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

The compliance/extended-use math: 30 years confirmed, not assumed

NDHFA's Compliance Manual states the framework in plain terms: "The Compliance Period (IRC 42 (i)(1)) Duration of the credit period plus 5 years. The compliance period is 15 years beginning with the first year of the tax credit period (placed-in-service year or subsequent year if deferral was elected). The Extended Use Period (IRC 42 (h)(6)(D)) Restricts the eligibility of developments to receive an allocation of Tax Credits to only those developments that agree to keep the property income and rent restricted for an extended period of time. The term for this period is a minimum of 15 years in addition to the Compliance Period of 15 years. The total term of compliance is 30 years" (Section 1.03). The current 2027 Allocation Plan's own operative clause tracks the same math from the applicant side: the Owner "must waive their right to request a qualified contract under Code (IRC § 42(h)(6)(F)) and enter into an Extended Use Agreement which requires the owner and any successors to meet the applicable fraction of low-income occupancy for an extended use period of at least 15 years beyond the initial 15-year compliance period" (Section 2.F).

The recorded document that carries this forward is the LURA (in NDHFA's own terminology, also called the "Declaration of Extended Rental Housing Commitment," now retitled the "Lien and Restrictive Covenant Agreement" in the glossary). The Compliance Manual is direct about its duration: "The LURA is binding for the 30-year term in addition to the minimum set aside election the owner will agree to certain additional requirements that were considered in the scoring and final allocation of LIHTCs. Compliance procedures will monitor that these additional elections are fulfilled during the 30-year term" (Section 1.06). This research found no scoring category, set-aside, or QAP provision offering points or preference for voluntarily extending affordability beyond that 30-year floor — North Dakota's structure, on the documents reviewed, is a flat 30-year floor rather than a voluntary ladder some other states run.

The Qualified Contract waiver has applied to every award since the 2020 QAP — and this research found no live QC fee schedule

NDHFA's Compliance Manual states the waiver's history in one sentence: "Effective with the 2020 QAP, all owners must waive their right to a qualified contract" (Section 1.03). The current 2027 Allocation Plan carries the same rule forward as a Threshold-adjacent commitment rather than a scoring incentive: the waiver is a precondition of the Extended Use Agreement itself, not something an owner can trade for points (Section 2.F, quoted above). Unlike some other states in this library, this research found no separate Qualified Contract fee — no eligibility-determination fee, no request fee, no inspection fee — anywhere in the current Allocation Plan's fee sections or the Compliance Manual's own fee schedule (Section 3.01). Where another state's agency might still price a Qualified Contract process for whatever part of its portfolio predates a mandatory waiver, North Dakota's current published fee structure does not appear to carry one at all.

One piece of glossary language is worth flagging rather than resolving by assumption. The Compliance Manual still defines a "Decontrol Period" as "[t]he three-year period following the termination of an Extended Use Agreement (either through qualified contract release or foreclosure) during which tenant protections apply to all existing low-income households" (Section 5, Glossary). That definition's reference to "qualified contract release" as a termination path sits alongside a waiver requirement that has applied to every award since 2020 — this research could not determine from the Compliance Manual or Allocation Plan alone whether that glossary language is simply inherited, unrevised boilerplate describing a path that is now closed for essentially the entire current portfolio, or whether it still describes a live possibility for a pre-2020 allocation that never executed the waiver. A developer relying on a pre-2020 North Dakota LIHTC award's original Extended Use Agreement should confirm its qualified-contract terms directly with NDHFA rather than assuming either the current blanket waiver or an old QC right controls.

Compliance monitoring loosens after Year 15 under NDHFA's dedicated Y15 Policy

During the initial 15-year Compliance Period, NDHFA's inspection and file-review cadence tracks the federal floor closely: "NDHFA is required by regulation to monitor and physically inspect each project within two years of the placed-in-service date and at least once every three years thereafter," with a sample size equal to "the lesser of (1) 20% of the LIHTC units or (2) not fewer than the number of units identified in the Minimum Unit Sample Size Chart" drawn from Treasury Regulation §1.42-5 (Section 3.04). Tenant File Reviews run on the same roughly-three-year cycle, generally as remote "Desktop Reviews." The correction period for noncompliance found during that window is "30 days from the date of the notice," extendable up to six months for good cause, with NDHFA required to notify the IRS via Form 8823 "no later than 45 days after the end of the allowed time for correction" (Section 3.05).

Once a project enters the Extended Use Period, NDHFA's dedicated "Extended Use Period Compliance Policy (Y15 Policy)" takes over, opening with the reason it exists at all: "At the end of the 15-year initial compliance period, the IRS no longer enforces compliance. Therefore, the monitoring state is responsible for creating a policy to monitor and enforce compliance through state courts or other internal measures such as debarment from future participation in NDHFA programs" (Section 4). Several federal-era rules stop being monitored outright: the Next Available Unit Rule ("Compliance with the Next Available Unit Rule is no longer monitored. A unit occupied by a household that is qualified at move-in may retain its designation until it is reoccupied as long as the unit remains rent-restricted"), and the student restriction ("LIHTC units may now be occupied by households consisting entirely of income-eligible, full-time students, without exception"). Unit transfers between buildings in the same property no longer require re-determining eligibility, and every project follows the annual-recertification rules otherwise reserved for 100% LIHTC properties (Sections 4.1-4.5).

