Construction monitoring, cost certification, and getting to Form 8609 — South Dakota

SDHDA's own inspection regime: monthly status reports and owner-initiated notice, not an assigned quarterly inspector

Every sponsor/developer holding a reservation must submit a monthly status report in SDHDA's format by the twentieth day of each month. SDHDA assesses a $250 fine on the third late monthly report and on every late report after that, and those fines must be paid before SDHDA will issue Form(s) 8609 (§I.J). Beyond that reporting cadence, the QAP places the burden of coordinating inspections on the applicant: "Applicants should notify SDHDA of any scheduled inspections with the architect, engineer, contractor, etc., including the final inspection." There is no separate SDHDA-assigned construction inspector performing scheduled quarterly increment inspections the way some other states' agencies structure it — South Dakota's QAP simply doesn't describe that kind of program.

SDHDA reserves broad, unscheduled inspection rights instead of a fixed cadence: "SDHDA may inspect projects at any time yet assumes no liability for construction quality or compliance with any codes, standards, or health/safety requirements" (§I.Q). Separately, SDHDA can recapture a reservation outright "if the sponsor/developer is unable to provide satisfactory evidence of progress toward the project completion" (§I.K) — but the QAP's own text does not define what counts as satisfactory progress or attach specific milestone dates to that standard, unlike the detailed post-award calendars some other states publish. Treat that as a case-by-case administrative judgment call and confirm SDHDA's actual expectations directly rather than assuming a fixed timeline.

The federal placed-in-service deadline applies even though South Dakota's own QAP never restates it

Under federal law generally — not South Dakota's own QAP text — a building must be placed in service by the close of the second calendar year following the calendar year in which the housing credit allocation is made, or the allocation is lost (26 U.S.C. §42(h)(1)(E)). A full-text search of the current 2026-2027 QAP found no restatement of that two-year rule anywhere in its 67 pages. That doesn't make the deadline optional — it's binding as a matter of federal statute regardless of whether a state QAP repeats it — but it does mean South Dakota developers won't find their own placed-in-service countdown spelled out in the Plan the way they might elsewhere. SDHDA's own administrative deadlines (the 10% test, the Final Cost Certification package, and the November 1 cutoff below) function as the practical calendar keeping a deal on pace toward that federal date, even though none of them is framed as "your PIS deadline" in the QAP's own language.

Carryover: the 10% test, and what "Allocation Year" means for your own clock

By November 15 of the Allocation Year, the owner must give SDHDA satisfactory evidence of meeting federal requirements, including: a written owner certification of the expected placed-in-service date, intent to reserve the applicable percentage of units for the entire Extended Use Period, and intent to charge no more than allowable Code/Rev. Proc. 94-57 rents; a written CPA certification of "reasonably expected basis" covering eligible basis, qualified basis, applicable fraction, credit amount reserved, credit percentage, and qualified rents, all per building; and, for a USDA Rural Development or HUD property acquisition, the agency's approval letter for the ownership transfer, rental assistance contract, and outstanding debt (§VI.C.1-4).

The 10% test itself requires two parallel certifications on SDHDA's own forms: an Owner Cost Certification of line-item expenditures exceeding 10% of total project costs, and a CPA's audited line-item cost certification of the same threshold, with a statement that the CPA is not affiliated with the developer or owner. If developer fee is counted toward that 10% (it cannot exceed 20% of the carryover basis amount), the developer must document to the CPA that the fee has actually been earned and paid. "A project which receives a reservation of housing tax credits after June 30th of the Allocation Year will have until November 15th of the following year to meet the 10% test requirements" (§VI.C.5) — that clause is the one exception to the standard same-year November 15 deadline.

One ambiguity worth flagging rather than resolving by assumption: the QAP defines "Allocation Year" only as "the calendar year from which housing tax credits are awarded to South Dakota" (§VIII), and doesn't spell out in every scenario how that maps onto an individual project's own reservation date beyond the June 30 cutoff rule already built into §VI.C.5. This research could not independently resolve every edge case that phrasing could produce; confirm your project's exact 10% test deadline directly with SDHDA rather than calculating it from the definition alone.

