HUD Updates List of Federally Mandated Income Exclusions
Four new types of income will no longer impact eligibility calculations.
Specific sources of income are excluded by federal statute from consideration as income for purposes of determining eligibility for, or benefits in, a HUD program. By extension, these income exclusions also apply to the LIHTC program. This is because tax credit law requires owners to use HUD rules regarding income calculations.
According to Treasury Regulations Section 1.42-5(b)(1)(vii), “Tenant income is calculated in a manner consistent with the determination of annual income under Section 8 of the U.S. Housing Act of 1937.” And IRS Notice 88-80 reiterated this when it stated, “the income of individuals and area median gross income (adjusted for family size) are to be made in a manner consistent with the determination of annual income and the estimates for median family income under section 8 of the United States Housing Act of 1937.”
On Jan. 31, HUD published a revised list of exclusions, replacing the previously published version by adding four new income exclusions and modifying existing exclusions to specifically identify which sources of income are excluded both from income calculations and asset determinations. The last time HUD updated the list of federally mandated exclusions from income was nearly 10 years ago, in May 2014. This updated list of income exclusions incorporates the Housing Opportunity Through Modernization Act (HOTMA) regulatory exclusions.
We’ll go over the updates to the list of income and asset sources required by federal law to be excluded from consideration in HUD programs.
New Income Exclusions
HUD has added four new types of income that will no longer impact eligibility calculations. These include specific tax refunds, allowances for children of certain veterans, distributions from ABLE accounts, and emergency rental assistance payments.
Tax refunds. The amount of any refund (or advance payment with respect to a refundable credit) issued under the Internal Revenue Code is excluded from income and assets for a period of 12 months from receipt [26 U.S.C. 6409].
Children of certain service veterans. The update adds allowances paid to children of certain Thailand service veterans born with spina bifida as an income and asset exclusion. This is in addition to any allowance paid to children of Vietnam veterans born with spina bifida, children of women Vietnam veterans born with certain birth defects, and children of certain Korean service veterans born with spina bifida.
ABLE account distributions. Any amount in an Achieving a Better Life Experience (ABLE) account is excluded from income and assets. The value of, distributions from, and certain contributions to ABLE accounts are excluded.
Emergency rental payments. Payments received by a household under the Emergency Rental Assistance Program under the Consolidated Appropriations Act of 2021 and the American Rescue Plant Act of 2021 are excluded from income and assets.
Modifications to Existing Mandated Exclusions
In addition to adding new income exclusions, HUD’s notice makes new corrections and modifies existing exclusions. HUD has adjusted existing criteria, in essence refining the way HUD programs calculate assets and income.
AmericorpsVISTA payments. Prior to the publication of the Federal Register, payments to volunteers under the Domestic Volunteer Service Act of 1973 were excluded without exception. With the Federal Register update, such payments would be included when determining gross household income, if the CEO of the Corporation for National and Community Service determines that the value of all such payments, adjusted to reflect the number of hours such volunteers are serving, is equivalent to or greater than the minimum wage then in effect under the Fair Labor Standards Act or the minimum wage, under the laws of the state where such volunteers are serving, whichever is the greater.
Tribal Trust Settlements. The notice amends the way income from Tribal Trust Settlements is excluded. The first $2,000 of per capita payments are also excluded unless the per capita payments exceed the amount of the original Tribal Trust Settlement.
NAHASDA benefits. This exclusion was updated to include reference to exclusion language under federal statutes, Title 42 U.S.C. and 38 U.S.C., which specifies that this exclusion applies to amounts not received that are excludable under 42 U.S.C. 1382B(a)(7), and amounts received for a service-connected disability under 38 U.S.C. Chapter 11. In other words, the notice has been adjusted so that wording more accurately captures the language in the U.S. Code that describes the exclusion for programs under NAHASDA (Native American Housing Assistance and Self-Determination Act).
