TAX CREDIT SPECIALIST EXAM 2026/2027 — Original Practice Material
LOW-INCOME HOUSING TAX CREDIT COMPLIANCE
TAX CREDIT SPECIALIST EXAM
2026/2027 • Original Practice Examination
Aligned to public SHCM / LIHTC compliance domains
A+ 5 100%
QUESTIONS VERIFIED EXAM DOMAINS COVERED RATIONALES INCLUDED
CATEGORIES
■ Program Regulations & Allocations
■ Unit Eligibility & Rent Restrictions
■ Applicant Eligibility, Income & Assets
■ Documentation, Leasing & Recordkeeping
■ Compliance Monitoring, Noncompliance & Reporting
NOTICE: This is an original practice examination created for study purposes. It is not the official Tax Credit Specialist, SHCM, or NCHM
examination. All questions and rationales are newly written and aligned to publicly available LIHTC compliance domains and IRC §42
requirements. Passing score on this practice set: 80%.
STUVIAACTUALEXAM
STUVIAACTUALEXAM Page 1
, TAX CREDIT SPECIALIST EXAM 2026/2027 — Original Practice Material
DOMAIN: PROGRAM REGULATIONS & ALLOCATIONS
Q1. A developer receives a carryover allocation for a 60-unit new construction LIHTC project in late November. To keep the
allocation, the project must meet the 10% expenditure test by the end of the following calendar year. The owner’s
accountant asks what costs may be counted toward that 10% test. The specialist should explain that:
A. Only hard construction costs paid to third-party contractors may be included.
B. Reasonably expected basis costs, including land, soft costs, and construction costs incurred by the required date, may be
included if properly documented.
C. Only costs that have already been reimbursed by the syndicator may be counted.
D. Only the developer fee earned to date may be counted toward the 10% test.
Correct Answer: A
Rationale: Under IRC §42(h)(1)(E) and related guidance, the 10% test looks to reasonably expected basis. Qualifying costs include land, soft
costs, and hard costs that have been incurred (and for which the taxpayer has basis) by the statutory deadline, provided they are properly
documented.
Q2. An LIHTC building is placed in service on August 15. The owner elects to begin the credit period in the following year.
The first year of the credit period will therefore start on:
A. January 1 of the year the building is placed in service.
B. August 15 of the year the building is placed in service.
C. January 1 of the year after the building is placed in service.
D. The first day of the month after the building is placed in service.
Correct Answer: B
Rationale: When the owner elects to defer the credit period under §42(f)(1), the 10-year credit period begins on the first day of the taxable year
following the year the building is placed in service. The compliance period still begins when the building is placed in service.
Q3. A state allocating agency issues a reservation letter for 9% credits. The letter states that a portion of the credits is being
held in reserve. This most commonly means that:
A. The project has failed the threshold review and will not receive any credits.
B. The agency has reserved a portion of the annual credit amount pending the project meeting certain conditions or final
underwriting.
C. The credits have already been allocated and the reservation is merely administrative.
D. The project must return the entire reservation within 30 days.
Correct Answer: C
Rationale: A reservation is a preliminary commitment. Agencies often reserve a portion of the credits pending satisfaction of conditions such as
final financing commitments, environmental clearance, or updated underwriting. The full allocation is typically confirmed later via carryover or final
allocation.
Q4. The minimum compliance period for an LIHTC property, when combined with the extended-use period required by the
extended low-income housing commitment, must provide affordability for at least:
A. 15 years total.
B. 20 years total.
C. 30 years total.
D. 40 years total.
Correct Answer: D
Rationale: The statutory compliance period is 15 years. The extended-use agreement required by §42(h)(6) must extend affordability for at least
an additional 15 years, producing a minimum 30-year affordability period.
Q5. Eligible basis for a new construction LIHTC building generally includes:
A. The cost of land and the cost of commercial space.
B. Depreciable residential rental property costs, including certain common areas that serve the residential units, but excluding
land and most commercial space.
C. Only the costs of the low-income units themselves, excluding all common areas.
D. All development costs including marketing and permanent loan fees.
Correct Answer: A
Rationale: Eligible basis under §42(d) is based on adjusted basis of residential rental property. Land is excluded. Common areas that serve
residential units may be included; commercial space is generally excluded unless it meets specific limited exceptions.
STUVIAACTUALEXAM Page 2
, TAX CREDIT SPECIALIST EXAM 2026/2027 — Original Practice Material
Q6. A project elects the 40/60 minimum set-aside. This means that:
A. At least 40% of the units must be occupied by households at or below 60% of area median income.
B. At least 40% of the units must be occupied by households at or below 40% of AMI and 60% of units at or below 60% of AMI.
