TAX CREDIT SPECIALIST EXAM 300 ACTUAL
QUESTIONS AND CORRECT ANSWERS WITH
RATIONALE LATEST UPDATE ALREADY GRADED A+
ASSURED PASS
This comprehensive 300-question review for the Tax Credit Specialist exam
covers all essential domains including LIHTC program fundamentals, income
and asset verification, IRS compliance reporting, and general business credits.
Each unique multiple-choice question includes a correct answer and a detailed
rationale. Topics include Section 42 regulations, State Housing Finance
Agency administration, compliance periods, Form 8609 and 8823 reporting,
refundable versus nonrefundable credits, Child Tax Credit, Earned Income
Tax Credit, American Opportunity Tax Credit, and Affordable Care Act
credits. Questions address recertification rules, available unit rules, student
eligibility, fair housing, physical inspection standards, average income testing,
and professional ethics standards. The rationales explain regulatory
requirements, compliance procedures, and eligibility criteria essential for tax
credit specialist certification.
Question 1
Who is responsible for most of the regulatory administration of the Low-Income
Housing Tax Credit Programs?
A. U.S. Department of Housing and Urban Development (HUD)
B. Internal Revenue Service (IRS)
C. State Housing Finance Agencies (SHFA)
D. Local zoning boards
Answer: C
Rationale: While the IRS oversees the LIHTC program at the federal level and
issues regulations, most of the regulatory administration is carried out by State
Housing Finance Agencies (SHFAs). SHFAs allocate tax credits, monitor
compliance, conduct inspections, and ensure properties meet program requirements
throughout the compliance period .
Question 2
The initial Compliance Period for LIHTC properties combined with the Extended
Use Period must be for a minimum period of affordability at:
,A. 15 years
B. 30 years
C. 45 years
D. 99 years
Answer: B
Rationale: LIHTC properties must remain affordable for a minimum of 30 years
when combining the initial 15-year Compliance Period with the Extended Use
Period .
Question 3
Which section of the Internal Revenue Code establishes the Low-Income Housing
Tax Credit (LIHTC) program?
A. Section 45
B. Section 42
C. Section 48
D. Section 121
Answer: B
Rationale: The LIHTC program is governed by Section 42 of the Internal Revenue
Code. This section was added by the Tax Reform Act of 1986 to incentivize
private investment in affordable rental housing .
Question 4
The LIHTC regulations require that HUD guidance for properly identifying and
calculating income and assets be followed according to:
A. HUD Handbook 4350.1
B. HUD Handbook 4350.3 REV-1
C. HUD Handbook 4225.1
D. HUD Handbook 7460.1
Answer: B
Rationale: HUD Handbook 4350.3 REV-1 provides the guidance for properly
identifying and calculating income and assets for LIHTC properties. This
handbook is the standard reference for tenant income certification in affordable
housing programs .
Question 5
Use of HUD's EIV system for LIHTC income verifications is:
A. Required for all properties
B. Permitted with owner approval
C. Required for properties receiving project-based rental assistance
D. Prohibited for LIHTC properties
,Answer: C
Rationale: Use of HUD's EIV system for LIHTC income verifications is required
for properties receiving project-based rental assistance. For other LIHTC
properties, EIV use may be permitted depending on state agency requirements .
Question 6
Under Section 42 of the IRC, LIHTC properties must be available for use by the
general public for their designated low-income purpose. This requirement is
satisfied if:
A. The property is advertised in local media
B. The property has a rental office open during business hours
C. The property is not restricted to a specific class of individuals
D. All of the above
Answer: C
Rationale: Section 42(g)(9) requires that LIHTC properties be available for use by
the general public. This means the property cannot be restricted to a specific class
of individuals (with limited exceptions). The property must be available to any
qualified applicant on a first-come, first-served basis .
Question 7
Which of the following is NOT a defined low-income set-aside test for LIHTC
properties?
A. 20-50 test: At least 20% of units are rent-restricted and occupied by households
at or below 50% AMI
B. 40-60 test: At least 40% of units are rent-restricted and occupied by households
at or below 60% AMI
C. 25-60 test: At least 25% of units are rent-restricted and occupied by households
at or below 60% AMI
D. Average Income Test: A qualified group averaging no more than 60% AMI
Answer: C
Rationale: The defined low-income set-aside tests for LIHTC properties are the 20-
50 test, the 40-60 test, and the Average Income Test. The 25-60 test is not a valid
set-aside test under Section 42 .
