Single Parent Exception to the Student Rule

 Q As I understand it, there’s an exception to the student rule for a single parent. At what age is the child no longer considered a child or a full-time student for the purposes of this exception?

A For the LIHTC program, a household cannot be comprised of all full-time students (kindergarten through 12th grade and institutions of higher education) unless they meet one of the following exceptions:

• A student receives assistance under Title IV of the Social Security Act (TANF);
• A student was previously in the foster care program;
• A student is enrolled in a job training program receiving assistance under the Job Training Partnership Act or under other federal, state, or local laws;
• The household is comprised of single parents and their children, and such parents are not dependents of another individual, and such children are not dependents of another individual other than a parent of such children. In the case of a single parent with children, the legislative history explains that none of the tenants (parent or children) can be a dependent of a third party; or
• The household contains a married couple entitled to file joint tax returns.

According to LIHTC compliance expert Karen Graham, if a household is comprised entirely of full-time students, then it’s important an exception be properly documented. For the single parent exception to apply, it’s not about the age of the child; rather, it’s about dependency on a tax return. The “single parent exception” states that the single parent isn’t a dependent of another individual and the child(ren) aren’t dependent(s) of someone other than a parent.

The best documentation of meeting this exception is the single parent’s tax return showing that she’s filing her own return claiming all of her children or the return of the other parent showing he’s claiming the children, says Graham. If the returns aren’t available, a divorce decree, separation agreement, or custody document describing dependency may also be used, she adds.

According to Chapter 17 of the Audit Guide for Completing Form 8823, for the LIHTC program, a student who’s a full-time student for any portion of five months out of the current calendar year is considered a full-time student for the entire calendar year. The months don’t need to be consecutive [Treas. Reg. §1.151-3(b)].

Also, the determination of student status as full- or part-time should be based on the criteria used by the educational institution the student is attending. An educational organization, as defined by IRC §170(b)(1)(A)(ii), is one that normally maintains a regular faculty and curriculum, and normally has an enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. The term “educational organization” includes elementary schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools. It doesn’t include on-the-job training courses.