C. The project may never house any household above 60% of AMI.
D. All units must be rent-restricted at the 40% AMI rent limit.
Correct Answer: B
Rationale: The 40/60 minimum set-aside requires that at least 40% of the residential units in the project be both rent-restricted and occupied by
individuals whose income is 60% or less of area median income. It does not impose a 40% AMI income limit on those units.
Q7. The applicable fraction for a building is the smaller of the unit fraction and the floor-space fraction. If a building has 20
units of which 16 are low-income and the low-income units comprise 78% of the residential floor space, the applicable
fraction is:
A. 80%.
B. 78%.
C. 100%.
D. 50%.
Correct Answer: C
Rationale: Applicable fraction is the smaller of the unit fraction (16/20 = 80%) and the floor-space fraction (78%). Therefore the applicable
fraction is 78%.
Q8. An owner claims credits on a building that fails to meet the minimum set-aside by the end of the first year of the credit
period. The most serious consequence is:
A. A reduction of that year’s credit by 10%.
B. Loss of all credits for that building for the entire credit period, subject to possible recapture and disallowance.
C. Only a state agency fine with no federal tax impact.
D. Automatic conversion of the building to market-rate status with no further consequences.
Correct Answer: D
Rationale: Failure to satisfy the minimum set-aside by the close of the first year of the credit period means the building does not qualify as a
qualified low-income building. Credits claimed are subject to disallowance and recapture.
Q9. The IRS, state allocating agencies, and owners each have distinct roles in the LIHTC program. The agency primarily
responsible for monitoring compliance during the extended-use period and reporting noncompliance to the IRS is:
A. The syndicator.
B. The state housing finance agency (or other allocating agency).
C. The local public housing authority.
D. The Department of Housing and Urban Development exclusively.
Correct Answer: A
Rationale: State allocating agencies are responsible for compliance monitoring under §42 and for filing Form 8823 with the IRS when they
discover noncompliance. HUD provides income-limit data and related guidance but does not administer the credit itself.
Q10. Acquisition credits may be claimed on an existing building only if, among other requirements:
A. The building was last placed in service more than 10 years before the acquisition (with limited exceptions) and the purchaser
meets the related-party and other statutory tests.
B. The building is less than five years old.
C. The seller agrees to claim no credits on the same building.
D. The building has never been used for residential rental purposes.
Correct Answer: B
Rationale: Section 42(d)(2) imposes a 10-year placed-in-service rule (with exceptions for certain federally or state-assisted buildings and other
situations) and related-party restrictions before acquisition credits may be claimed.
STUVIAACTUALEXAM Page 3
LOW-INCOME HOUSING TAX CREDIT COMPLIANCE
TAX CREDIT SPECIALIST EXAM
2026/2027 • Original Practice Examination
Aligned to public SHCM / LIHTC compliance domains
A+ 5 100%
QUESTIONS VERIFIED EXAM DOMAINS COVERED RATIONALES INCLUDED
CATEGORIES
■ Program Regulations & Allocations
■ Unit Eligibility & Rent Restrictions
■ Applicant Eligibility, Income & Assets
■ Documentation, Leasing & Recordkeeping
■ Compliance Monitoring, Noncompliance & Reporting
NOTICE: This is an original practice examination created for study purposes. It is not the official Tax Credit Specialist, SHCM, or NCHM
examination. All questions and rationales are newly written and aligned to publicly available LIHTC compliance domains and IRC §42
requirements. Passing score on this practice set: 80%.
STUVIAACTUALEXAM
STUVIAACTUALEXAM Page 1
, TAX CREDIT SPECIALIST EXAM 2026/2027 — Original Practice Material
DOMAIN: PROGRAM REGULATIONS & ALLOCATIONS
Q1. A developer receives a carryover allocation for a 60-unit new construction LIHTC project in late November. To keep the
allocation, the project must meet the 10% expenditure test by the end of the following calendar year. The owner’s
accountant asks what costs may be counted toward that 10% test. The specialist should explain that:
A. Only hard construction costs paid to third-party contractors may be included.
B. Reasonably expected basis costs, including land, soft costs, and construction costs incurred by the required date, may be
included if properly documented.
C. Only costs that have already been reimbursed by the syndicator may be counted.
D. Only the developer fee earned to date may be counted toward the 10% test.
Correct Answer: A
Rationale: Under IRC §42(h)(1)(E) and related guidance, the 10% test looks to reasonably expected basis. Qualifying costs include land, soft
costs, and hard costs that have been incurred (and for which the taxpayer has basis) by the statutory deadline, provided they are properly
documented.
Q2. An LIHTC building is placed in service on August 15. The owner elects to begin the credit period in the following year.
The first year of the credit period will therefore start on:
A. January 1 of the year the building is placed in service.
B. August 15 of the year the building is placed in service.
C. January 1 of the year after the building is placed in service.
D. The first day of the month after the building is placed in service.
Correct Answer: B
Rationale: When the owner elects to defer the credit period under §42(f)(1), the 10-year credit period begins on the first day of the taxable year
following the year the building is placed in service. The compliance period still begins when the building is placed in service.
