Documenting Efforts to Rent Vacant Units

Q: One of our tax credit units became vacant early last year. We advertised regularly in the newspaper and on the Internet and posted flyers at local shopping centers. But all the prospective households were ineligible. We’ve finally succeeded in renting the unit to a qualified low-income household. Will the fact that it took us nearly a year to rent the unit threaten the owner’s tax credits?

A: No. As long as you’ve properly documented your efforts to rent your vacant unit, the owner’s tax credits should stay fine. The IRS permits an owner to continue claiming credits for a vacant unit as long as management makes reasonable efforts to rent the vacant unit (or another unit of comparable or smaller size) to a qualified low-income household [IRC §42(g)(1); §42(c)(1)(B)]. The IRS rules don’t define “reasonable attempt,” but advertising in the newspaper and on the Internet and posting flyers as you did should be considered reasonable because you acted diligently. The fact that your attempt was unsuccessful for a while doesn’t make it unreasonable.

Be prepared if your state housing agency asks you to prove that you made a reasonable attempt. Keep copies of all your advertisements and flyers. Also, organize the information about your efforts. List your ads with the dates and places they ran, and also keep track of the dates you showed your vacant unit to prospective households and any reason they gave you for deciding not to rent.