Construction, the 10% test, and getting to 8609 — Alabama

The clocks you are now running against

This phase starts once the Reservation Letter is behind you and AHFA's own Progress Requirements take over the calendar. AHFA states outright that missed deadlines are enforced without a default cure: "Failure to comply with any one of the deadlines (in whole or in part) ... will cause the Reservation Package to be automatically terminated."

None of this runs through a codified administrative code the way California's CTCAC regulations do. Alabama's QAP is approved annually by the AHFA Board and the Governor and posted at ahfa.com as "the final and definitive requirements" for that cycle — a policy document AHFA can rewrite each year, not a standing regulation. Read the current year's QAP; a rule of thumb carried over from a prior cycle is not a safe assumption here.

AHFA adds one more hard stop with real teeth: "AHFA is under no obligation to issue [Form] 8609s for any year if the Actual Cost Certification package is received after December 1 of such year." A package that clears the 180-day window in November but sits in AHFA's queue past December 1 can cost an entire tax year of credit.

The 10% test: a contract date, not a QAP date

Federal law is the backstop, and it's the same backstop everywhere: the taxpayer's basis in the project must exceed 10 percent of reasonably expected basis within one year of the allocation, measured against basis expected as of the close of the second calendar year following the allocation year (IRC §42(h)(1)(E)(ii)).

AHFA does not publish a single statewide 10%-test date. Instead the QAP points to the deal document itself: "For purposes of the 10% Test, AHFA requires that a Carryover Certificate be provided to verify that each project has met the requirement that 10% of the reasonably expected basis has been expended in the manner required by the Carryover Allocation Agreement" (2026 AHFA QAP §II.E(2)). The controlling date lives in that agreement, not in the QAP — read your own Carryover Allocation Agreement for the number that governs your project, and don't assume it matches another deal's date even in the same application cycle.

AHFA reserves the right to request certification or verification, in a form and content satisfactory to AHFA, of any line-item cost included in the expected basis used to satisfy the test. Costs genuinely spent but not properly capitalized, legally obligated, or accrued are the more common way to fail this test than simply not having spent enough.

AHFA underwrites financial feasibility three separate times over the life of a deal — at application, again at the 10% Test, and a third time at Actual Cost Certification (2026 AHFA QAP §II.E). A project that clears the 10% Test on paper can still see its credit amount recalculated downward at cost certification if actual costs or actual equity pricing diverge from what was underwritten.

AHFA is allocator, bond issuer, and credit certifier in one agency

Alabama does not split the 9% competitive credit and the 4% bond-financed credit across two agencies the way California splits CTCAC from CDLAC. AHFA calculates the credit at a maximum of 9% of determined Eligible Basis for new construction or substantial rehabilitation, and at a maximum of 4% of determined Eligible Basis for any project financed with AHFA's own Multifamily Housing Revenue Bonds or a qualifying acquisition (2026 AHFA QAP §II.G(1)–(2)). A bond-financed application is exempt from the Point Scoring System entirely but must still clear every QAP threshold requirement.

For rehabilitation deals, two different 10%-adjacent tests apply at once, and they are not the same number. The federal rehabilitation test requires qualifying expenditures within a 24-month period equal to the greater of 20% of adjusted basis or $6,000 per low-income unit, inflation-indexed since 2009 (IRC §42(e)(3)(A)(ii), (D)). AHFA layers its own hard-construction-cost floor on top: a minimum of $12,500 per qualified unit for a project previously funded by AHFA, or $20,000 per qualified unit for a project AHFA has not funded before, backed by a Capital Needs Assessment satisfactory to AHFA (2026 AHFA QAP §II.C(11)). Clearing the federal floor does not mean clearing AHFA's.

A large share of Alabama's rural LIHTC stock pairs with USDA Rural Development 515 financing, and it shows up directly in AHFA's underwriting: the minimum debt service coverage ratio drops from 1.20:1 to 1.05:1 for Rural Development-financed debt or debt financed with any non-AHFA HUD funds (2026 AHFA QAP §II.E(1)(iii)), and a 1997 Memorandum of Understanding between AHFA and USDA Rural Development governs how the two agencies coordinate on combined deals (2026 AHFA QAP §II.L).

