Compliance, Year 15, and DC's 40-year extended-use floor — District of Columbia

The compliance/extended-use math: 40 years confirmed, not 30 and not 55

DHCD's Threshold Eligibility Requirements state the operative rule directly: Low-Income Units "must be rent restricted as defined by IRC Section 42(g)(2) for a period of at least 40 years (the Compliance Period of 15 years and an extended use period of at least 25 years, for a total period of at least 40 years) unless the project presents a plan to transfer ownership to tenants at year 15." The QAP's Monitoring for Compliance section independently restates the same figure in different words: "The Compliance Period is for 15 years, beginning with the first taxable year of the building's credit period and is extended over at least an additional 25-year period by the Land Use Restrictive Covenants, for a total of at least 40 years." Two independent sections of the same document agree on the same number — DC's floor is 40 years, not the bare federal 30-year minimum (15-year Compliance Period plus the federal statutory minimum 15-year Extended Use Period under IRC §42(h)(6)(D)).

Worth flagging rather than silently smoothing over: the QAP's own Introduction and Authority section, on page 3, states more generically that "Projects generally must meet certain requirements for low-income use for a minimum of 30 years per federal requirements" — a plain restatement of the federal floor that does not reflect DC's own, twice-repeated, DC-specific 40-year operative requirement stated later in the same document. Treat the introductory sentence as generic background framing, not the controlling number for a DC deal.

Also worth noting for anyone cross-referencing another state's QAP style: DHCD's Definitions section formally defines "Compliance Period" by direct reference to IRC §42(i)(1) ("the period of 15 consecutive taxable years beginning with the first taxable year of the Tax Credit Period") but does not carry a matching, standalone defined term for "Extended Use Period" the way some states' QAPs do — the 25-year addition and 40-year total are stated operationally in the Threshold Eligibility Requirements and Monitoring for Compliance sections rather than as a separately defined term.

Every applicant effectively waives the Qualified Contract right — with one narrow exception

The QAP's Year 15 Plan requirement ties the waiver directly to the 40-year commitment: each applicant must present a plan covering the limited partner/investor exit strategy, any anticipated refinancing, re-syndication, or third-party sale, and "how affordability will be maintained through the minimum 40-year extended affordability period." It then states the waiver without much room to maneuver: "Applicants must agree to maintain the minimum 40-year extended affordability period by waiving their right to seek a qualified contract for the Project purchase after the 14th year of the Compliance Period, unless the project presents a plan to transfer ownership to tenants at year 15." The only carve-out named in the QAP text is a tenant-ownership-transfer plan at Year 15 — not a fee, not a scoring trade-off, and not an option available simply by declining points elsewhere.

DHCD backstops that waiver with a compliance-history screen at the applicant level: "Any application submitted by an applicant with a principal that was or is currently a principal in an Ownership Entity that has previously requested a Qualified Contract will not be considered for any reservation or allocation of credits at DHCD's discretion." Unlike some states' scoring-based versions of this rule, DC's QAP does not attach a specific look-back date to this screen, and frames it as a discretionary bar on future awards rather than an automatic, self-executing disqualification. Separately, every LIHTC equity Letter of Intent must include a written acknowledgment from the investor/syndicator "that they have never sought to achieve early termination of a LIHTC extended use agreement through the qualified contract process, nor have they sought to undermine the exercise of a right of first refusal or a non-profit's option to purchase in prior transactions."

One more data point corroborates how thoroughly the QC exit has been closed for new awards: unlike some other states' fee schedules, which still price a Qualified Contract Eligibility Determination fee, a QC Request fee, and a QC Inspection fee for legacy deals, this research found no Qualified Contract fee line anywhere in DC's current QAP Fee Table. That's consistent with a policy that has functionally foreclosed the QC route for new awards — though it does not by itself establish whether any older LURC recorded under a prior DC QAP cycle might still carry a live, unwaived QC right; that couldn't be confirmed from this document.

