Compliance monitoring through the Indiana extended use period — Indiana

Two clocks, and a threshold you signed away

An Indiana LIHTC deal runs the same federal clocks as any state, plus one Indiana-specific term that IHCDA sets in the recorded Extended Use Agreement (EUA) — and, for nearly the entire current pipeline, one door that was closed permanently at application.

IHCDA's QAP lets an applicant buy a longer commitment for scoring points, and once it's recorded it does not come back off the table.

The QAP is explicit that this commitment "will not be waived in the future and will be codified in the recorded Extended Use Agreement." A model that reads "Indiana = 30 years" off a rule of thumb will understate the restriction on any deal that took those points — and Indiana awards them every round.

The bigger structural fact is what happens to the federal qualified contract mechanism in Indiana. Every applicant, as a threshold requirement, must irrevocably waive the right to request early termination of the EUA through a qualified contract — no waiver of that waiver is available at application, and IHCDA will not grant an early release or exemption from it during the extended use period. The QAP frames this as protecting program integrity; the practical effect is the same one California reaches by statute, just built as a contract term instead: for any development funded under the 2020 QAP or later, or funded with Section 1602 Tax Credit Exchange dollars, the qualified contract exit does not exist.

That history is real and IHCDA publishes it: 139 developments have exited their Indiana extended use commitment through a qualified contract since the agency started tracking releases, most recently a 71-unit Indianapolis property in late March 2026. But the three developments currently working through the process — Broadstone Pointe, Enclave at Meridian, and Lafayette Landing at Kessler, all submitted the same week in January 2026 — carry Building Identification Numbers from 2009 to 2011. Nothing awarded under a QAP since 2020 is eligible to join that queue. A model built for an Indiana deal funded in the last several rounds should not carry a year-15 qualified contract scenario at all.

The annual machine: certification, monitoring, and the 8823

Every owner certifies compliance to IHCDA annually, under penalty of perjury, for every year of both the Compliance Period and the Extended Use Period. The Annual Owner Certification of Compliance (AOC) covers the prior calendar year and is due by February 15 — and a submission isn't complete until the owner has also finalized every tenant event in IHCDA's online system and paid the annual monitoring fee.

Sampling follows the same Treasury Regulation table every state uses — IHCDA's manual reproduces the full 28-row chart and reviews the lesser of 20% of a project's LIHTC units (rounded up) or the table minimum.

IHCDA must file Form 8823 with the IRS no earlier than the end of the correction period and no later than 45 days after it, whether or not the finding was corrected in time. IHCDA's own manual still points examiners to the January 2011 revision of the IRS "Guide for Completing Form 8823" — worth knowing before assuming a newer edition governs an Indiana file.

Two record-retention facts are easy to lose. First, ordinary compliance records must be kept 6 years past the filing deadline (with extensions) of the return for that year — but the initial tenant file from the first year of the credit period must be kept 6 years past the return for the last year of the compliance period, which works out to roughly 21 years of custody for a single year's paperwork. Second, a finding corrected before IHCDA ever notifies the owner of an upcoming review does not have to be reported to the IRS at all — the notification letter is IHCDA's own "bright line": anything found and fixed before that letter goes out stays off the 8823; anything still open after it goes out gets reported regardless of when it's eventually cured.

Recapture, and what survives it

The accelerated portion is the excess of credit actually allowed in prior years over what would have been allowed had the same total been spread ratably across 15 years instead of 10 — the statutory basis for the commonly quoted "about one-third" estimate, which is a derivation, not a number written anywhere in the Code. A calculator has to run both schedules and subtract; a flat fraction will be wrong for any deal with an unusual credit ramp-up or a mid-period basis change.

Recapture exposure ends at year 15 — this is federal law and identical everywhere. What Indiana does after that is enforce the recorded EUA directly: IHCDA can pursue "all applicable legal remedies" under the covenant itself, place the ownership entity in not-good-standing status (which can trigger suspension or debarment from future IHCDA funding), and, if a project was operating under the relaxed Extended Use Policy described below, simply revoke that status and reinstate the full original compliance requirements.

Indiana's fee ledger — application through the extended use tail

IHCDA prices almost every touchpoint of this phase, and the fee schedule changes shape depending on whether the request lands before or after Form 8609 is issued.

One notable absence: neither the QAP nor the Compliance Manual imposes an Indiana-specific ceiling on year-over-year rent increases beyond the federal AMI-indexed rent limit itself. There is no California-style per-household rent-growth cap to model here — Indiana rents move with the published income limits, full stop, unless a specific rental-assistance contract or the project's own election says otherwise.

