Generally tax credits are not available for all-student housing. Strict rules apply to units comprised entirely of full-time students, especially when the student is full time during five or more months out of a calendar year. It is the educational institution that determines whether or not a student is considered full-time.
Full Time Student Definition
IRC §151(c)(4) defines, in part, a student as an individual, who during each of 5 calendar months during the calendar year in which the taxable year of the taxpayer begins, is a full-time student at an educational organization described in IRC §170(b)(1)(A)(ii). Treas. Reg. §1.151-3(b) further provides that the five calendar months need not be consecutive. KHRC interprets IRC §151(c)(4) as meaning five full months during a calendar year. Therefore, students who have been in school since January of the current year and will be graduating in May are NOT considered full-time by this definition.
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 does not include on-the-job training classes.
4.2 Student Exceptions
A household comprised entirely of full-time students is not eligible to reside in a low-income housing tax credit unit; however, they may reside in market rate units within a qualified low income housing tax credit project. There are five exceptions to the full-time student rule as outlined in IRC §42(i)(3)(D). The five exceptions that would allow a household comprised entirely of full-time students to qualify a low income housing tax credit unit are:
A. All members of the household are married and eligible to file a joint income tax return. Members of the household do not need to be married to each other.
A copy of a marriage certificate/license is appropriate for verification to demonstrate the household meets this exception, or a copy of the federal income tax return that illustrates the couple filed jointly. Common law marriages are also acceptable if evidence is available to support the claim. The household does not need to file a joint income tax return, only be eligible to do so.
B. All members of the household are single parent(s) and their minor child(ren), 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). This regulation began effective in 2007 under HR 3648-4.
A copy of the signed federal income tax return must be obtained to prove that all tenants in the unit are not dependents of a third party. The student may also sign a notarized statement attesting to the fact that a federal income tax return will be filed for the current year that documents his/her dependents are not dependents of another individual and that a signed copy will be provided after filing. The manager should ensure this copy is retrieved. Single parents not earning enough income to file a tax return may sign a notarized statement indicating such.
The benefit of HR3658-4 is that in cases of divorce where one parent claims one child and the other parent claims the other child (but both children are living with one parent in a tax credit unit), or when parents trade off annually on who is eligible to claim a child(ren) on the tax return, this is no longer an issue for qualification with the IRC §42's Student Rule.
C. AT LEAST ONE member of the household receives assistance under Title IV of the Social Security Act (i.e., AFDC). Temporary Aide for Families (TAFF) is acceptable in Kansas.
Documentation must be obtained to prove the student is receiving this type of assistance. TAFF is currently being administered in Kansas by the Department of Social & Rehabilitation Services.
D. AT LEAST ONE member of the household is enrolled in a job-training program receiving assistance under the Job Training Partnership Act, or similar federal, state, or local laws.
Documentation must be obtained to prove the student is receiving this type of assistance and that the program's mission and/or purpose is similar to that of the JTPA.
Definition: JTPA is a program of the Department of Labor Employment and Training Administration. The JTPA's mission and/or purpose is “...to establish programs to prepare youth and adults facing serious barriers to employment for participation in the labor force by providing job training and other services that will result in increased employment and earnings, increased education and occupational skills, and decreased welfare dependency, thereby improving the quality of work force and enhancing the productivity and competitiveness of the Nation.” The programs cover everything from summer youth programs, job corps, adult welfare to work, migrant and seasonal farmer workers, etc.
A. AT LEAST ONE member of the household was previously in Foster Care.
Documentation must be obtained from the State to prove the student was in Foster Care at some point during their life.
Note: This last exemption was part of the HERA legislation. There was no stipulation given by Congress to indicate they expected a timeline to be applied, such as “within the last five years.” Therefore, so long as a student was previously in Foster Care at some point during their life, they will qualify under this exception in Kansas.