Two ownership-transfer mechanisms stack at Year 15: the federal nonprofit ROFR, and DC's own TOPA

Where a Qualified Non-profit Organization holds a right of first refusal under IRC §42(i)(7), the QAP sets specific windows: the right "may be exercised anytime within a twenty-four (24) month period, or longer period, after the close of the Compliance Period," and once exercised, the nonprofit "shall have at least twelve (12) months to close on the purchase of the Project or the interests of the non-managing members." The purchase price is calculated by the Project's accountants based on "the minimum purchase price in IRC Section 42(i)(7)(B) plus the amount needed to pay any unpaid fees, loans or other amounts due to the non-managing members ... from the managing member or general partner." The right cannot be conditioned on the Owner first receiving a bona fide third-party offer, and it may be assigned to a governmental entity, another qualified non-profit, or a tenant organization.

DHCD's Evaluation Criteria layer scoring incentives on top of that same mechanism: points are available where a Qualified Non-profit Organization is the managing member of the general partner (or holds 51% or more of it) and will hold the §42(i)(7) right of first refusal, with maximum points requiring the ROFR agreement to be signed, or intended to be signed, before financial closing. All LIHTC Projects meeting that nonprofit-managing-member threshold "are required to apply for the Tax Relief Program" — tying the scoring preference directly to the property-tax mechanism described below.

DC layers a second, citywide statute on top of the federal ROFR that most other states' QAPs don't have to address: "All rights of first refusal granted to Qualified Non-profit Organizations are subject to the requirements of the Tenant Opportunity to Purchase Act (TOPA) and the District's Opportunity to Purchase Amendment Act of 2008, DC Law 17-286 (DC Official Code Section 42-3404.31 et seq.)." TOPA is a distinctly DC mechanism giving tenants and tenant associations their own purchase rights on a covered building's sale. This research confirmed TOPA's applicability from the QAP's own text but did not independently trace the exact procedural sequencing between a tenant association's TOPA rights and a qualified non-profit's §42(i)(7) ROFR window in a Year 15+ disposition — that sequencing should be confirmed with DC counsel experienced in TOPA before relying on either right in isolation.

Compliance monitoring: the federal minimum by reference, and a fee schedule that explicitly continues past Year 15

DHCD states its monitoring standard in general federal terms: it has "established compliance monitoring procedures consistent with the requirements of §1.42-5 of the Income Tax Regulations," covering physical inspections, review of low-income certifications, rent records, recordkeeping, and non-compliance notification, with the procedural detail "provided in detail in the DHCD LIHTC Compliance and Monitoring Reference Guide." Unlike some other states' QAPs, DC's own QAP text does not itself restate a specific inspection cycle (e.g., "at least once every three years") or a specific unit/file sample percentage (e.g., "20% of units") — those numbers, if DC's actual practice differs from the bare federal minimum, live only in the separate Reference Guide. The most recent version of that guide found publicly posted on DHCD's project-monitoring page is dated 2019 — six years before this QAP's December 2025 publication — so this research could not confirm whether its inspection-cadence and sample-size provisions still reflect DHCD's current practice. Confirm the current cadence directly with DHCD's compliance division before building a monitoring calendar around any specific number.

On noncompliance, DHCD "will promptly notify Project owners in writing" with "a cure period of up to 90 days from the notice date," extendable "up to an additional six months" for good cause at DHCD's sole discretion, and "all incidents of noncompliance must be reported to the IRS on Form(s) 8823 notwithstanding the resolution of compliance issues." Form 8823 and federal recapture risk are inherently tied to the 15-year Compliance Period — once that period ends, there is no federal tax return left to recapture credits from — but DHCD's contractual monitoring under the recorded Land Use Restrictive Covenants, including the reduced compliance fee above and the property-change notification duty below, continues through the full 40-year (or longer) extended-use term.

Two provisions are worth flagging as textually narrower than they might first appear. The Notification of Project Changes duty (30 days' written notice before any change in property management or ownership/GP interest) isn't explicitly time-bounded in the QAP text to the Compliance Period, and given its link to the recorded Restrictive Covenants, likely continues through the full extended-use term — but that continuation is an inference from context, not a sentence the QAP states outright. The Recordkeeping and Retention subsection, by contrast, ties record maintenance specifically to "each year of the Compliance Period" without a parallel sentence extending it through the additional 25-year period. This research could not confirm from the QAP text alone whether DHCD's actual recordkeeping expectation ends at Year 15 or continues for as long as the LURC remains recorded — confirm directly with DHCD before assuming either answer.

