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

THDA's real number: a 30-year floor, confirmed in the LURC's own definition -- and a scoring election that muddies it at the edges

The federal floor is the same everywhere: a 10-year Credit Period under 26 U.S.C. Section 42(f)(1), inside a 15-year Compliance Period under Section 42(i)(1), followed by an Extended Use Period of at least 15 more years under Section 42(h)(6)(D) -- 30 years minimum, nationwide, unless the property terminates early through foreclosure or an unsuccessful Qualified Contract request. Tennessee's own program does not layer anything longer on top of that floor. The QAP's own definition of the "Extended Use Agreement" -- also called the Declaration of Land Use Restrictive Covenants for Low-Income Housing Tax Credits, or "LURC" -- states outright that the agreement "[c]ommences on the first day of the Compliance Period for a term of at least thirty (30) years (the 'Extended Use Period')." THDA's own Qualified Contract Program Guidelines confirm the same figure independently: "Extended Use Period begins on the first day of the Compliance Period and ends thirty years thereafter or as otherwise specified in the LURC."

The QAP complicates that clean 30-year floor at exactly one point, and it is worth reading precisely rather than assuming it away. The QAP's formal definition of "Compliance Period" is the ordinary federal 15 years, but adds a sentence most states' equivalent definitions don't carry: "This definition may be revised under the land use restrictive covenants for a longer duration based on Applicant's election under Section 18 [sic; the body text is printed as Section 17 -- see the numbering note below] and Section 2." The scoring election it points to is real and appears twice, once for new construction (9 points) and once for rehabilitation (10 points): "Waiver of the Qualified Contract Process ... Initial Applications waiving the ability to participate in the QCP. If the Qualified Contract Process is waived, the Compliance Period within the LURC will be defined as thirty (30) years, unless there is an approved PILOT. If there is an approved PILOT, the Compliance Period will be defined as fifteen (15) years."

Read against the LURC's own baseline definition ("at least thirty (30) years"), that PILOT-plus-waiver combination is not simply confirming the default -- its own text describes cutting the recorded restriction to just 15 years total when an approved PILOT is paired with a Qualified Contract waiver. That is worth flagging rather than resolving. The federal statute's 15-year Extended Use Period beyond the Compliance Period (26 U.S.C. Section 42(h)(6)(D)) is not itself waivable by a state agency merely because a local tax abatement exists, and a Qualified Contract waiver is normally what locks a deal into the fuller term, not what shortens it. This guide could not determine from the QAP's public text alone whether "the Compliance Period will be defined as fifteen (15) years" for a PILOT-plus-waiver deal describes some Tennessee-specific interaction with the recorded LURC that this research did not fully trace, or whether it is an internal drafting inconsistency in THDA's own document. Confirm the actual recorded term on any specific PILOT-plus-waiver deal directly with THDA's Multifamily Programs Division and the closing attorney, rather than relying on either the 30-year default or the 15-year scoring-item language alone.

One more numbering wrinkle in the same neighborhood, worth a single flag: the 2026 QAP's own Table of Contents lists "Initial Application Scoring" as Section 18 and the noncompetitive bond section as Section 23, but the body of the document prints them as Section 17 and Section 22 respectively (and several sections in between shift by the same one-section offset, apparently because the Table of Contents was not updated after a section was removed or renamed). This guide cites section numbers as they are actually printed in the QAP's body text -- which is also how the QAP's own internal cross-references cite themselves -- not the Table of Contents numbering, and a reader comparing this guide to the QAP's page-count index should expect that one-section gap from Section 13 onward.

The Qualified Contract door stays open by default for competitive deals -- Tennessee sells the waiver for points instead of mandating it outright

Unlike states that force every applicant to sign away Qualified Contract rights as a mandatory condition of any award, Tennessee's competitive scoring treats the waiver as an optional trade: give up the federal right to request a Qualified Contract, and a new-construction Initial Application gets 9 points, a rehabilitation Initial Application gets 10. An applicant who wants to preserve QCP eligibility simply does not take those points. THDA's own Qualified Contract Program Guidelines describe the baseline mechanic for anyone who has not waived: "If Owner has not postponed or waived their right to participate in the Qualified Contract Process, the Extended Use Period terminates if, after the 14th year of the compliance period," the Owner submits a Notice of Intent, is found eligible, complies with all QCP requirements, and THDA's marketing of the development during a one-year period fails to produce a buyer's offer at or above the Qualified Contract price.

Two things push Tennessee's stated openness to Qualified Contracts closer to a soft ban in practice. First, participation carries a cross-application consequence that reaches beyond the single deal: an Initial Application is ineligible if any Development Team member "is involved with another Housing Credit Development in Tennessee that has participated in the Qualified Contract Process since January 1, 2024" -- so a developer, architect, or contractor who has been part of even one Tennessee QCP request can taint every subsequent Tennessee application they touch. Second, THDA makes the waiver mandatory, not optional, on the one track where a developer might otherwise assume it is negotiable: every noncompetitive Housing Credit allocation tied to Multifamily Tax-Exempt Bond Authority financing requires the applicant to "agree to not participate in the Qualified Contract process" as an allocation condition (2026 QAP, Section 22-A-5, printed in the body; the Table of Contents lists this as Section 23). THDA extracted the identical waiver as a condition of its narrower 2024 Housing Credit Exchange relief program as well -- "[t]he ability to request the Qualified Contract Process for the particular development is permanently waived" -- a consistent pattern of trading special accommodations for a QC waiver even where the general competitive process does not require one outright.

