15 Ark. Code of Rules § 86-903

15 CAR § 86-903. Tax-exempt bonds.
(a)(1) The Arkansas Development Finance Authority, as issuer of certain tax-exempt bonds, will monitor those projects that combined tax credits and tax-exempt bonds.
(2) The authority will monitor those projects in accordance with the terms and conditions of specific regulatory agreements and applicable LIHTC program requirements.
(b)(1) The bond issuer, rather than the project owner, may make the election to satisfy the 20/50 test or the 40/60 test at the time the bonds are issued.
(2)(A) This election may be entirely separate from the choice of minimum set aside for LIHTC purposes.
(B) Thus, it is not impossible that an issuer will elect the 20/50 test for a bond issue, while the project owner elects the 40/60 test for the LIHTC project financed by those bonds.
(C) Of course, the project would have to satisfy both the 20/50 test for bond purposes and the 40/60 test for LIHTC purposes.
(3) The rent restriction must comply with the terms of the regulatory agreement but must not exceed the LIHTC limit.
(c)(1) The property that is financed with both tax-exempt bonds and low-income housing tax credits must comply with both programs.
(2) While some rules overlap, such as the 20/50 or 40/60 minimum set aside, the programs do not exactly match.
(3) The owner is responsible for knowing and complying with both sets of requirements.

Rules for Combining LIHTC and Tax-Exempt Bonds

LIHTC Rule
Tax Exempt bonds

Compliance Period
The compliance period for LIHTC projects is a period of 15 taxable years beginning with the first taxable year of the credit period. Additionally, 15 or more years are mandated in extended use agreements.
The compliance period (qualified project period) is the period beginning on the date of issuance of the bonds and ending on the latest of:

the date which is 15 years after the date on which 50% of the dwelling units are occupied;the first date on which no tax- exempt private activity bond (as that phrase is used in Section 142(d)(2) of the Code) issued with respect to the Mortgaged Property is outstanding;the date on which any assistance provided with respect to the Mortgaged Property under Section 8 of the Housing Act terminates.

Occupancy Requirements
At least 20 percent of units must be reserved for households with incomes at or below 50 percent of area median income OR 40 percent of the units must be reserved for households with incomes at or below 60 percent of area median income.
At least 20 percent of units must be reserved for households with incomes at or below 50 percent of area median income OR 40 percent of the units must be reserved for households with incomes at or below 60 percent of area median income. The project may have to satisfy both requirements. See the Regulatory Agreement.

Rent Requirements
Rents for qualified units must not exceed the applicable rent limit for the LIHTC program.
There is no rent restriction on bond-financed properties.
However, if combined with tax credits, the rent must not exceed the tax credit rent limit.

Income
The rules for determining income-certified tenants are the same for both programs.
The rules for determining income-certified tenants are the same for both programs. See the Regulatory Agreement for specific requirement.

Reexamination of Income
Re-examinations are performed annually following the same
Re-examinations are performed annually following the same

procedures as initial certification.
procedures as initial certification.

Interim Recertifications
The LIHTC program does not require interim recertifications. Changes in household composition or changes in income need to be reported only at the time of recertification. This may change in the future.
Recertifications are required if the number of occupants in a unit changes (other than the birth of a child).

Over-Income Tenants
Over income tenant is an existing tenant whose income, at recertification, is determined to exceed 140% of the applicable income limit. An increase in a tenant's income does not necessarily disqualify the unit as a low-income unit, provided the next available unit of comparable or smaller size is rented to a qualified low-income household.
Over income tenant is an existing tenant whose income, at recertification, is determined to exceed 140% of the applicable income limit. An increase in a tenant's income does not necessarily disqualify the unit as a low-income unit, provided the next available unit of comparable or smaller size is rented to a qualified low-income household.

Next Available Unit Rule
The next available comparable unit rule is applied on a building-by- building basis.
The next available comparable unit in the building must be rented to a qualified household.

Full Time Student Household
Full time student status must be checked annually. Units occupied by full time students are not allowed unless one of the exceptions applies.
Full time student status must be checked annually. Units occupied by full time students are not allowed unless one of the exceptions applies.

(d)(1) Owners of qualified tax-exempt bond properties must comply with all regulatory agreements and program rules and regulations.
(2) Owners' files must include the following:
(A) Initial and annual income certifications, income verifications/documents, etc.;
(B) Complete records of unit history/occupancy reports;
(C) Leases (six-month minimum term, as property cannot be used on a transient basis);
(D) Interim recertifications are required if number of occupants in the unit changes for any reason other than the birth of a baby to an occupant of the unit;
(E) Copy of Certificate of Continuing Program Compliance; and
(F) Copy of Internal Revenue Service Form 8703.