In this installment of “Compliance Corner,” we answer two common questions about calculating income for residents of Low Income Housing Tax Credit (LIHTC)-financed homes.
Question No. 1: On a recent tenant file review, I was asked to obtain a copy of an applicant’s child support income for the past 12 months. If we are anticipating income for the next 12 months, why would I look at what they have received in the past?
Answer: In our calculations, we must count alimony or child support amounts awarded by the court, unless the applicant certifies that payments are not being made and that he or she has taken all reasonable legal actions to collect amounts due. This is also true if the court-ordered amount is higher than what is actually received by the custodial parent or applicant.
The commonly accepted rule in the Low Income Housing Tax Credit (LIHTC) industry is to always anticipate income for the upcoming 12 months, regardless of the income type. However, there are a few instances where historical information might provide more accurate data to anticipate what will happen in the future. An example would be the comparison of employment income verifications versus child support income verifications.
When we review employment verification, we are looking at information provided to us by the applicant’s employer. The employer verifies the applicant’s year-to-date income information, how much the applicant will make per hour, how many hours per week they will work, and if there will be any additional forms of income (Ex: tip income, bonuses, raises, etc.). With the information the employer provides, we can accurately anticipate how much the applicant (or other adult household member) will earn in the upcoming 12 months.
Child support income is a little harder to anticipate because the child support enforcement agency verifying the income has no control over how much the non-custodial parent will pay for the upcoming 12 months. In order to obtain a thorough overview of the child support income, verify the court-ordered amount through a third party and obtain a report from the child support enforcement agency that reflects what the non-custodial parent has paid in the previous 12 months. Because the court cannot verify that the parent will pay the full court-ordered amount, we can compare the court-ordered amount to the amount the custodial parent or applicant actually receives. This is also known as the “look back” method. After performing the necessary calculations, you are allowed to use the lower of the two amounts for the certification.
As a reminder, in some instances, child support income could be paid to the custodial parent or applicant through a social services agency, and the income may be included in the family’s monthly assistance check. Furthermore, the child support income may be designated in different ways. In some states, these payments are not identified separately from the assistance grant. In this instance, it is important to determine which portion is child support and not to count it twice. In other states, the payment may be listed as child support or as “pass-through” payments. These amounts must be counted as annual income.
The “look back” method is only allowed for select few types of income. You should always refer to your state agency’s compliance manual or a compliance expert for further guidance on the topic if you are unsure what the preferred method is for verifying a specific type of income in your state.
Question No. 2: I was recently asked on a tenant file review to provide child support affidavits for all children in the household. Why would I need to do this if both parents are living in the home?
Answer: In order to fully understand the LIHTC requirements, let’s take a moment to review the compliance regulations regarding the use of child support affidavits or paternity affidavits (if applicable). Alimony or child support that is court-ordered or supported by a written agreement should be included in income unless the recipient certifies that the funds were not received and reasonable efforts have been made to collect the amount due, including filing with courts or agencies responsible for enforcing payments.
When no documentation of child support stipulated in a divorce decree or separation is available, self-certification by a tenant is sufficient documentation to show that a tenant is not receiving child support payments and is consistent with LIHTC documentation requirements. In addition to specifying that a tenant is not receiving any child support payments, an annual signed, sworn self-certification should indicate whether the tenant will be seeking or expects to receive child support payments within the next 12 months.
If the tenant possesses a child support agreement but is not presently receiving any child support payments, the tenant should include an explanation of this and all supporting documentation. (Ex: a divorce decree or court documents.) Also, the self-certification should indicate that the tenant would notify the owner of any changes in the status of child support. In instances where both paternal parents reside in a unit with their children, a paternity affidavit may be used in lieu of child support affidavits.
It is not always clear to an outside auditor who the paternal parents of children living in the household are. The most common area of confusion is when a household has multiple members with different last names. Even though you may have firsthand knowledge of a household’s composition, it may be unclear to someone with little or no knowledge of the family’s composition.
It is important to keep in mind that the file you are constructing needs to be able to stand on its own during an audit. The only way to affirm child support income status of all children in a household is to obtain a child support affidavit for each child in the household, or if applicable, have the paternal parents (if living together in the unit) complete a paternity affidavit.
