CREA Edge - May 2019

EDGE Communications from the

Portfolio Management Frontline

PAGE 1

May 14, 2019

INCOME AVERAGING: INCREASING OPPORTUNITIES

by: Brooke Solis, Senior Vice President - Asset Management

and occupied by individuals with incomes of 60% or less of the Area Median Income (40/60 test). In 2018, the omnibus bill amended Section 42(g) of the Internal Revenue Code of 1986 by adding a third minimum set-aside test called Average Income Test, commonly referred to as “Income Averaging.” The Average Income Test is now a third option available to elect on the partnership’s Form 8609: 3) 40 percent or more of the residential units are rent-restricted and occupied by individuals whose income does not exceed the imputed income limitation designated by the taxpayer with respect to a specific unit. The designated imputed income limitation for each unit shall be made in 10% increments from 20% to 80% and the average of all the imputed income limitations designated shall not exceed 60% of

the area gross median income.

To break it down further, the Average Income Test has two parts a) 40% of the units must be occupied by qualified low-income tenants and b) the average of designated income limits for all units must not exceed 60% of AMI. This new federal set- aside is not based on the tenant’s actual income percentage but based on federal set-asides set in 10% increments between 20% and 80% which are designated to each unit. For example, if a tenant’s actual income is 42% of the AMI, they would be able to occupy a unit with a federal set-aside of 50% or greater. This new set-aside brings flexibility and increased opportunity to provide affordable housing to additional tenants in areas and income bands that have historically been harder to reach. Tenants at deeper income limits such as 20% AMI can now be

It has been a year since the Consolidated Appropriations Act, 2018, also known as the omnibus spending bill, was signed into law. Since then, our industry has been focused on understanding and formulating policies around the new “Income Averaging” concept introduced by the bill. The Low Income Housing Tax Credit (LIHTC) program was created under the Tax Reform Act of 1986, and since inception, there have only been two options for the minimum set-aside test: 1) 20 percent or more of the residential units are rent-restricted and occupied by individuals with incomes of 50% or less of the Area Median Income (20/50 test) or

2) 40 percent or more of the residential units are rent-restricted

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INDIANAPOLIS OFFICE BUILD OUT The Indianapolis office recently underwent a remodel and expansion. CREA continues to reside at 30 S. Meridian Street in the heart of downtown, but we are now occupying the entire 4th floor. Gone are the days where new hires have to sit at conference room tables or mini desks along the cubicle walls throughout our office... continue on page 4

Samantha (Sam) Theising, AVP, Senior Asset Manager joined CREA in April of 2015. Originally located in Indianapolis and working her way from Asset Manager, to Senior Asset Manager and AVP, Sam was given the opportunity to move across the country and work out of CREA’s Portland office. Read about Samantha’s transition and role at CREA... EMPLOYEE SPOTLIGHT: SAM THEISING continue on page 5

P7 AWARDS & KUDOS P7 TAX SEASON P7 GOOD TO KNOW

P5 EMPLOYEE SPOTLIGHT, CONT. P6 NEW HIRES P6 FLANNEL FRIDAYS

P2 INCOME AVERAGING, CONT. P3 PROPERTY SPOTLIGHT P4 INDIANAPOLIS BUILD-OUT, CONT.

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