SECTION 330:36-6-7. OHFA monitoring procedures

(a)   General. Section 42(m)(1)(B)(iii) of the Code mandates that state housing Credit agencies monitor all Placed-In-Service tax Credit projects for compliance with the provisions of Section 42. The Code also mandates that the Internal Revenue Service be notified, by the state housing agencies, of any instances of noncompliance, this includes failure to comply with the Code and federal regulations and these Chapter 36 Rules, as well as failure to pay all compliance fees in a timely manner. OHFA will also monitor for compliance with the Regulatory Agreement provisions which contain additional Owner Commitments made to secure points in the project selection process, e.g. additional Low-Income Units or an Extended Use Period. OHFA has assembled and will make available to the Development Owners, a Compliance Manual explaining the OAHTC monitoring process in detail. An Owner representative and a management agent representative will be required to successfully complete a compliance training session conducted by OHFA or approved by OHFA and submit proof thereof with the first Quarterly report. OHFA will monitor the documents and Certifications set forth in 330:36-6-7(b) and (c) for compliance with the Code.

(b)   Record keeping and record retention provisions.

(1)   The Owner of a low-income housing project is required to keep records for each qualified low-income Building in the project showing:

(A)   The total number of residential units in the Building (including the number of bedrooms and the size in square feet of each residential rental unit);

(B)   The percentage of residential rental units in the Building that are Low-Income Units;

(C)   The rents charged on each residential rental unit in the Building (including any utility allowances);

(D)   The number of occupants in each Low-Income Unit;

(E)   The Low-Income Unit vacancies in the Building and information that shows when, and to whom the next available units were rented;

(F)   The initial Income Certification of each low-income tenant per unit, and any additional recertification that may be required;

(G)   Documentation to support each low-income tenant's Income Certification;

(H)   The Eligible Basis and qualified basis of the Building at the end of the first year of the Credit period;

(I)   The character and use of the nonresidential portion of the Building included in the Building's Eligible Basis under Section 42(d) of the Code (e.g. tenant facilities that are available on a comparable basis to all tenants and for which no separate fee is charged for use of the facilities, or facilities reasonably required by the project); and

(J)   Copies of all correspondence with the IRS.

(2)   The Owner is required to retain the records described in this section for each Building in the project for at least six (6) years after the Due Date (with extensions) for filing the federal income tax return for that year. The records for the first year of the Credit period must be retained for at least six (6) years beyond the Due Date (with extensions) for filing the federal income tax return for the last year of the Compliance Period of the Building.

(c)   Certification and review provisions.

(1)   Between the Placed-In-Service date of a Building and the submission of an Application for a final Allocation of Credits, and prior to the issuance of an 8609, OHFA may physically inspect the property. An on-site review will again be conducted within the following year as described in 330:36-6-7 (c)(6) of these Rules.

(2)   In accordance with Section 42(l)(1), following the close of the first taxable year in the Credit period, the Owner must certify to the Secretary of the Treasury:

(i)   the taxable year in which such Building was Placed-In-Service,

(ii)   the adjusted basis and Eligible Basis as of the close of the first year of the Credit period,

(iii)   the maximum applicable percentage and qualified basis, and

(iv)   the election made for the low-income targeting threshold.

(v)   This Certification is accomplished by completing Part II of the 8609(s). A copy of the completed 8609(s) must also be submitted to OHFA. The Due Date for submission is May 10, or as extended by The Service or Staff, of the year due to The Service for the first Credit year.

(3)   Owners must prepare and submit a quarterly report beginning with the first full calendar quarter after the last Building is Placed-In-Service, and for the subsequent three quarters. This report must be accompanied by copies of the Tenant Income Certifications for each tenant and new move-ins for the appropriate quarter. If a project is determined not to be in compliance with Program requirements or there is indication of possible noncompliance, OHFA, at its discretion, may require reports each quarter until compliance is demonstrated.

(4)   The Owner of a low-income housing project is required to certify annually, in a form prescribed by OHFA, that for the preceding 12-month period:

(A)   The project met the requirements of the 20-50 or 40-60 test under Section 42(g)(I) of the Code, whichever Minimum set-aside is applicable to the project, and, if applicable to the project, the 15-40 test under Section 42(g)(4) for "deep rent skewed" projects;

(B)   There was no change in the Applicable Fraction (as defined in Section 42(c)(1)(B))of any Building in the project, or that there was a change and a description of the change;

(C)   The Owner has received an Income Certification from each low-income tenant and documentation to support that Certification;

(D)   Each Low-Income Unit in the project was Rent-Restricted under Section 42(g)(2);

(E)   All units in the project were for use by the general public and used on a nontransient basis (except for Transitional Housing for the Homeless);

(F)   Each Building in the project was suitable for occupancy, taking into account local health, safety, and building codes (or other habitability standards), and the State or local government unit responsible for making building code inspections did not issue a report of a violation for any Building or Low-Income Unit in the project;

(G)   There was no change in the Eligible Basis (as defined in Section 42(d)) of any Building in the project, or that there was a change, and the nature of that change;

(H)   All tenant facilities included in the Eligible Basis under Section 42(d) of any Building in the project, such as swimming pool, other recreational facilities, and parking areas, were provided on a comparable basis without charge to all tenants in the Building;

(I)   If a Low-Income Unit in the project became vacant during the year, reasonable attempts were, or are being made to rent that unit or the next available unit of comparable or smaller size to tenants having a qualifying Income before any units in the project were, or will be rented to tenants not having a qualifying Income;