Question 8
What is the Average Income Test (AIT) for LIHTC properties?
A. At least 40% of units must be occupied by households at 60% AMI or below
B. A qualified group of units averaging no more than 60% AMI with no single unit
exceeding 80% AMI
C. At least 20% of units averaging 50% AMI or below
, D. 100% of units must be at 60% AMI or below
Answer: B
Rationale: The Average Income Test requires a qualified group of units with an
average of the imputed income limitations not exceeding 60% of the area median
gross income (AMGI), with no single unit exceeding 80% AMI .
Question 9
The low-income occupancy requirement for a building under the 40-60 test is:
A. 20% of units occupied by tenants with income at or below 50% of AMI
B. 40% of units occupied by tenants with income at or below 60% of AMI
C. 50% of units occupied by tenants with income at or below 50% of AMI
D. 60% of units occupied by tenants with income at or below 60% of AMI
Answer: B
Rationale: The 40-60 test requires that at least 40% of the units in a building be
both rent-restricted and occupied by individuals with incomes at or below 60% of
the area median income .
Question 10
The low-income occupancy requirement for a building under the 20-50 test is:
A. 20% of units occupied by tenants with income at or below 50% of AMI
B. 20% of units occupied by tenants with income at or below 60% of AMI
C. 30% of units occupied by tenants with income at or below 50% of AMI
D. 30% of units occupied by tenants with income at or below 60% of AMI
Answer: A
Rationale: The 20-50 test requires that at least 20% of the units in a building be
both rent-restricted and occupied by individuals with incomes at or below 50% of
the area median income .
Question 11
What is the purpose of the Extended Use Period in LIHTC?
A. To extend the compliance period to 30 years total
B. To allow properties to exit the program after 15 years
C. To increase the credit amount available
D. To reduce the rent restrictions
Answer: A
Rationale: The Extended Use Period requires LIHTC properties to remain
affordable for an additional 15 years beyond the initial 15-year Compliance Period.
This creates a minimum 30-year period of affordability .
Question 12
QUESTIONS AND CORRECT ANSWERS WITH
RATIONALE LATEST UPDATE ALREADY GRADED A+
ASSURED PASS
This comprehensive 300-question review for the Tax Credit Specialist exam
covers all essential domains including LIHTC program fundamentals, income
and asset verification, IRS compliance reporting, and general business credits.
Each unique multiple-choice question includes a correct answer and a detailed
rationale. Topics include Section 42 regulations, State Housing Finance
Agency administration, compliance periods, Form 8609 and 8823 reporting,
refundable versus nonrefundable credits, Child Tax Credit, Earned Income
Tax Credit, American Opportunity Tax Credit, and Affordable Care Act
credits. Questions address recertification rules, available unit rules, student
eligibility, fair housing, physical inspection standards, average income testing,
and professional ethics standards. The rationales explain regulatory
requirements, compliance procedures, and eligibility criteria essential for tax
credit specialist certification.
Question 1
Who is responsible for most of the regulatory administration of the Low-Income
Housing Tax Credit Programs?
A. U.S. Department of Housing and Urban Development (HUD)
B. Internal Revenue Service (IRS)
C. State Housing Finance Agencies (SHFA)
D. Local zoning boards
Answer: C
Rationale: While the IRS oversees the LIHTC program at the federal level and
issues regulations, most of the regulatory administration is carried out by State
Housing Finance Agencies (SHFAs). SHFAs allocate tax credits, monitor
compliance, conduct inspections, and ensure properties meet program requirements
throughout the compliance period .
Question 2
The initial Compliance Period for LIHTC properties combined with the Extended
Use Period must be for a minimum period of affordability at:
,A. 15 years
B. 30 years
C. 45 years
D. 99 years
Answer: B
Rationale: LIHTC properties must remain affordable for a minimum of 30 years
when combining the initial 15-year Compliance Period with the Extended Use
Period .
Question 3
Which section of the Internal Revenue Code establishes the Low-Income Housing
Tax Credit (LIHTC) program?