One provision under the Y15 Policy gives an owner real relief for a genuinely struggling property: if sustained vacancy exceeds a 10% average over the trailing 12 months, NDHFA may, case by case, "grant a waiver to rent vacant units to non-qualified households, providing the owner is in good standing with NDHFA," for up to 50% of the units in a 100%-restricted project — and "[i]f a waiver is granted, it shall continue for the property's remaining extended use period unless rescinded by the NDHFA for good cause" (Section 4.6). That waiver is unavailable, however, if it would conflict with another funding source's requirements at the same property, such as Rural Development, HOME, or HUD Section 8.

Ownership transfer at Year 15: a real, named fee schedule tied to placed-in-service timing, not to Year 15 itself

NDHFA's Compliance Manual names the Year 15 investor exit directly as one of the two ownership-transfer scenarios it expects: "There are two basic types of LIHTC ownership transfers: a partial change in the underlying organization of the ownership entity (for example, replacement of the investor limited partner upon year-15 exit) or sale or transfer of title to a new organization" (Section 1.13). The fee that attaches to a transfer, though, is keyed to how long the property has been placed in service — not to whether the transfer happens to land at Year 15: "$5000 if transfer is within five years of placed-in-service date. $500 if transfer is beyond five years of placed-in-service date. There is no fee for a partial change in the underlying organization of the ownership entity such as the replacement of the limited partner." A typical Year-15 LP exit, occurring well past the five-year mark, would fall into either the $500 fee tier or the no-fee partial-change category, depending on exactly how the transfer is structured; half of whichever fee applies is refunded once NDHFA has received all required transfer documentation. Whatever the fee outcome, "NDHFA will conduct an on-site inspection and compliance review following a transfer of ownership to establish a 'baseline' of the physical condition of the project and the state of tenant files and compliance documents" — a real, resource-consuming step that follows every ownership change regardless of its fee tier.

Property tax: a real exemption-plus-PILOT under state law, but conditioned on nonprofit ownership or control — and never mentioned in the QAP

North Dakota does have a genuine, statutory property-tax mechanism for affordable rental housing, but this research found it nowhere in NDHFA's own Allocation Plan or Compliance Manual — it lives entirely in the North Dakota Century Code, administered through the county, not through NDHFA's LIHTC program documents. N.D.C.C. §57-02-08(43) provides that "[a]ll residential rental property, inclusive of land and administrative and auxiliary buildings, used as affordable housing shall be exempt from taxation for the property's period of affordability," conditioned on the housing finance agency certifying to the county director of tax equalization that the property (1) "is subject to and in compliance with a land use restriction agreement that enumerates the mandatory income and rent restrictions"; (2) "is owned by a qualified nonprofit entity, as defined in section 42 of the Internal Revenue Code," with any for-profit limited-partner interest subject to a mandatory nonprofit right of first refusal and a no-financial-gain condition on any transfer of that for-profit interest; and (3) has its general partner or other ownership entity "owned or controlled by a nonprofit entity or a political subdivision."

The exemption is not a full pass on property taxes — it substitutes a payment in lieu: "In lieu of the ad valorem taxes that would otherwise be assessed, the project owners shall make a payment equal to five percent of the balance of the total annual rents collected during the preceding calendar year, minus the utility costs for the property paid by the owner of the property" (§57-02-08(43)(d)). If part of the property is not eligible for assistance through a local, state, or federal affordable housing program, the exemption is prorated by dividing the number of income- and rent-restricted units by the total unit count (§57-02-08(43)(c)), and the housing finance agency must notify the county "on or before March fifteen of each calendar year" if the property falls out of compliance and loses eligibility (§57-02-08(43)(e)).

The condition most likely to trip up a conventional LIHTC deal is the ownership-and-control test. A standard LIHTC limited partnership with a for-profit general partner and an unrelated for-profit or nonprofit limited partner investor does not, on the statute's own terms, qualify merely because a nonprofit holds a minority interest or a right of first refusal — the statute requires the general partner or other ownership entity itself to be "owned or controlled by a nonprofit entity or a political subdivision." A deal structured the conventional way, with a for-profit sponsor controlling the general partner, would need to restructure control (or forgo the exemption) to use this provision. Neither the 2027 Allocation Plan nor the Compliance Manual references this statute, NDHFA's certification role under it, or the county-level application process at all — a developer who wants to use it will need to coordinate directly between NDHFA (for the certification) and the county director of tax equalization (for the exemption itself), without a walkthrough in either of NDHFA's own LIHTC program documents.

Labor requirements after construction, and the absence of a separate state tax credit

North Dakota's LIHTC program itself imposes no Davis-Bacon or other prevailing-wage requirement of its own. The only place Davis-Bacon appears in the current Allocation Plan is scoped to layered federal funding: the Plan expects a development team including HOME or HTF funds to "demonstrate the proposed team's experience with, or working knowledge of, all federal cross-cutting requirements including, but not limited to, Section 3, Women-owned and Minority-owned Business Enterprise contracting practices, Davis-Bacon and related acts, environmental review, Section 504 and ADA requirements, lead-based paint mitigation, Uniform Relocation Act, and property condition requirements" (Section 4.E). A LIHTC-only deal that carries no HOME or National Housing Trust Fund layer would not, on this Plan's own terms, trigger a Davis-Bacon obligation from NDHFA itself — any prevailing-wage exposure would come from whatever other funding source sits in that project's capital stack, not from the LIHTC allocation.

This research also found no North Dakota state tax credit that runs parallel to the federal LIHTC the way some other states' programs do — North Dakota's own gap-financing tool for affordable housing, the Housing Incentive Fund, is a separate state appropriation-based program, not a state tax credit stacked on top of the federal 9%/4% credit.