Final Cost Certification/Placed in Service: a sixteen-item package due within 180 days of Project Completion

"Project Completion" is a defined, whole-project standard, not a per-building one: "A project is considered complete when construction of all buildings within the project have been completed and all units are ready for occupancy as verified by the certificate(s) of occupancy" (§VIII). That definition is what starts the 180-day clock for the Final Cost Certification/Placed in Service package, even though the placed-in-service date used for income-limit purposes can still be tracked per building, or from the earliest building in a multi-building project, depending on the multiple-building election made on Form 8609, line 8b.

Missing the 180-day window triggers a flat $500 fine plus $25 for every business day the package remains outstanding, and §VII.E is explicit that "fines must be paid before SDHDA will issue IRS Form(s) 8609."

8609 issuance: a hard November 1 cutoff for the same year, then a 30-day return window

"An owner may request a final allocation as soon as the building(s) is/are placed in service by submitting required documentation. SDHDA must receive the documentation prior to November 1st to issue IRS Form(s) 8609 before year end" (§I.M). That creates a second, separate clock from the 180-day Final Cost Certification deadline above: a project that completes late in the year and submits comfortably inside its 180-day window can still miss the November 1 cutoff for that calendar year's 8609 issuance if the completion date falls late enough. The two deadlines should be checked independently, not treated as one requirement.

The QAP's own text does not describe a Part I/Part II issuance split the way some states structure the process (an agency issuing Part I, with the owner completing and returning Part II on its own clock). South Dakota's version is a single closing step: "Within 30 days of filing the initial tax return with the IRS, owners must submit a copy of the completed IRS Form(s) 8609 to SDHDA" (§VI.D).

Cost caps that get tested for real at cost certification

The cost-certification standard itself covers the whole project, not just hard costs: §VI.D requires "audited line-item expenditures of the total project costs by an independent CPA with a statement of non-affiliation with the developer and applicant on approved SDHDA forms." What the QAP's own text does not specify is which auditing standard that engagement must follow — it says "audited," but doesn't reference GAAS, a review-level engagement, or any equivalent standard by name the way some other states' compliance exhibits do. Confirm the expected engagement level directly with SDHDA before assuming a particular standard applies.

Underwriting standards reach into the cost-certification review too: pro formas must show a debt coverage ratio of at least 1.20 in the first year full expenses are in effect and annually thereafter through the longer of the first 15 years or the term of the first mortgage financing, then at least 0.95 for the remainder of the Extended Use Period (§III.K) — SDHDA may vary this based on developer experience, financing type, and financial strength. At cost certification, SDHDA is validating that actual, not merely projected, numbers still clear that bar.

Post-award change control, property standards, and an honest gap on construction season

"Any change to the project must be pre-approved by SDHDA prior to implementation" (§III.L). The Board can require a return of the reservation/allocation for a "significant change," a non-exhaustive list that includes any reduction in bedrooms per unit or unit square footage, any decrease in total units, any change to financial feasibility, any increase in overall density, any change in unit or project amenities, or "any change that, had it been in the original project application, might have resulted in the project receiving a different ranking."

New construction must meet the current IBC, National Standard Plumbing Code, and National Electrical Code Handbook (or a state/local alternative if adopted), 24 CFR Part 8 (Section 504) and Fair Housing Act design/construction requirements, and ADA requirements, plus set-asides of at least 5% of units (or one unit) for mobility impairments — with roll-in showers in half of those units — and at least 2% of units (or one unit) for sensory impairments, kept separate from the mobility-impairment units (§III.F). The architect must certify these standards were incorporated on the final working plans, and that certification is one of the sixteen items due in the Final Cost Certification package.

One thing this research could not confirm, and is reporting honestly rather than guessing: South Dakota's own QAP and Compliance Manual contain no discussion of a shortened cold-climate construction season, winter mobilization limits, or any comparable scheduling accommodation. The only climate-adjacent requirement found anywhere in SDHDA's published materials is an Energy Star "Northern climate zone" window standard in the multifamily project characteristics exhibit. Nothing in the 180-day or November 1 deadlines above is written to flex for a South Dakota winter -- treat any assumption that SDHDA builds in extra time for the state's short building season as unconfirmed, not as documented agency practice.