Individual development accounts. Any amounts in an individual development account (IDA) are excluded from assets, and any assistance, benefit, or amounts earned by or provided to the individual development account are excluded from income, as provided by the Assets for Independence Act. This exclusion was updated to clarify that an IDA is excluded from assets, and any IDA benefits are also excluded as income. It should be noted that this program was defunded in 2017.
29 Federally Mandated Income Exclusions
It’s important to note that HUD’s updated list of federally mandated income exclusions isn’t a comprehensive list of all exclusions from income. The sources listed here are those that are specifically excluded by federal law.
Other income exclusions, as listed in the various HUD Handbooks, as well as Notice H 2023-10/PIH 2023-27, remain applicable. Also, the exclusions listed below apply to income only, except where HUD states that the exclusion also applies to assets:
1) The value of the allotment provided to an eligible household under the Food Stamp Act of 1977. This exclusion also applies to assets.
2) Payments, including for supportive services and reimbursement of out-of-pocket expenses, for volunteers under the Domestic Volunteer Service Act of 1973, are excluded from income except that the exclusion shall not apply in the case of such payments when the Chief Executive Officer of the Corporation for National and Community Service appointed under 42 U.S.C. 12651c determines that the value of all such payments, adjusted to reflect the number of hours such volunteers are serving, is equivalent to or greater than the minimum wage then in effect under the Fair Labor Standards Act of 1938 or the minimum wage, under the laws of the State where such volunteers are serving, whichever is the greater. This exclusion also applies to assets.
3) Certain payments received under the Alaska Native Claims Settlement Act. This exclusion also applies to assets.
4) Income derived from certain submarginal land of the United States that is held in trust for certain Indian tribes. This exclusion also applies to assets.
5) Payments or allowances made under the Department of Health and Human Services’ Low-Income Home Energy Assistance Program. This exclusion also applies to assets.
6) Income derived from the disposition of funds to the Grand River Band of Ottawa Indians. This exclusion also applies to assets.
7) The first $2000 of per capita shares received from judgment funds awarded by the National Indian Gaming Commission or the U.S. Claims Court, the interests of individual Indians in trust or restricted lands, and the first $2000 per year of income received by individual Indians from funds derived from interests held in such trust or restricted lands. This exclusion does not include proceeds of gaming operations regulated by the Commission. This exclusion also applies to assets.
8) Amounts of student financial assistance funded under title IV of the Higher Education Act of 1965, including awards under Federal work-study programs or under the Bureau of Indian Affairs student assistance programs.
For section 8 programs only, any financial assistance in excess of amounts received by an individual for tuition and any other required fees and charges under the Higher Education Act of 1965, from private sources, or an institution of higher education (as defined under the Higher Education Act of 1965), shall not be considered income to that individual if the individual is over the age of 23 with dependent children.
9) Payments received from programs funded under Title V of the Older Americans Act of 1965.
10) Payments received on or after January 1, 1989, from the Agent Orange Settlement Fund or any other fund established pursuant to the settlement in In Re Agent Orange Product Liability Litigation, M.D.L. No. 381 (E.D.N.Y.). This exclusion also applies to assets.
11) Payments received under the Maine Indian Claims Settlement Act of 1980. This exclusion also applies to assets.
12) The value of any child care provided or arranged (or any amount received as payment for such care or reimbursement for costs incurred for such care) under the Child Care and Development Block Grant Act of 1990.
13) Earned income tax credit (EITC) refund payments received on or after January 1, 1991, for programs administered under the United States Housing Act of 1937, title V of the Housing Act of 1949, section 101 of the Housing and Urban Development Act of 1965, and sections 221(d)(3), 235, and 236 of the National Housing Act. This exclusion also applies to assets. Please note: While this income exclusion addresses EITC refund payments for certain HUD programs, the exclusion in 26 U.S.C. 6409 excludes Federal tax refunds more broadly for any Federal program or under any State or local program financed in whole or in part with Federal fund.
14) The amount of any refund (or advance payment with respect to a refundable credit) issued under the Internal Revenue Code is excluded from income and assets for a period of 12 months from receipt.