(J)   If the Income of the tenant of a Low-Income Unit in the project increased above the limit allowed in Section 42(g)(2)(D)(ii), the next available unit of comparable or smaller size in the project was, or will be, rented to tenants having a qualifying Income;

(K)   An extended Low-Income Housing Commitment, as described in Section 42 (h)(6), was in effect;

(L)   The project meets the additional requirements contained in the Regulatory Agreements;

(M)   There was no change in the Owner entity (for example, Transfer of general partnership interest);

(N)   If the Owner received its Credit Allocation from a portion of the State's ceiling set-aside for projects involving "qualified Nonprofit organizations" under Section 42(h)(5) of the Code, the Nonprofit organization has materially participated in the operation of the Development (within the meaning of CFR § 1.469)and complete the Nonprofit Addendum or other form prescribed by OHFA;

(O)   No finding of discrimination under the Fair Housing Act, 42 U.S.C. 3601-3619, has occurred for this project. A finding of discrimination includes an adverse final decision by a substantially equivalent state or local fair housing agency, 42 U.S.C. 361a(a)(1), or an adverse judgment from federal court; and

(P)   An extended Low-Income Housing Commitment as described in Section 42(h)(6) was in effect, that an Owner cannot refuse to lease a unit in a project to an applicant because the applicant holds a voucher or certificate of eligibility under Section 8 of the United States Housing Act of 1937, 42 U.S.C. 1437s.

(Q)   Collect data required by HUD in a form prescribed by OHFA. In no way will the data collection be in violation of Fair Housing.

(5)   OHFA will review the Owner Certifications submitted pursuant to 330:36-6-7(c)(4), for compliance with the requirements of Section 42 of the Code.

(6)   OHFA must and will conduct on-site inspections of all Buildings in the project by the end of the second calendar year following the year the last Building in the project is Placed-In-Service, and for at least twenty (20) percent of the project's Low-Income Units, inspect the units and review the low-income Certifications, the documentation supporting the Certifications, and the rent records for the tenants in those units.

(7)   At least once every three (3) years through the Extended Use Period, OHFA must conduct on-site inspections of all Buildings in the project and, for at least twenty percent (20%) of the project's Low-Income Units, inspect the units and review the low-income Certifications, the documentation supporting the Certifications, and the rent records for the tenants in those units.

(8)   The Certifications and reviews of paragraphs 330:36-6-7(c)(2) and (c)(4) of these Chapter 36 Rules are required to be made at least annually until the end of the Extended Use Period, and the Certifications are to be made under penalty of perjury.

(9)   The Owner is required to provide to OHFA, for the first Credit year, a copy of the completed Part II 8609, 8609 Schedule A and Form 8586 that is submitted to the Internal Revenue Service.

(10)   The Owner is required to provide to OHFA, as it occurs, copies of all correspondence with the Internal Revenue Service.

(d)   Auditing/compliance provisions. OHFA has the right to perform an audit and/or compliance inspection of any low-income housing project during the term of the Regulatory Agreement. An audit/compliance inspection includes physical inspection of any Building in the project, as well as a review of the records described in 330:36-6-7(c)(1) of these Chapter 36 Rules. The auditing/compliance inspection provisions of this paragraph is in addition to any inspection of low-income Certifications and documentation under 330:36-6-7(c)(7)of this Chapter 36 Rules.

(e)   Notification of noncompliance provisions.

(1)   OHFA will provide prompt written notice to the Owner of a low-income housing project if OHFA does not receive the Certification described in 330:36-6-7(c)(4) of these Chapter 36, or does not receive, or is not permitted to inspect, the tenant Income Certification supporting documentation and rent records, or discovers on audit, inspection review, or in some other manner, that the project is not in compliance with the Code or these Chapter 36 rules. The Owner shall have a period of time, not to exceed thirty (30) calendar days, from the date of such notice (the "correction period") to supply any missing Certifications and bring the project into compliance. OHFA may extend, in its own discretion, the correction period for up to an additional thirty (30) calendar days for good cause.

(2)   OHFA must file IRS Form 8823 Report of Noncompliance with the Internal Revenue Service no later than forty-five (45) calendar days after the end of the correction period whether or not the noncompliance or failure to certify is corrected. OHFA will explain on Form 8823 the nature of the noncompliance or failure to certify and indicate whether the Owner has corrected the noncompliance or failure to certify. Any change in either the Applicable Fraction or Eligible Basis that results in a decrease in the qualified basis of the project under Section 42(c)(1)(A) is an event of noncompliance that must be reported under this paragraph.

[Source: Added at 18 Ok Reg 1003, eff 3-14-01 (emergency); Added at 18 Ok Reg 3055, eff 7-12-01; Amended at 19 Ok Reg 643, eff 1-17-02 (emergency); Amended at 19 Ok Reg 1104, eff 7-11-02; Amended at 20 Ok Reg 2439, eff 1-1-04; Amended at 21 Ok Reg 2280, eff 1-2-05; Amended at 22 Ok Reg 2579, eff 1-2-06; Amended at 23 Ok Reg 2960, eff 1-2-07; Amended at 26 Ok Reg 303, eff 11-20-08 (emergency); Amended at 26 Ok Reg 1208, eff 7-1-09; Amended at 26 Ok Reg 2540, eff 1-1-10; Amended at 28 Ok Reg 1658, eff 1-1-12; Amended at 30 Ok Reg 1987, eff 1-1-14]