A. Section 45
B. Section 42
C. Section 48
D. Section 121
Answer: B
Rationale: The LIHTC program is governed by Section 42 of the Internal Revenue
Code. This section was added by the Tax Reform Act of 1986 to incentivize
private investment in affordable rental housing .
Question 4
The LIHTC regulations require that HUD guidance for properly identifying and
calculating income and assets be followed according to:
A. HUD Handbook 4350.1
B. HUD Handbook 4350.3 REV-1
C. HUD Handbook 4225.1
D. HUD Handbook 7460.1
Answer: B
Rationale: HUD Handbook 4350.3 REV-1 provides the guidance for properly
identifying and calculating income and assets for LIHTC properties. This
handbook is the standard reference for tenant income certification in affordable
housing programs .
Question 5
Use of HUD's EIV system for LIHTC income verifications is:
A. Required for all properties
B. Permitted with owner approval
C. Required for properties receiving project-based rental assistance
D. Prohibited for LIHTC properties
,Answer: C
Rationale: Use of HUD's EIV system for LIHTC income verifications is required
for properties receiving project-based rental assistance. For other LIHTC
properties, EIV use may be permitted depending on state agency requirements .
Question 6
Under Section 42 of the IRC, LIHTC properties must be available for use by the
general public for their designated low-income purpose. This requirement is
satisfied if:
A. The property is advertised in local media
B. The property has a rental office open during business hours
C. The property is not restricted to a specific class of individuals
D. All of the above
Answer: C
Rationale: Section 42(g)(9) requires that LIHTC properties be available for use by
the general public. This means the property cannot be restricted to a specific class
of individuals (with limited exceptions). The property must be available to any
qualified applicant on a first-come, first-served basis .
Question 7
Which of the following is NOT a defined low-income set-aside test for LIHTC
properties?
A. 20-50 test: At least 20% of units are rent-restricted and occupied by households
at or below 50% AMI
B. 40-60 test: At least 40% of units are rent-restricted and occupied by households
at or below 60% AMI
C. 25-60 test: At least 25% of units are rent-restricted and occupied by households
at or below 60% AMI
D. Average Income Test: A qualified group averaging no more than 60% AMI
Answer: C
Rationale: The defined low-income set-aside tests for LIHTC properties are the 20-
50 test, the 40-60 test, and the Average Income Test. The 25-60 test is not a valid
set-aside test under Section 42 .
Question 8
What is the Average Income Test (AIT) for LIHTC properties?
A. At least 40% of units must be occupied by households at 60% AMI or below
B. A qualified group of units averaging no more than 60% AMI with no single unit
exceeding 80% AMI
C. At least 20% of units averaging 50% AMI or below
, D. 100% of units must be at 60% AMI or below
Answer: B
Rationale: The Average Income Test requires a qualified group of units with an
average of the imputed income limitations not exceeding 60% of the area median
gross income (AMGI), with no single unit exceeding 80% AMI .
Question 9
The low-income occupancy requirement for a building under the 40-60 test is:
A. 20% of units occupied by tenants with income at or below 50% of AMI
B. 40% of units occupied by tenants with income at or below 60% of AMI
C. 50% of units occupied by tenants with income at or below 50% of AMI
D. 60% of units occupied by tenants with income at or below 60% of AMI
Answer: B
Rationale: The 40-60 test requires that at least 40% of the units in a building be
both rent-restricted and occupied by individuals with incomes at or below 60% of
the area median income .
Question 10
The low-income occupancy requirement for a building under the 20-50 test is:
A. 20% of units occupied by tenants with income at or below 50% of AMI
B. 20% of units occupied by tenants with income at or below 60% of AMI
C. 30% of units occupied by tenants with income at or below 50% of AMI
D. 30% of units occupied by tenants with income at or below 60% of AMI
Answer: A
Rationale: The 20-50 test requires that at least 20% of the units in a building be
both rent-restricted and occupied by individuals with incomes at or below 50% of
the area median income .
Question 11
What is the purpose of the Extended Use Period in LIHTC?
A. To extend the compliance period to 30 years total
B. To allow properties to exit the program after 15 years
C. To increase the credit amount available
D. To reduce the rent restrictions
Answer: A
Rationale: The Extended Use Period requires LIHTC properties to remain
affordable for an additional 15 years beyond the initial 15-year Compliance Period.
This creates a minimum 30-year period of affordability .
Question 12