15) Payments by the Indian Claims Commission to the Confederated Tribes and Bands of the Yakima Indian Nation or the Apache Tribe of the Mescalero Reservation. This exclusion also applies to assets.
16) Allowances, earnings and payments to AmeriCorps participants under the National and Community Service Act of 1990.
17) Any allowance paid to children of Vietnam veterans born with spina bifida, children of women Vietnam veterans born with certain birth defects, and children of certain Korean and Thailand service veterans born with spina bifida is excluded from income and assets.
18) Any amount of crime victim compensation that provides medical or other assistance (or payment or reimbursement of the cost of such assistance) under the Victims of Crime Act of 1984 received through a crime victim assistance program, unless the total amount of assistance that the applicant receives from all such programs is sufficient to fully compensate the applicant for losses suffered as a result of the crime. This exclusion also applies to assets.
19) Allowances, earnings, and payments to individuals participating in programs under the Workforce Investment Act of 1998 reauthorized as the Workforce Innovation and Opportunity Act of 2014.
20) Any amount received under the Richard B. Russell School Lunch Act and the Child Nutrition Act of 1966, including reduced-price lunches and food under the Special Supplemental Food Program for Women, Infants, and Children (WIC). This exclusion also applies to assets.
21) Payments, funds, or distributions authorized, established, or directed by the Seneca Nation Settlement Act of 1990. This exclusion also applies to assets.
22) Payments from any deferred U.S. Department of Veterans Affairs disability benefits that are received in a lump sum amount or in prospective monthly amounts.
23) Any amounts (i) not actually received by the family, (ii) that would be eligible for exclusion under 42 U.S.C. 1382b(a)(7), and (iii) received for service-connected disability under 38 U.S.C. chapter 11 or dependency and indemnity compensation under 38 U.S.C. chapter 13 as provided by an amendment by the Indian Veterans Housing Opportunity Act of 2010 to the definition of income applicable to programs under the Native American Housing Assistance and Self Determination Act (NAHASDA).
24) A lump sum or a periodic payment received by an individual Indian pursuant to the Class Action Settlement Agreement in the case entitled Elouise Cobell et al. v. Ken Salazar et al., 816 F.Supp.2d 10 (Oct. 5, 2011 D.D.C.), for a period of one year from the time of receipt of that payment as provided in the Claims Resolution Act of 2010. This exclusion also applies to Assets.
25) Any amounts in an ‘‘individual development account’’ are excluded from assets and any assistance, benefit, or amounts earned by or provided to the individual development account are excluded from income, as provided by the Assets for Independence Act, as amended.
26) Per capita payments made from the proceeds of Indian Tribal Trust Settlements listed in IRS Notice 2013–1 and 2013–55 must be excluded from annual income unless the per capita payments exceed the amount of the original Tribal Trust Settlement proceeds and are made from a Tribe’s private bank account in which the Tribe has deposited the settlement proceeds. Such amounts received in excess of the Tribal Trust Settlement are included in the gross income of the members of the Tribe receiving the per capita payments as described in IRS Notice 2013–1. The first $2,000 of per capita payments are also excluded from assets unless the per capita payments exceed the amount of the original Tribal Trust Settlement proceeds and are made from a Tribe’s private bank account in which the Tribe has deposited the settlement proceeds.
27) Federal assistance for a major disaster or emergency received by individuals and families under the Robert T. Stafford Disaster Relief and Emergency Assistance Act and comparable disaster assistance provided by States, local governments, and disaster assistance organizations. This exclusion also applies to assets.
28) Any amount in an Achieving Better Life Experience (ABLE) account, distributions from and certain contributions to an ABLE account established under the ABLE Act of 2014, as described in Notice PIH 2019–09/H 2019–06 or subsequent or superseding notice is excluded from income and assets.
29) Assistance received by a household under the Emergency Rental Assistance Program pursuant to the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021.