Compliance monitoring runs at full intensity for the entire LURC term -- no stated relaxation after Year 15

Section 10 of the QAP opens by stating its own reach without qualification: "The following compliance requirements and monitoring process apply to all buildings placed in service in Tennessee under this QAP. Owners are responsible for complying or ensuring compliance ... throughout the term of the LURC." Unlike a compliance manual that visibly relaxes its own file-review and recertification requirements once the federal Compliance Period ends, nothing in Section 10's text distinguishes a Year 1-15 monitoring regime from a Year 16-and-beyond one -- the same standards run for the life of the recorded LURC, whatever term that turns out to be on a given deal.

The Owner's Annual Certification of Compliance ("OAC") is the annual backbone of the system -- a perjury-level certification, due every year for the full LURC term, covering an Affirmatively Furthering Fair Housing marketing plan, minimum-set-aside compliance under whichever test (40/60, 20/50, or Average Income) was irrevocably elected at Initial Application, income certifications and supporting documentation on file for every household, proper utility-allowance methodology, THDA's rent-increase notice rules (90-day notice at renewal, or mid-lease only where the lease allows it and the tenant may relocate), NSPIRE and local code compliance, next-available-unit compliance for over-income households, Section 8 voucher nondiscrimination, non-transient occupancy, and -- specific to Tennessee -- that the Owner "listed all vacancies for every property they own that receives any type of THDA funding at TNHousingSearch.com." THDA files IRS Form 8823 no later than 45 days after the end of a 30-day Correction Period (extendable to 6 months on a showing of good cause, except for immediate health-and-safety items, which carry their own 3-business-day mitigation-reporting clock) -- "whether or not the noncompliance or failure to certify compliance is corrected."

Two more standing obligations run for the LURC's full term rather than tapering after Year 15: every property management team, owner-managed or not, must hold a current THDA Property Management Compliance Certification for the entire term, and Owners and management entities must send representatives to THDA's compliance training -- within 12 months before the 8609 issues for new construction, or before placed-in-service for rehabilitation deals -- with the same requirement repeating for any subsequent change in ownership entity during the LURC term. Fee-wise, THDA charges a Monitoring Fee of $600 per low-income unit (or $1,200 per unit if the development elected the Income Averaging test), due when the Final Application is submitted -- a one-time charge at that stage rather than a recurring annual bill -- plus a $200-per-unit Compliance Reinspection Fee and a $500-per-month late fee on the OAC itself.

Property tax relief has nothing to do with THDA -- it runs through a city's own Housing Authority or Health, Educational and Housing Facility Board

Search the 2026 QAP for a property-tax provision and there isn't one -- THDA's own compliance and allocation rules never mention ad valorem taxes, assessments, or exemptions. That silence is real, not a research gap: Tennessee's property-tax relief for a Housing Credit deal runs entirely outside THDA, through a local government actor operating under its own separate statute, and the mechanics and term length genuinely differ by city. The QAP does, however, acknowledge that PILOT deals exist at one specific point -- its ground-lease site-control rule ordinarily requires a minimum 50-year term with no early-termination provisions before the extended use period defined in 26 U.S.C. Section 42(h)(6)(D) expires, but "[p]roposed developments which are the subject of a Payment In Lieu of Taxes ('PILOT') agreement may be exempt from this minimum term requirement subject to THDA's review of and satisfaction with the terms of the PILOT" (Section 6, Site Control).

None of these three PILOT terms is pegged to THDA's 30-year Extended Use Period -- Nashville's runs at most 10 years, Memphis's tops out at 30 years only with an elected extension, Chattanooga's runs 15. A developer should not assume a PILOT automatically covers the property for the entire compliance-plus-extended-use term; in every documented city, the local tax abatement is negotiated, capped, and time-limited on its own separate clock, and a project outside Nashville, Memphis, or Chattanooga may have no comparable local mechanism available at all unless its own city or county has adopted one. Some version of these programs likely exists in Knoxville and other Tennessee cities with their own HEHFBs or housing authorities; this research pass verified Nashville, Memphis, and Chattanooga directly and did not attempt an exhaustive statewide survey of every Tennessee jurisdiction's PILOT posture.

What the sources don't settle

Three things here should be confirmed directly with THDA, a local Housing Authority or HEHFB, or a specific deal's own recorded documents rather than treated as settled by this guide.

Whether the scoring item's "the Compliance Period will be defined as fifteen (15) years" for a PILOT-plus-QC-waiver deal genuinely shortens the recorded LURC term below the federal 30-year Extended Use floor, or instead describes something else the public QAP text does not make explicit (for example, a state-only compliance layer distinct from the federal extended-use commitment) is not resolved here. Treat the 30-year figure as the safe planning assumption for any deal that has not specifically closed a PILOT-plus-waiver combination, and confirm the recorded LURC language directly on any deal that has.

The substantive content of THDA's "Minimum Design Standards for the Rehabilitation and New Construction of Single Family and Multifamily Housing Units" -- referenced by Section 7 of the QAP but not independently reachable during this research pass because its published link returned a genuine access-denied response to direct download, WebFetch, and a browser-based fetch alike -- is not restated anywhere in this guide's Phase 10 or Phase 11 content and should be pulled directly from THDA before relying on it.

Whether Health, Educational and Housing Facility Boards or comparable housing-authority PILOT programs exist on similar terms in Tennessee cities beyond Nashville, Memphis, and Chattanooga was not exhaustively surveyed; those three are verified directly against each program's own current policies-and-procedures document, not assumed to represent every Tennessee jurisdiction.