Your state agency’s monitoring procedure may require you to obtain documentation, other than the statement described above, to support a tenant’s annual certification of child support payments. The state agency’s compliance manual should be referenced for further guidance. In some cases, a specific form may need to be used.
If you have questions regarding this topic or any other compliance needs, please contact the Travois Asset Management team at assetmanagement@travois.com or 816-994-8970. We are more than happy to help!
Hi, I am a single father with joint custody and pay $1250 per month in child support. My question is , can that $1250 be counted against my gross income so I may qualify for LIHTC income requirements. My current annual gross is $68K and about $57K after child support.
Hello – Unfortunately, we cannot deduct any amounts for child support, taxes or health insurance premiums from your income in order to qualify your household for the Low Income Housing Tax Credit program. Chapter 5-1 of the HUD handbook specifically states that we count the “full amount, before any payroll deductions, of wages and salaries, overtime pay, commissions, fees, tips and bonuses, and other compensation for personal services.” We do count child support that is received by a household, but we cannot deduct child support that is paid by a household.
Applicant mother receives child support. The father is delinquent in his child support payment to mother. Court ruled in favor of mother and ordered father to increase his weekly payments in order to catch up with the receivable owed to mother. Given this increase was for past years for which the mother had to pay child expenses from her own sources, can the portion of the child payments received representing past due amounts not be counted as income since it is only reimbursement for mother’s past years for initial certification purposes and just count what would be considered current obligations?
When qualifying LIHTC households, we must determine the household’s income for the next 12 months from the certification date or proposed move-in date when qualifying a new move in. Keeping this in mind and using the example you have given, the court-ordered amount was recently adjusted for previous non-payment and according to the program guidelines, we would have to count the new higher amount when determining the household’s annual income. I realize this may seem a bit unfair, however the LIHTC program also allows us to not count the court-ordered child support if we can prove that the household has not been collecting the court-ordered amount. In the example you provided, it sounds like the household has not been collecting the court-ordered child support amount. We would recommend obtaining a third-party verification from the child support enforcement agency that reflects a 12-month history of what has been collected. If the amount actually collected for the past 12 months by the household is less than the court ordered amount, you could use the third-party information to calculate the annual child support.
The information above is based off the federal guidelines. We would also recommend a review of your state agency’s compliance manual to confirm that it does not have a stricter interpretation of the program rules.
Why is a child support audit and income verification requested?
Hello – Verification of child support is required when an applicant certifies that they are receiving child support, or that they are entitled to receive child support.
The HUD Occupancy Handbook states that we must count alimony or child support amounts awarded by the court unless payments are not being made AND the applicant has taken reasonable legal actions to collect support.
By obtaining a verification from child support enforcement agencies, we can verify if support is being received and if the applicant is taking the necessary steps to try to collect support.
We can then determine whether or not we should include the support as part of the household’s annual income, or if we can exclude the support.
I hope this is helpful information!
What steps can a person take to show child support is not being received, such as reasonable legal actions? What is needed to show reasonable legal actions? Could a person bring in a letter from the caseworker showing he is not paying but they are taking him back to court? Or what if the person who is supposed to pay was in jail? Would the child support still be counted?
Generally, you can obtain a print-out from the child support enforcement agency in your location that will demonstrate when, if any, child support payments have been received and the amount(s) that were paid.
Reasonable legal action would be demonstrated by the child support enforcement group having an open case and attempts to collect (such as garnishment) being made. A person could bring in a letter. However, the preferred method of verifying this information is third-party verification such as obtaining the information directly from the court, child support enforcement group, or in this case, the caseworker.
Because annual income is based on amounts that are “anticipated” to be received from a source outside the family during the 12-month period, if there is sufficient evidence that the child support income is not being received or will not be received in the next 12 months, the income might not be included in annual income.
If a court order exists and reasonable efforts to collect are not being made, the full amount of the court order should be counted as income.
I have a question. i live in WV, and I was told that my HUD apartment cannot use my child support as income. Is this true?
In order to accurately answer this question, we would need some more information regarding the child support income. Are you receiving the child support income or has the respondent not been paying?
By definition, child support income is considered when determining annual income, as long as the household is actually receiving the income. If there is sufficient evidence that the child support income is not being received or will not be received in the next 12 months, the income might not be included in annual income, and therefore, not included into factoring the ability to pay rent. This is necessary because annual income is based on amounts that are “anticipated” to be received from a source outside the family during the 12-month period following admission or the annual reexamination effective date.