Q3. A state allocating agency issues a reservation letter for 9% credits. The letter states that a portion of the credits is being
held in reserve. This most commonly means that:
A. The project has failed the threshold review and will not receive any credits.
B. The agency has reserved a portion of the annual credit amount pending the project meeting certain conditions or final
underwriting.
C. The credits have already been allocated and the reservation is merely administrative.
D. The project must return the entire reservation within 30 days.
Correct Answer: C
Rationale: A reservation is a preliminary commitment. Agencies often reserve a portion of the credits pending satisfaction of conditions such as
final financing commitments, environmental clearance, or updated underwriting. The full allocation is typically confirmed later via carryover or final
allocation.
Q4. The minimum compliance period for an LIHTC property, when combined with the extended-use period required by the
extended low-income housing commitment, must provide affordability for at least:
A. 15 years total.
B. 20 years total.
C. 30 years total.
D. 40 years total.
Correct Answer: D
Rationale: The statutory compliance period is 15 years. The extended-use agreement required by §42(h)(6) must extend affordability for at least
an additional 15 years, producing a minimum 30-year affordability period.
Q5. Eligible basis for a new construction LIHTC building generally includes:
A. The cost of land and the cost of commercial space.
B. Depreciable residential rental property costs, including certain common areas that serve the residential units, but excluding
land and most commercial space.
C. Only the costs of the low-income units themselves, excluding all common areas.
D. All development costs including marketing and permanent loan fees.
Correct Answer: A
Rationale: Eligible basis under §42(d) is based on adjusted basis of residential rental property. Land is excluded. Common areas that serve
residential units may be included; commercial space is generally excluded unless it meets specific limited exceptions.
STUVIAACTUALEXAM Page 2
, TAX CREDIT SPECIALIST EXAM 2026/2027 — Original Practice Material
Q6. A project elects the 40/60 minimum set-aside. This means that:
A. At least 40% of the units must be occupied by households at or below 60% of area median income.
B. At least 40% of the units must be occupied by households at or below 40% of AMI and 60% of units at or below 60% of AMI.
C. The project may never house any household above 60% of AMI.
D. All units must be rent-restricted at the 40% AMI rent limit.
Correct Answer: B
Rationale: The 40/60 minimum set-aside requires that at least 40% of the residential units in the project be both rent-restricted and occupied by
individuals whose income is 60% or less of area median income. It does not impose a 40% AMI income limit on those units.
Q7. The applicable fraction for a building is the smaller of the unit fraction and the floor-space fraction. If a building has 20
units of which 16 are low-income and the low-income units comprise 78% of the residential floor space, the applicable
fraction is:
A. 80%.
B. 78%.
C. 100%.
D. 50%.
Correct Answer: C
Rationale: Applicable fraction is the smaller of the unit fraction (16/20 = 80%) and the floor-space fraction (78%). Therefore the applicable
fraction is 78%.
Q8. An owner claims credits on a building that fails to meet the minimum set-aside by the end of the first year of the credit
period. The most serious consequence is:
A. A reduction of that year’s credit by 10%.
B. Loss of all credits for that building for the entire credit period, subject to possible recapture and disallowance.
C. Only a state agency fine with no federal tax impact.
D. Automatic conversion of the building to market-rate status with no further consequences.
Correct Answer: D
Rationale: Failure to satisfy the minimum set-aside by the close of the first year of the credit period means the building does not qualify as a
qualified low-income building. Credits claimed are subject to disallowance and recapture.
Q9. The IRS, state allocating agencies, and owners each have distinct roles in the LIHTC program. The agency primarily
responsible for monitoring compliance during the extended-use period and reporting noncompliance to the IRS is:
A. The syndicator.
B. The state housing finance agency (or other allocating agency).
C. The local public housing authority.
D. The Department of Housing and Urban Development exclusively.
Correct Answer: A
Rationale: State allocating agencies are responsible for compliance monitoring under §42 and for filing Form 8823 with the IRS when they
discover noncompliance. HUD provides income-limit data and related guidance but does not administer the credit itself.
Q10. Acquisition credits may be claimed on an existing building only if, among other requirements:
A. The building was last placed in service more than 10 years before the acquisition (with limited exceptions) and the purchaser
meets the related-party and other statutory tests.
B. The building is less than five years old.
C. The seller agrees to claim no credits on the same building.
D. The building has never been used for residential rental purposes.
Correct Answer: B
Rationale: Section 42(d)(2) imposes a 10-year placed-in-service rule (with exceptions for certain federally or state-assisted buildings and other
situations) and related-party restrictions before acquisition credits may be claimed.
STUVIAACTUALEXAM Page 3
