How to Determine Absentee Status of Resident Confined to Hospital or Nursing Home
When one of your tax credit residents gets confined to a hospital or nursing home, you must decide whether the absence is temporary or permanent. This is due to the fact that a household member's temporary or permanent absence will determine whether you must count her income when you recertify the household. If you calculate household income incorrectly, the IRS may cite you for noncompliance, and you'll place the owner's tax credits in jeopardy.
Unfortunately, it's not always clear whether an absentee's confinement is temporary or permanent. And in fact, there's no hard-and-fast definition of these terms in this context. So you'll need to ask households the right questions to get enough information to make a decision. You'll also need a record of the answers to those questions to use when it's time to recertify. And it's a good idea to have documentation for your decision handy in case the IRS questions your judgment.
You can adapt and use our Model Form: Get Information You Need to Determine Absentee Status to help you determine whether you must count an absentee's income when the absentee is confined to a hospital or nursing home. Once you make your decision, you'll have a record to remind you and your staff. Plus, the absentee status form will provide the backup you'll need if you run into trouble with the IRS.
Basics on Absentee Rule
IRS and HUD rules require you to calculate income for every household member, says Mark Alper, senior trainer for the National Center for Housing Management. But sometimes it's not clear whose income to count when a household member gets confined to a hospital or nursing home. For instance, an elderly household member may suffer a stroke and be forced to live in a nursing home for an indefinite amount of time. Or a resident may spend a month or two in a hospital because of injuries in a car accident.
To calculate the household income, you must determine whether to treat the absentee as a household member. The HUD Handbook says that, if a resident is temporarily absent, you must still consider the resident a household member [Handbook 4350.3, par. 5-6(B)]. But if a resident is permanently confined to a hospital or nursing home, the household gets to decide whether you should treat the resident as a household member [HUD Handbook 4350.3, par. 5-6(D)(1)].
When you're required to treat an absentee, temporary or permanent, as a household member, you must count all of the absentee's income, says Alper [Handbook 4350.3, par. 5-6(B)(1)]. According to the HUD Handbook, you must do this even if part of the income won't be available to the household, he adds. For example, a household member who's temporarily hospitalized may get worker's compensation to pay for the hospitalization. Even though this part of the member's income may not be available to the entire household, you must still count it as part of the household's income when you recertify.
EDITOR'S NOTE: If a household member is temporarily absent not due to confinement in a medical facility but because she's away on active military duty, you must not consider her to be a household member and you must not count her income unless:
o She is the head, cohead, or spouse; or
o Her spouse or dependents are household members [Handbook 4350.3, par. 5-6(B)(3)].
How to Decide Whether Absence Is Temporary or Permanent
Whether an absentee's confinement in a hospital or nursing home is temporary or permanent isn't always clear. That's because sometimes even the household isn't sure how long the absentee will be confined. For example, when a resident falls into a coma after an automobile accident, doctors may not be able to say when the resident can return home. They may predict an absence of anywhere from a week to any number of years. Since the situation isn't always clear, you'll need to ask households the right questions to get all the available information to make your decision. Then you must decide the correct absentee status using the information you have.
The HUD Handbook doesn't define the terms “temporary” or “permanent.” Alper suggests checking with your state housing agency and reading its compliance manual to see if the agency gives any guidance. Then, make your best determination based on the information you have.
An absentee doesn't have to be confined to a hospital or nursing home forever to be considered permanently absent. As a rule of thumb, if the absentee has been confined for an indefinite amount of time, and it could be many months or years until the absentee returns to the site, you should treat the absentee as a permanent absentee, says compliance expert Roxie Munn. If you have trouble deciding whether a household member's absence is temporary or permanent, talk with a tax credit consultant.
How Absentee Rule Affects Tax Credit Sites
Treating an absentee as a household member may bring the household over-income if the absentee's income would lift the household's income above 140 percent (or 170 percent in deep rent-skewed units) of the income limits, explains Alper. If this happens, the household may remain eligible and in the unit even though the household is over-income.
