Section 1602 Reporting

OMB #1505-0218

Section 1602: Reporting Requirements for
Post-Subaward Compliance
Purpose
This document sets forth ongoing reporting requirements applicable to state housing finance
agencies (hereinafter “state agencies”) awarded Section 1602 funds. The purpose of these
ongoing reporting requirements is to ensure:
(1) that the amount of Section 1602 funds subawarded to a project is equal to or less than
85 percent of the project’s eligible basis; and
(2) that Section 1602 funded projects remain qualified projects throughout the 15-year
compliance period.

Definitions
Compliance period. The term compliance period has the same meaning as that term is
defined in section 42(i) (1) of the Internal Revenue Code (IRC).
Credit period. For purposes of the Section 1602 program the credit period begins on
January 1st of the year following the placed in service date.
Eligible basis. Eligible basis is determined at the end of the first year of the credit period
and includes any increase for buildings located in high cost areas under section 42(d)(5)(B)
of the IRC.
Placed in Service. The term placed in service has the same meaning as that term is defined
in section 42 of the IRC.
Placed in Service Date. The placed in service date is the date that a project is placed in
service. For purposes of the Section 1602 program, if a project has multiple buildings the
placed in service date is the date the last building in the project is placed in service.
Qualified Project. A project is a qualified project if the applicable fraction of the project (see
section 42(c)(1)(B) of the IRC) is equal to or greater than the percentage of Section 1602
funds that comprise the eligible basis of the project or the minimum set-aside elected for
the project under section 42(g)(1) of the IRC, whichever is greater. For purposes of
determining the applicable fraction, a unit is a low income unit if the tenants are qualified as
low-income (see section 42.1(c)(1)(iii) of the IRC); the unit is rent-restricted (see section
1.42(c)(1)(iv) of the IRC); and the unit is suitable for occupancy (see section 1.42(c)(1)(vi)
of the IRC).

Reporting Requirements
1. Report of Eligible Basis and Attachments
On an annual basis beginning in 2011 and continuing until all projects are reported on, state
agencies must submit a report regarding the project’s placed in service date and eligible
basis. This report is due on or before July 1 of the first year following the end of the first
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year of the applicable credit period. For example, if the credit period for a project begins
January 1, 2010, this report is due July 1, 2011 for that project.
For the 2011 report, enter information in columns A-E for all 1602-funded projects and
enter information in columns F-J for projects for which the first year of the credit period has
ended. Leave columns F-J blank for any project that has not completed the first year of the
credit period. For subsequent annual reports, enter information in columns F-J for any
projects for which the first year of the credit period has ended since the previous year’s
submission.
Submit with the report for each project reported upon, a copy of the state agency’s approval
of the certification of eligible basis. For projects with multiple buildings, copies of the state
agency’s approval of the certifications of eligible basis for each building should be submitted
at the same time and only after all buildings are placed in service.
State agencies submit this report and the supporting documentation by email to
[email protected]. Include with the email submission the following:
I declare that I have examined this report and to the best of my knowledge and
belief, it is true, correct, and complete. I declare that I am an authorized official for
the designated state housing credit agency authorized to submit this report on behalf
of the agency.
State agencies may be required to submit additional information upon request such as
supporting documentation for the state agency’s approval of eligible basis and copies of
form 8609s.
Extract of columns on report
F
Certified
eligible
basis of
project

G
Amount of 1602
funds disbursed to
project

H
Amount of 1602
funds disbursed
divided by certified
eligible basis

I
1602
disbursement is
85% or less than
eligible basis?
Y/N

J
Date project
placed in
service

Instructions
Columns A, date of subaward, and B, amount of subaward. Copy the
information for columns A and B from columns A and B of the previous QPR.
Column C, name of project. Copy the information for column C from column E of
the previous QPR.
Column D, number of total housing units, collapses the number of total housing
units newly constructed (former QPR column N) and the number of total housing
units rehabilitated (former QPR column O). For each project, add the numbers in
those columns from the former QPR together and enter the result in column D.
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Column E, number of low-income housing units, collapses the number of lowincome housing units newly constructed (former QPR column P) and the number of
low-income housing units rehabilitated (former QPR column Q). For each project,
add the numbers in those columns together and enter the result in column E.
Column F, certified eligible basis of project. Enter the state-approved total
amount of eligible basis for the project.
Column G, amount of 1602 funds disbursed to project. For a project with an
entry in column F, enter the total amount of 1602 funds disbursed to the project. All
1602 funds must be disbursed by close of business December 31, 2011.
Column H, amount of 1602 funds disbursed divided by certified eligible
basis. For a project with an entry in column F, divide the amount in column G by
the amount in column F and enter the result in column H.
Column I, 1602 disbursement is 85% or less than eligible basis? Y/N. For a
project with an entry in column F, enter Y for yes if the percent in column H is 85.99
or less. Enter N for no if the percent in column H is 86.00 or more. If no, attach an
explanation of how the subawardee plans to meet the requirement.
Column J, date project placed in service. For a project with an entry in column
F, enter the date the project was placed in service.