Can HUD consider a Department of Veterans Affairs apportionment paid directly to a dependent under their social security number as income? This includes them also not living with you and there is no child support order enacted?
Chapter 5-1 of the HUD Handbook specifies what income is included and excluded. Paragraph (4) states that the following will be included as income: “The full amount of periodic amounts received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts, including a lump-sum amount or prospective monthly amounts for the delayed start of a periodic amount (e.g. Black Lung Disease benefits, Veterans Disability, Dependent Indemnity Compensation, payments to the widow of a serviceman killed in action).”
The only exception to this would be if you were participating in housing that was funded under NAHASDA (Native American Housing Assistance and Self-Determination Act), which specifically excludes VA benefits connected to a service-related disability.
However, all other housing programs that fall under HUD regulations will include the full amount of any benefit before any deduction or apportionment.
How do I calculate child support income anticipated for the next year, when the resident just started receiving support in Dec 2015? It is supposed to be received biweekly, but the resident has only received one payment so far for February 2016.
Owners must count alimony and child support amounts awarded by the court unless the applicant certifies that payments are not being made AND that he or she has taken all reasonable legal actions to collect amounts due, including filing with the appropriate courts or agencies responsible for enforcing payment.
If the applicant has been awarded child support, but has NOT taken all reasonable legal actions to collect, we will count the full amount for the next 12 months even if it is not being received.
However, if the applicant HAS taken reasonable legal actions to collect and is receiving child support sporadically, we would average out what the resident has received so far, and anticipate that for the year.
For example:
Wendy has a court order requiring her ex-husband to pay $200 per month in child support. She has pursued collection through the local child support enforcement agency, which provides a printout showing what she has received for the last 6 months:
Jan – $50 Feb – $25 March – $75 April – $25 May – $100 June – $0
Total the amount received for 6 months: $275.00
Divide by 6 to determine a monthly average: $45.83
Annualize the monthly average: $45.83 x 12 = $549.96
Actually I have a question. Is the child support print outs from the court acceptable as third party verification?
Hi Kim,
Yes, child support print outs sent from the court are considered third party verification and are actually the preferred method of verification.
Hi, if child support is not court ordered but I receive money orders every two weeks for child support, how would I use that as apart of my income? Do I have a letter written up and if so what do I have written? Your response is greatly appreciated! Thank you!
Sincerely,
Vickey J
Hi, Vickey – If you receive non-court ordered child support directly from the non-custodial parent, the best way to verify is to have the non-custodial parent provide a notarized affidavit attesting to the monthly amount of support provided. If you retain copies of the money orders, those can also be used as verification.
Hello, I have a couple of questions. I had a court order from the state. I moved to where I reside now from where I have been collecting arrears from 22 years ago. Do I need to have that counted as income?
My 2nd question: My case worker for child support in the state I reside in will not return my calls no matter the urgency. So getting a third party verification is impossible. How can I go about this before I am removed from the housing program?
Yes, court-ordered arrears support is counted as income. If a third-party verification cannot be obtained after three attempts by the Housing Authority in a two-week timeframe, second party verification is acceptable. For child support, that would mean a 12-month printout of child support received.
Hello, I have a question. My daughter’s father is supposed to be paying $117 a month in child support, but he does not pay every month. When he does pay, it’s around $26. Can I still get into housing if that’s my only income at the moment?
Sporadic child support would be calculated using the actual amounts received in the past 12 months, unless reasonable attempts to collect support have not been made. At that point, the full amount of the award would be counted. In order to determine if you qualify for housing, you would need to speak with the Housing Authority to see what their admissions and occupancy policies say.
Hi, I have lived in a low income housing for the last 9 years, 3 of the last years has been under section 8. I have two children one who just graduated and the other graduates next year but turns 18 in Nov 2017. I have had an open case with my county for over 8 years and they have collected child support for me however my ex has not worked for over 2 years. My ex may return to work once he doesn’t have to pay the monthly order which is 800 a month (400 each child) and will be in back pay. Does the back pay affect my housing rent? Does that count as income? I have been struggling on my own just wondering how much rent will increase. I live in California
Hi Frances,
Child support payments from arrearages would be counted as income if they are received. Your landlord can help determine your monthly rental payment if your income changes.