Year 14 forward: what the qualified contract process actually costs

For the small, closed universe of pre-2020 Indiana deals still eligible to use it, the qualified contract process is real, specific, and expensive — worth modeling accurately rather than waving at.

After year 14 of the compliance period, an eligible owner submits a notification letter to IHCDA's Chief Real Estate Development Officer along with thirteen required exhibits: a signed acknowledgement form, a CPA-prepared price calculation across five worksheets, a narrative and photographs of the property, three years of financial statements plus year-to-date, a debt summary with copies of notes and mortgages, a certified rent roll, three years of occupancy history, environmental and governmental correspondence, a property condition report, and a $5,000 processing fee.

A narrower path exists for owners who, before 2020, took scoring points for voluntarily committing to serve qualified tenants for the longest period and later want out. They can request an exemption from that commitment by showing the property is either economically unviable at its current rent structure or already renting at roughly market rates — but the fee for even asking is the remaining years in the Extended Use Period times the unit count times $10 (the Extended Use Policy rate), and if IHCDA denies the request it keeps $1,500 of that payment regardless.

Whether a development exits through qualified contract or foreclosure, the same federal decontrol period applies afterward: for three years, the owner cannot evict a then-current household except for good cause, and cannot raise that household's gross rent beyond what the restriction in place at termination allowed. New move-ins after termination are unrestricted immediately.

Requesting a qualified contract, or losing a property to a foreclosure that releases the extended use period, is not free of consequence for the next application either. Any such event connected to the applicant, owner, developer, or a principal of any of them, occurring after January 25, 2021, at any Indiana project, costs future applications negative points: -2 for one qualified-contract release, -4 for more than one, -4 for a foreclosure release.

On the right of first refusal, Indiana rides the federal provision rather than layering its own mandate on top. Wherever a deal's ownership structure includes a nonprofit general partner, IHCDA requires the LPA — or a separate ROFR agreement — to contain the IRC § 42(i)(7) language, and it reviews that document before issuing Form 8609. There is no California-style rule limiting the mandate to a particular set-aside or vintage; if the GP is a nonprofit, the ROFR requirement applies, full stop, at the minimum federal purchase price of outstanding debt plus exit taxes.

The Extended Use Policy: a lighter regime once Year 15 clears

Indiana runs something California's guide doesn't need to describe, because California's compliance burden never eases: a project that clears its 15-year Compliance Period cleanly can apply to shift onto IHCDA's Extended Use Policy, which trades a real reduction in ongoing paperwork and fees for a project that has proven, over three straight years, that it won't need the scrutiny.

Qualifying requires three consecutive years — any three, starting as early as Year 13-15 or any later three-year window — with no Form 8823 issued and no outstanding compliance issue. The definition of "free of noncompliance" is stricter than it sounds: if an 8823 is issued and corrected within the same year, that year still doesn't count, and the clean three-year window can't begin until the following year. A finding that spans two calendar years taints both of them.

The student-rule suspension carries a real trap. If the property later wants to pursue a new tax credit allocation on the same building — resyndication — the units have to show "continuous compliance," which includes the full-time student rule even during years it wasn't technically being enforced. Coasting on the Extended Use Policy's relaxed rules and then trying to resyndicate without having tracked student status the whole time can disqualify the household files that were never actually re-checked.

Getting onto the policy isn't free, either: the owner pays to record an amendment to the Extended Use Agreement reflecting the new terms, and has 90 days to get it recorded and returned to IHCDA once IHCDA sends it. And it isn't permanent — a noncompliance event discovered afterward gives IHCDA the right to simply revoke the status and reinstate the full original requirements.

What this phase reaches backward into underwriting

Almost everything binding here was elected years earlier, at application, when it was cheap to change.

The deferred-developer-fee rule deserves its own line, because it's a harder deadline than the equivalent in some other states: Indiana doesn't just cap the fee, it requires the deferred portion be structured so it can actually be repaid by the end of Year 15, and only fee that is actually paid — not merely accrued on a balance sheet — counts toward eligible basis. A pro forma that pushes fee repayment past Year 15 on the assumption that IHCDA won't notice is underwriting against the QAP's own text.

Finally, the framing. Because the qualified contract door is shut for essentially the entire live Indiana pipeline, and because deferred fee has a hard Year-15 repayment expectation built into the eligible-basis calculation, an Indiana model that leans on a Year-15 cash-out at market value is making the same mistake a California model makes assuming the same thing — just reached by a signed application waiver instead of a state statute. What the extended use tail actually determines in Indiana is the same question it determines everywhere the exit is closed: whether deferred fee gets repaid on schedule, and what the GP is on the hook for if it doesn't.