This research located AHFA's Multifamily Housing Revenue Bond Policy only by reference inside the QAP, not the policy document itself, so Alabama-specific bond-cycle deadlines analogous to a TEFRA hearing window or a performance-deposit forfeiture threshold could not be verified here. Treat the federal TEFRA and reimbursement rules (26 CFR §§1.147(f)-1, 1.150-2) as the floor on a 4% bond deal, not the complete Alabama-specific picture.

Placing in service is a filing event, not a construction event

A certificate of occupancy gets a project no closer to a Form 8609 on its own. AHFA requires the Actual Cost Certification package to be prepared by an independent Certified Public Accountant, and AHFA will perform its own on-site inspection — and may engage a third-party accountant, attorney, environmental, architectural, or construction professional at the Ownership Entity's expense — before it will issue the 8609 (2026 AHFA QAP §II.E(3)). Any additional deposit AHFA requires to cover those third-party costs is due within 10 business days of the invoice date.

Two numbers get locked in at this step, not at application. AHFA sets the accepted operating reserve at four months of projected first-year operating expenses (including replacement reserve payments) plus two months of debt service, and the accepted replacement reserve at $250 per unit annually for new-construction elderly projects or $300 per unit annually for every other project type — with AHFA making the "final determination of the amount of reserves accepted when the project submits an Actual Cost Certification" (2026 AHFA QAP §II.E(1)(iii)).

Fee caps get re-checked here too: developer fee at 15% of total project cost excluding the developer fee (15% of acquisition cost on an acquisition deal, 8% for Rural Development-financed acquisitions), builder fee at 8% of construction cost, and general requirements at 6% of total construction cost (2026 AHFA QAP §II.F(1)–(3)).

Then the federal step every state shares. The owner must certify first-year information to the IRS following the close of the first taxable year of the credit period, and IRC §42(l)(1) is explicit that no credit is allowable for any taxable year ending before that certification is made. AHFA separately requires a copy of the completed Form 8609 with Part II filled out by the Ownership Entity the first year credits are claimed — miss the 60-day window after AHFA's written notice of non-receipt and it is a flat $500 fee (2026 AHFA QAP Addendum B §I(E)).

The compliance point system starts counting before you're a compliance case

Alabama's negative-consequence regime for an operating Housing Credit project is not a single per-violation cap. It is a running point total, tallied January 1 through December 31 of each calendar year, that follows the Ownership Entity and the Management Company into the next competitive cycle. Deductions for late or missing Annual Owner Certifications, tenant-event data, and uncured health-and-safety or unit deficiencies don't touch a given year's application score at all until the entity's cumulative total for the prior year exceeds 4 points — at which point the entire accumulated total is deducted from the current cycle's score (2026 AHFA QAP Addendum B §II(F)).

The mechanics start operationally, well before any inspection. Every Ownership Entity must enter tenant move-in, move-out, transfer, and recertification events into AHFA's DMS system by the 15th of each month for the prior month, and by the first business day of February for the full prior year. If the entered data disagrees with the physical household file for more than 25% of the files AHFA inspects, both the Ownership Entity and the Management Company draw an automatic 1-point deduction (2026 AHFA QAP Addendum B §I(B)). The Annual Owner's Certification is due the first business day of March; the annual financial statement and Schedule A are due the first business day of May, with a flat $500 fee if either is more than 30 days late after written notice (2026 AHFA QAP Addendum B §I(C)–(D)).

A cumulative total of 10 or more points assessed against an Ownership Entity or Management Company across all AHFA-audited projects in a calendar year triggers immediate suspension from every AHFA-funded program — Housing Credits, HOME, National Housing Trust Fund, and Multifamily Housing Revenue Bonds — through December 31 of the following year. Five consecutive suspended years is a permanent ban (2026 AHFA QAP Addendum B §II(H)).