But if you needed to keep that unit low income to maintain the minimum set-aside, you'll have to follow the next available unit rule by making sure your staff rents your next available unit, low income or market rate, of comparable or smaller size, in the same building, to a qualified low-income applicant. Otherwise, the owner's tax credits will be at risk.
Problems can arise if you make the wrong decision about an absentee's status or don't even realize you need to make one. If you count the income of an absentee who shouldn't be considered a member of the household, it may lead you to treat the household as over-income, causing you to apply the next available unit rule unnecessarily. Or if you don't count the income of an absentee who should be considered a member of the household, you may treat the household as being within the income limits when it's not. Either way, you risk bringing the entire building into noncompliance.
How to Explain Options to Household
If it's up to the household to decide whether to count an absentee as a household member, first check whether doing so would bring the household over-income, suggests Alper. If it would, you should explain the consequences of the decision to the household. Let household members know that they will remain in the unit whether or not they decide to have you count the absentee as a household member. But explain that if the household chooses to keep the absentee as a household member, and this causes the household to go over-income, you and your staff will have to follow the next available unit rule. In addition to the administrative burdens imposed by following the rule, such a decision will pose a serious threat to the owner's tax credits that won't go away unless and until you've complied with the next available unit rule.
If the household understands that choosing not to have you count the absentee as a household member won't harm it or the absentee, while the entire building could fall into noncompliance if it chooses to count the absentee, the household will probably decide not to include the absentee.
But don't go beyond laying out the consequences. That is, don't try to convince a household not to have you count a permanent absentee as a member, warns Alper. You must comply with the HUD Handbook, which requires the household to make its own decision. If the household, for whatever reason, chooses to have you count an absentee as a member, you must accept its decision, even if this will cause the household to go over-income.
Using the Absentee Status Form
Using a form ensures that you are asking all the right questions to get the information you need. It also makes it easy for your staff to be consistent with each absentee. A written record means that you won't have trouble remembering your decision when you recertify the household later, because you'll have it written down on the form. And by having your staff complete the form, you'll automatically be creating backup to support your decision in case the IRS challenges it. Like our Model Form, your form should include the following important bits of information:
Where absentee is confined. Ask staff to indicate whether the absentee is confined in a hospital or nursing home by checking the correct box. Then have them write the name of the institution in the space provided. The name of the particular hospital or nursing home should have no effect on the absentee's status. But writing down this detail will give your completed form more credibility if the IRS challenges your decision.
Also be sure to refrain from asking why the absentee has been confined to a hospital or nursing home. You may think it's logical to want this information because it's relevant to deciding whether an absence is temporary or permanent. But asking households about a member's disability invites fair housing trouble, warns Alper. If a household offers your staff information about why an absentee was confined, you don't need to worry. But your staff shouldn't follow up with any questions, he adds.
Date absentee left site. Have staff ask the household when the absentee was confined and write it down.
When absentee will return to site. This last question is important to helping you determine whether an absence is temporary or permanent. Have staff ask the household for the date range during which it expects the absentee to return to the site, and indicate whether this date range is exact or an estimate. If the household can't give a range, staff should check “Can't determine” and explain the reason in the space provided. This explanation can help you make your decision. For example, if the household can't say because the absentee is in a coma that may last indefinitely, this suggests that you should treat the absence as permanent.
Status determination. After getting the information, the staff member should determine whether the absence is temporary or permanent and check the appropriate box. If the absence is permanent, HUD Handbook 4350.3, par. 5-6(D) requires the household to choose whether to count the absentee as a household member. So your staff may need to call the household back to complete this final part of the form after you've made your determination. Then check the box to indicate the household's response.
Mark S. Alper: Vice President of Compliance, National Center for Housing Management, 333 N. First St., Jacksonville Beach, FL 32250; www.nchm.org.
Roxie Munn, HCCP: President, Roxie Munn, Inc., 117 Kingsland Way, Piedmont, SC 29673; www.roxiemunn.com.
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