Compliance, Year 15, and Kentucky's 30-year extended-use floor — Kentucky

The compliance/extended-use math: 30 years, confirmed three ways, with one internally inconsistent figure to flag

Kentucky's QAP itself never states a specific total for the Extended Use Period the way some states' QAPs spell out in a Definitions section. The current 2027-2029 QAP runs only nine pages, and its entire Compliance Monitoring section (Section V) simply cross-references federal recordkeeping, certification, inspection, and noncompliance-notification provisions under Treas. Reg. §1.42-5, without independently defining "Extended Use Period" or stating a year count anywhere in the document.

The number has to be pieced together from KHC's other materials, and three independent sources agree on 30. First, KHC's 2027 Multifamily Guidelines states, describing its own Compliance Monitoring Fees, that "KHC charges a compliance monitoring fee to owners of LIHTC properties for the duration of the 30-year compliance period," billed in two blocks: annually from operating income for "Years 1-15," and as a single cumulative payment due in advance at placed in service, before Form(s) 8609 issue, for "Years 16-30" beginning with 2027 LIHTC awards. Second, the Guidelines' own Chapter 1 fee schedule repeats the same split, describing the "Annual Compliance Monitoring Fee" and noting "Post 15 compliance fees (Years 16-30) must be paid in advance at placed in service before IRS Form(s) 8609 will be issued." Third, KHC's own public materials on its new Payment in Lieu of Taxes program state that the PILOT/tax-exemption term "aligns with the LIHTC extended use period, typically 30 years."

One figure in KHC's own materials doesn't match. The Multifamily Guidelines' Chapter 9 "Program Descriptions" table -- a plain-language summary of KHC's funding programs, which the chapter's own introduction states "should not be construed as an all-inclusive list of all the requirements of each program" -- states that Housing Credit "property must remain affordable for a minimum of 33 years." This research found no other KHC source, and no QAP or statutory citation, supporting 33 rather than 30. Treat the 33-year figure as an apparent internal drafting inconsistency in a simplified summary table, not as evidence that Kentucky's actual restriction runs longer than the federal 30-year floor -- but if a specific project's own recorded LURA states a different number than either 30 or 33, that recorded document controls and should be confirmed directly with KHC rather than either figure discussed here.

Every application waives the Qualified Contract right -- unconditionally

The QAP states the waiver in a single sentence, in a subsection that pairs it with an unrelated Fair Housing topic ("F. FAIR HOUSING AND QUALIFIED CONTRACT"): "By applying for LIHTCs pursuant to this QAP, the applicant waives any and all rights to a qualified contract process with respect to the project to which the application pertains." Unlike some other states' QAPs, which pair a mandatory QC waiver with an explicit carve-out preserving a right to transfer ownership or seek a subsequent credit allocation, Kentucky's text contains no stated exception of any kind -- the waiver as written is flat and unconditional.

This research did not find language distinguishing whether the waiver reaches only awards made under the current 2027-2029 QAP or Kentucky's entire existing LIHTC portfolio. Confirm the applicable Qualified Contract language directly against any specific project's own recorded LURA/extended use agreement rather than assuming this QAP's current text controls retroactively for an older award. Separately, KHC's own Multifamily Guidelines confirm the LURA and the federal "extended use agreement" are the same instrument in Kentucky practice -- describing, in the context of the Average Income Test, "existing developments already placed in service with a recorded LIHTC extended use agreement" as a category distinct from developments still pre-8609.

Compliance monitoring: "at least every three years" for the whole affordability period -- no stated post-Year-15 reduction found

The QAP's Compliance Monitoring section lists KHC's procedures largely by cross-reference to federal regulation: recordkeeping and retention under Treas. Reg. §1.42-5(b); the owner's annual certification under §1.42-5(c)(1); review of certifications and supporting documentation for at least 20% of the low-income units in each property, at least once every three years, under §1.42-5(c); on-site inspection under §1.42-5(d); and notification of noncompliance to owners and the IRS under §1.42-5(e). KHC's Multifamily Guidelines restate the same cadence in plainer language: "KHC-assisted projects must meet compliance requirements throughout the affordability period. KHC will conduct compliance reviews and will inspect all projects at least every three years."

This research did not find Kentucky-specific language -- of the kind some other states' compliance manuals spell out -- distinguishing a reduced inspection cadence, a longer cure period, or the end of Form 8823 filings once a property moves past its 15-year federal Compliance Period into the Extended Use Period. Both the QAP and the Multifamily Guidelines describe compliance monitoring as continuing "throughout the affordability period" without stating whether the federal 3-year/20%-sample minimum simply continues unchanged for the full 30 years, or whether KHC's own LIHTC Manual -- referenced in the QAP as incorporated by reference but not independently available for this research -- sets a different post-Year-15 standard. Confirm directly with KHC's Compliance Department before assuming either a lighter or an unchanged monitoring burden after Year 15.

The concrete noncompliance lever this research did find in KHC's own materials is a capacity-review consequence rather than a points-based scoring category: late submission of the LURA/8609 stage itself "may result in a capacity deduction in future funding rounds," and any party "found to be in consistent noncompliance with program guidelines or that demonstrate flagrant or serious incident(s) of misuse of funds will not be allowed to participate in KHC programs," with suspension and debarment tracked against the entity and any related parties. This research did not find a Georgia-style, points-based Compliance Performance scoring mechanism operating independently of Form 8823 in the Kentucky materials reviewed.