2. Annual Report of Compliance
On an annual basis, beginning July 1, 2011 and continuing until all projects have completed
their 15-year compliance periods, a state agency must submit an annual report of
compliance.
Enter information in column A for all 1602-funded projects and enter information in the
remaining applicable columns for projects for which the credit period began the previous
year. For example, for the report submitted in 2011, columns B-C must be completed for
all projects for which the credit period began Jan 1, 2010. For the report submitted in
2012, columns B-D should be completed for any projects for which the credit period began
January 1, 2010 and January 1, 2011. Enter n/a (not applicable) in column B for any
project for which the credit period has not yet begun and leave the remaining columns for
those projects blank.
State agencies submit this report by email to [email protected]. Include with the
email submission the following:
I declare that I have examined this annual report of compliance and to the best of
my knowledge and belief they are true, correct, and complete. I further declare that
for the 12-month period covered by this report the state housing credit agency has
complied with all applicable requirements under its compliance monitoring
procedures for the 1602 program. I declare that I am an authorized official for the
designated state housing credit agency authorized to submit this statement on behalf
of the agency.
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State agencies may be required to submit additional information upon request such as
copies of the owner’s certificate of compliance and copies of inspection reports.
Extract of Annual Report of Compliance
The following is an extract of columns from the Annual Report of Compliance with examples.
The Annual Report has columns A through AU to track the 15-year compliance periods.
A

B

Name of
project

Date credit
period
began

Covington
Street
Apts.
Armfield
Court
Concord
Village
Heritage
House

1/1/2010

C
D
Compliance in 2010

E

Owner’s
certificate of
compliance
received?
Y/N

On-site
inspection
conducted?
Y/N

If Yes, Noncompliance
found? Y/N

Y

Y

N

1/1/2011

F
G
Compliance in 2011

H

Owner’s
certificate of
compliance
received?
Y/N

On-site
inspection
conducted?
Y/N

If yes, Noncompliance
found? Y/N

Y

N

N

Y

Y

N

Y

N

N

n/a
1/1/2010

Y

Y

N

Instructions
Column A, name of project. Copy the information from Column E of the previous
QPR. List all projects that have received 1602 subawards.
Column B, date credit period begun. For the first annual submission complete
this column for all projects having a credit period beginning January 1, 2010. For
subsequent submissions, complete this column for all projects for which the credit
period began January 1st of the prior year or earlier.
Column C, owner’s certificate of compliance received. For all projects for
which Column B is completed, answer Y if the state agency has received a certificate
of compliance for the project [see IRC regulations at section 1.42-5 (c)(3)] for the
year covered by the report. Answer N if no certificate has been received for that
year.
Column D, on-site inspection conducted. For all projects for which Column B is
completed, answer Y if the state agency has conducted an on-site inspection of the
project during the 12-month period covered by the report. Answer N if the state
agency has not conducted an on-site inspection during the 12-month period covered
by the report.
Column E, if yes, noncompliance found. For all projects for which Column B is
completed, answer Y if the state agency has completed an inspection of the property
and found incidents of non-compliance that remain unresolved as of the date of the
report. For this purpose, incidents of non-compliance are only incidents that warrant
initiation of Section 1602 recapture procedures. Answer Y only if the period of
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correction has expired and the incidents remain unresolved. Answer N if the state
agency has not conducted an inspection of the project during the period covered by
the report or has conducted an inspection and found no unresolved incidents of noncompliance.
Columns F through AU continue to report on compliance for the years 2011
through 2024, as appropriate, for each project until all projects have completed their
15-year compliance periods.

3. Reports of Non-compliance and Recapture (Ad-hoc)
State agencies must have procedures in place for monitoring Section 1602 subawardees
during the compliance period. Such procedures must be consistent with IRS regulations and
guidance applicable to monitoring compliance with low-income housing tax credit
requirements (see Section 1602 Recapture Guidance).
During the compliance period, the project must remain a qualified project. For more
information see Question 9b of the Frequently Asked Questions and Answers
(http://www.treasury.gov/initiatives/Documents/FAQs.pdf).
State agencies must report to Treasury 1602 Team via email to [email protected]
when non-compliance which could result in recapture of Section 1602 funds is known.
Include in the email: (1) the name of the project; (2) a short description of the noncompliance (this may be from the form 8823 if applicable), for example “project failed to
meet minimum set-aside requirement”; (3) actions taken by the state agency to remedy the
non-compliance; (4) whether or not the state agency has commenced recapture; and (5) a
description of the actions taken to recapture or if recapture has not commenced, a
description of the state agency’s plan with respect to recapture.
A Report of Non-compliance and Recapture should be submitted within 10 days after the
state agency has a recapture event (see Section 1602 Recapture Guidance) which the state
agency determines cannot be resolved. State agencies are not required to report noncompliance which has been resolved or for which the period of correction has not expired.
State agencies are not required to submit a Form 8823 to the Treasury 1602 team.
A follow-up report must be sent to the Treasury 1602 team via email when funds are
recaptured. This report includes the name of the project; the amount of funds recaptured
and the date the recaptured funds were returned to the Treasury. If funds have not been
recaptured within 6 months from the date of the initial report to Treasury, a follow-up
report must be submitted by email detailing recapture efforts to date.
Recaptured funds are to be deposited into the Treasury General Fund (instructions to be
provided).

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