteran
-Has a legal dependent – (example: child or
parent)
-Is a graduate or professional student
-Is married
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Students in Affordable Housing - 2015
HUD Section 8/RD/HOME Student Eligibility Flow Chart…
Is anyone in the household a student at an
institute of higher learning under age 24?
YES
This is an eligible Household
Are any of the following true about the student?
• A dependent of the household
• A veteran
• Married
• A parent with dependent child(ren)
• A disabled individual who was receiving
assistance prior to November 30, 2005
NO
Is the following true regarding the student?
• S/he is of legal contract age per state
• S/he is not claimed on parent’s tax return
• Parents have supplied a certification regarding
financial help provided
YES
Is the following true regarding the student?
• S/he has established a separate household
from parents for at least a year
NO
Is the student:
• An orphan or ward of the state through age 18
• Living with a legal dependent
Example: parent
• A graduate or professional student
NO
Are the student and his/her parent’s income
eligible?
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