Davis-Bacon and related funding-triggered obligations don't appear to carry into ongoing operations

The QAP frames Davis-Bacon/DBRA, Section 3, and BABA entirely around specific other funding sources being present alongside the LIHTC financing — each provision's own examples (HOME, CDBG, HTF, STORM, HUD 542(c) Risk Share, ACC, HPTF, LRSP) describe development-stage subsidies, not an operating-period wage floor. This research found no separate prevailing-wage, living-wage, or labor requirement in the QAP text that attaches specifically to Year 15-plus property operations (for example, an ongoing wage floor for maintenance or service staff). If a specific DC deal's post-construction operating budget assumes no such ongoing obligation, that assumption is consistent with what this QAP says — but it should still be checked against that deal's own recorded HOME or HPTF regulatory agreement, since those documents, not the LIHTC QAP, are what would actually carry a continuing wage covenant if one exists for a particular funding mix.

DC's property-tax mechanism: a real, nonprofit-gated statutory exemption — not a negotiated PILOT

DC's QAP points LIHTC Projects to DC Official Code §47-1005.02, the "Tax Relief Program," for real property tax and recordation tax exemptions. Reading the statute directly (not DHCD's QAP summary of it) confirms a genuinely broad exemption: qualifying property "shall be exempt from the taxes imposed by" Chapters 8 and 10 of Title 47 (real property tax) and, separately, from "payment in lieu of tax" under §47-1002(20) — meaning a qualifying property is not expected to owe either an ad valorem property tax bill or a PILOT once certified. The statute separately exempts the conveyance of a qualifying property from the Title 42 recordation tax on deeds, from the Title 47 Chapter 9 transfer tax, and exempts a security interest instrument (a mortgage or deed of trust) securing acquisition, development, or refinancing debt on the property from its own recordation tax. This is a materially broader relief package than a single property-tax exemption, and it is a statutory exemption rather than a negotiated payment structure — there is no PILOT payment expected from a certified property under this statute, in contrast to how some other jurisdictions structure PILOT-based relief.

The duration language matters directly for this phase: the exemption runs "during the time that the real property is being developed for or being used as affordable housing and is subject to restrictive covenants governing the income of residents that occupy the affordable housing units during the federal low-income housing tax credit compliance period, including any extended use period." Tied to a Project's actual recorded LURC, that means the exemption tracks however long that Project's Compliance Period and Extended Use Period actually run — a minimum of 40 years under the current QAP.

The exemption is gated to ownership structure, not automatic for every LIHTC award: it reaches property "owned by or leased to an organization that is not organized or operated for private gain, or that is owned by or leased to an entity controlled, directly or indirectly, by such an organization." A for-profit-only ownership structure, with no qualifying nonprofit owner or controlling nonprofit affiliate, does not qualify under this subsection. That lines up with the QAP's own scoring section, which requires Projects where a nonprofit is the managing member (with 51%+ ownership of the GP/managing member) to apply for the Tax Relief Program — DHCD treats it as an expected benefit specifically for that ownership structure, not a program-wide entitlement available to every award.

Administration runs through the Mayor's certification to the Office of Tax and Revenue (OTR): the Mayor certifies each eligible property and owner/lessee to OTR, and OTR then "administer[s] the exemption ... in the same manner as" other property tax exemptions, with the statute specifying that "an owner or lessee ... shall not be required to file an application with OTR to qualify for an exemption." In practice there is still an application step — DHCD's own QAP directs applicants to "Applications for the Tax Relief Program should be made to DHCD at: dhcd.law@dc.gov" — it's simply directed at DHCD's certification process rather than filed with OTR itself. A separate subsection, (a-1), extends a parallel exemption to nonprofit-owned properties financed through the Housing Production Trust Fund or other District affordable-housing programs at or below 80% AMI, for awards made after August 23, 2021 (that subsection itself effective November 13, 2021) — relevant for a Project blending HPTF and LIHTC financing even outside the federal LIHTC compliance-period framing.

One footnote worth knowing but out of scope for this phase: DHCD's own QAP flags, in its introductory footnote, that the District also runs a separate "District of Columbia Low Income Housing Tax Credit (DC LIHTC)" under DC Official Code Title 47, Chapter 48 — explicitly "differentiated from" the federal program this entire QAP governs. This research did not dig into that separate local credit program, since DHCD's own text places it outside the QAP being analyzed here; a developer stacking DC-specific financing tools should be aware it exists as a distinct instrument.