Layered on top of all of that is how long the compliance period actually runs. Every project must commit in writing not to request a Qualified Contract until after the 19th year of the Extended Use Period — four years past the end of the 15-year Compliance Period — and a project can pick up 3 scoring points by irrevocably waiving Qualified Contract eligibility entirely and committing to the full 30-year Extended Use Period (2026 AHFA QAP §II.C(14); Addendum A).

Missing a date, and the narrow ways out

Outside a small number of enumerated exceptions, AHFA's Progress Requirements are absolute: miss one, in whole or in part, and the Reservation Package is automatically terminated with no default cure. The only path around a deadline is a request for extension submitted in advance, on AHFA's own form, with the required fee, before the deadline passes — not after (2026 AHFA QAP §II.I).

The one named federal relief valve for the placed-in-service deadline is a request to extend under IRS Revenue Procedure 2007-54 — AHFA's own QAP text calls it a "Revenue Ruling," but the actual disaster-area relief for LIHTC placed-in-service deadlines is a Revenue Procedure, not a ruling, of that number — and AHFA sets its own outer bound on when that request must be filed: by December 1 of the year in which the placed-in-service deadline occurs (2026 AHFA QAP §II.I(3)). File after that date and the option is gone regardless of the underlying facts.

A separate, narrower relief valve exists for genuinely unforeseen environmental conditions discovered after AHFA's own environmental review is complete. If that condition prevents timely placement in service, AHFA may elect — at its discretion, not automatically — to exchange the project's Housing Credits for a current or future year's allocation, conditioned on payment of an environmental extension penalty and full compliance with AHFA's Environmental Policy (2026 AHFA QAP §II.I(6)). The penalty amount is not stated in the QAP itself; it is posted separately at ahfa.com.

Fourteen enumerated events terminate an allocation outright after the Notification of Approval, with no point-based cushion the way the compliance-monitoring system runs: an unapproved site or ownership change, a change in syndication structure, a change in unit count, design, or square footage, a general contractor, architect, or management company change made without AHFA's prior written consent, uncorrected non-compliance on the sponsor's other projects, debarment, a foreclosure within the past 10 years, any material adverse change AHFA determines has occurred, and outstanding fees owed to AHFA on any project (2026 AHFA QAP §II.J). AHFA states plainly that this list "is not all-inclusive" — the Reservation Letter itself can add more.

What the sources do not settle

Several things a schedule needs are genuinely open, and this research could not resolve them from AHFA's published QAP.

No published distribution of real Alabama LIHTC construction and lease-up durations was located, and none is offered here as even an unverified range — inventing one would be worse than leaving the gap visible. Build a schedule from your own completed-deal history or your general contractor's actual bid, not a borrowed number.

The exact dollar amount for the Cost Certification Fee, the Compliance Fee due with the Actual Cost Certification package, and the environmental extension penalty are each referenced in the QAP but not stated in it — AHFA points to "a complete list of AHFA's fees" posted separately at ahfa.com. The only cost-certification-adjacent dollar figures the QAP itself states outright are the $500 late fees for a missed financial statement/Schedule A, a missed 8609 Part II copy, and a missed health-or-safety violation report.

AHFA's Multifamily Housing Revenue Bond Policy — the document that would carry Alabama's own bond-cycle deadlines, TEFRA scheduling practice, and any performance-deposit mechanics — is referenced throughout the QAP but was not itself part of the source reviewed here. Treat the federal TEFRA and reimbursement rules as the floor on a 4% bond deal, not the complete Alabama-specific picture.

Addendum B directs inspections to "the physical condition standards published by HUD" without naming NSPIRE specifically; whether AHFA's compliance manual has formally adopted NSPIRE terminology, or still runs on UPCS-era language internally, could not be confirmed from the QAP text itself.

The Alabama Workforce Housing Tax Credit — a separate state credit under Code of Alabama §§40-18-530 through 40-18-535, effective for tax years beginning January 1, 2025 and currently scheduled to expire September 30, 2027 absent extension — requires its own AHFA eligibility certificate confirming the project qualifies as a federal Housing Credit project. How that certificate's timing interacts with the placed-in-service and 8609 sequence above was not documented in the sources available for this research; treat it as a parallel track to confirm directly with AHFA on any project counting on it.