By Vivian R. Probst
Managing Partner of The TheoPRO Group
Most of us can look at a group of buildings that look like an apartment community and say, “It’s a Project”. We might prefer the word ‘property’ or ‘community’ because it sounds better, but the IRS calls it a Project, depending on how the ownership entity defines it on Form 8609, Line 8b.
Never hear of Form 8609? If not, it’s time (and that rhymed). Form 8609 contains very important details that a property manager should know not only as a project opens, but also for the tax credit life of that group of Buildings. (Think 30-99 years and know what is it for the property you’re managing.) Yes, it’s a BIG deal.
The sooner you know, the better. Look at the 8609 Line 8b below:
Owners formally make the YES or NO election for each Building/BIN AFTER the end of the first year of the credit period, (which they also elect. More about that in a future blog).
Imagine a 10-building project. One project; 10 buildings, right? MAYBE.
If an owner checks YES on line 8b, all buildings in that project are part of the same project. Make sense?
But what if the owner checks the NO box? What then? Each of those 10 buildings will be defined as a separate Project for tax purposes. It can get even more interesting if an owner decides some BINS will be a Project and other BINS will be a Project.
What’s important is that those of us who will be in charge of operating that Project MUST know—because, If a household wants to transfer to a different Building (and that happens, doesn’t it?), it’s OK if Line 8b is marked YES; it’s NOT OK if Line 8b is marked NO.
WHY? Because those 10 buildings are no longer just separate Buildings/BINS. Line 8b marked NO makes each Building its own Project and transfers are not allowed between Projects.
It’s not that the household can’t move into the next building; it’s that we need to know that we must income qualify that household into that next building, which isn’t a building because it’s a project. If that household doesn’t income and student qualify into that next building, we must deny the transfer. Oh, and state housing finance agencies also weigh in on transfers between Buildings even if the 8609s are marked ‘YES’. If it’s not OK with the state housing finance agency, it’s NOT OK.
So much to know! If you need a PRO, think TheoPRO! We’re here to help. Check out our training site: theopro.thinkific.com.