No blanket property-tax exemption, but a real -- and newly expanded -- state-law toolkit

Kentucky draws a sharp line between valuing a LIHTC property favorably and exempting it from property tax outright, and until this QAP cycle only offered the first. KRS 132.191, in its current form effective March 24, 2023, lets a Property Valuation Administrator (PVA) value "multi-unit rental housing that is subject to government restriction on use" using an income approach built from the property's own actual restricted rents and operating history, with a capitalization rate that must be "equal to or greater than the capitalization rate used for valuing multi-unit rental housing that is not subject to government restriction on use" and set in the range of 50 to 150 basis points above the most recent national average multifamily cap-rate survey. The statute is explicit that the LIHTC award itself cannot be used to inflate that value: "[i]ncome tax credits received under Section 42 of the Internal Revenue Code or from any state or federal program shall not be included" in the income calculation. An owner must separately notify the PVA in writing, within 60 days, of a change in a property's government-restricted status (including a foreclosure), on penalty of up to $200 for failing to do so.

Kentucky case law reaches a similar result through a different legal theory. In Buffalo School Apartments, LLLP v. LaRue County Board of Assessment Appeals (Kentucky Claims Commission, Final Order No. K-25305, July 6, 2017), the Commission reduced a LIHTC property's assessment from $2,671,454 to $230,000, holding -- as summarized in a Kentucky law firm's write-up of the decision -- that Section 42 tax credits "are intangible property, which is exempt from state and local property tax pursuant to KRS § 132.208," a general intangible-property exemption independent of the valuation-method statute above. Both routes point toward excluding LIHTC credit value from a property's taxable value, but they rest on different statutes, and a valuation dispute should cite the one actually applicable to the argument being made rather than treat the two as interchangeable.

Separately, KRS 198A.200 gives Kentucky Housing Corporation itself -- described in the statute as "a de jure municipal corporation and political subdivision of the Commonwealth of Kentucky" -- a blanket exemption from state and local taxation on real property it owns, while allowing KHC to negotiate a payment in lieu of taxes "consistent with the cost to the state or political subdivision of supplying municipal services to the housing development." Historically this exemption only mattered when KHC itself held title, which is not how a typical LIHTC deal (owned by a single-purpose LP or LLC) is structured -- until a 2026 statutory change made it directly relevant to LIHTC developers for the first time.

Effective January 1, 2027 -- the same date this QAP cycle takes effect -- 2026 House Bill 757, enacted as 2026 Ky. Acts ch. 161, added a new possessory-interest exemption at KRS 132.195(2)(j). Ordinarily, KRS 132.195(1) taxes a private party's leasehold interest in otherwise tax-exempt government property, when "leased or possession is otherwise transferred to a natural person, association, partnership, or corporation in connection with a business conducted for profit," as if the lessee owned the property outright -- meaning a developer leasing land from a tax-exempt entity like KHC would normally still owe property tax on its own leasehold interest. The new subsection (2)(j) carves out exactly that scenario for KHC: a private lessee's interest in KHC-owned real property is exempt from that possessory-interest tax when the property is "acquired and leased in connection with an activity, including new construction, that would result in an increase of forty-eight (48) units or more to the stock of residential multifamily housing," is "[s]ubject to an extended use agreement in favor of" KHC, and "[t]he county judge/executive and the mayor of the applicable political subdivisions have provided written consent of the acquisition and lease."

KHC has built a new Payment in Lieu of Taxes (PILOT) Program directly on that statutory change, opening to applications beginning January 1, 2027. Under the program, KHC itself acquires the real estate and ground-leases it to the developer -- a lease KHC's own materials describe as running "potentially up to 99 years" -- and the developer makes annual PILOT payments, negotiated directly with the applicable local governments rather than by KHC on the developer's behalf, in place of ordinary ad valorem property tax, for a term that "aligns with the LIHTC extended use period, typically 30 years." Eligibility requires the development to receive a 9% or 4% Housing Credit award, add at least 48 new units, and be subject to an extended use agreement in KHC's favor; both nonprofit and for-profit entities may apply. KHC's own materials note that developers must demonstrate site control and obtain written consent from the applicable jurisdictions themselves -- KHC's role is to confirm the resulting agreement meets statutory and program requirements, not to negotiate the PILOT amount. Trade-press reporting attributes initial funding for a related Residential Housing Infrastructure Fund to 2026 House Bill 900 ($5 million in each of FY2026-27 and FY2027-28); this research's own review of HB 900's bill-tracking summary did not independently surface that appropriation language, so treat the funding-source detail as trade-press-reported rather than independently confirmed against the enacted bill text. KHC's detailed program guidelines, policies, and procedures were still under development at the time of this research and had not yet been published in final form.

No parallel Kentucky state tax credit, and no KHC-run Right of First Refusal program found

Kentucky does not run a state-level low-income housing tax credit alongside the federal award the way a substantial number of LIHTC states now do. KHC's own program materials describe Housing Credits solely as the federal 26 U.S.C. §42 allocation -- no parallel state credit statute, no separate state-credit recapture rule, and no state-credit annual cap to track for LIHTC purposes specifically. (Kentucky's separate historic rehabilitation tax credit, administered jointly by the Kentucky Heritage Council and KHC under KRS Chapter 198A and recently touched by the same 2026 HB 757 that created the PILOT possessory-interest exemption, is a distinct program from LIHTC with its own 5-year affordability-maintenance clawback; don't conflate the two when a deal layers historic credits on top of Housing Credits.)

This research also did not find a KHC-administered Right of First Refusal program of the kind some other states' agencies run as a QAP-scored or QAP-mandated mechanism. The federal nonprofit ROFR under 26 U.S.C. §42(i)(7) remains available as a matter of federal law and ordinary limited-partnership-agreement drafting regardless of state administration, but no KHC form, exhibit, or QAP threshold/scoring provision creating or requiring a Kentucky-specific ROFR process turned up in the materials reviewed. Treat this as an area to confirm directly with KHC rather than assume either that no ROFR option exists at all, or that KHC runs one equivalent to states that do.