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

The clocks you are now running against

This phase starts once the award is behind you and the calendar turns into a pure function of dates. Texas ties several of them to the award date itself, and unlike a system that counts elapsed months, two of Texas's own deadlines are fixed calendar days — which changes how much runway a given award year actually buys, and makes the math easy to get wrong by analogy to a rolling window.

Look closely at what that fixed July 1 date actually buys. The federal statute gives every state's taxpayers 12 months from the allocation date to clear the 10% test. Texas's own rule instead names a single calendar date — July 1 of the year after the Carryover Allocation Agreement is submitted — regardless of exactly when in the prior year that agreement was executed. Depending on the precise allocation date under the federal statute, that fixed date can land at or after the 12-month mark, or short of it. The rule text and the 2026 program calendar are both verified; whether the fixed date always meets the federal floor was not independently resolved and should be treated as open, not settled.

The other honest gap is duration itself. No published, Texas-specific distribution of construction, stabilization, or CofO-to-8609 timelines was located — not even the kind of practitioner folklore a California-trained team might reach for. TDHCA's own applicant and award-list archive was not locatable past 2022 at the time of this research, which is also what blocks building that distribution from the agency's own records. Schedule this phase against your own completed-deal history, not an imported range from another state.

The 10% test: what counts, and who signs it

TDHCA requires the same substantive showing every state does — basis exceeding 10% of the project's reasonably expected total basis, tested under IRC §42(h)(1)(E)(ii) and 26 CFR §1.42-6 — wrapped in a fixed-date administrative package that asks for more than the federal minimum by itself would.

As in every state, the percentage itself is arithmetic and the signature is a professional-liability product — TDHCA reviews the accountant's report and the schedule; it does not recompute the basis itself.

The bond track runs its own two-agency calendar, all year

A 4% deal never enters the fixed 9% round at all. TDHCA scores bond pre-applications on a rolling monthly cycle, and the Texas Bond Review Board — a separate state agency from TDHCA — runs one annual lottery each November to set queue priority, then issues remaining reservations first-come-first-served for the rest of the calendar year. Missing the lottery does not disqualify a deal; it just drops it behind every lottery participant in the queue, regardless of the priority tier it would have carried inside the lottery.

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

A certificate of occupancy alone gets a Texas deal nothing. TDHCA issues Form 8609 only after cost certification is complete and the first compliance-monitoring-fee payment clears.

Then the federal step people forget in every state, not just Texas. The owner must certify first-year information to the IRS following the close of the first taxable year of the credit period, and no credit is allowable for any taxable year ending before that certification is made (IRC §42(l)(1)).

Texas adds a consequence that doesn't have a documented parallel elsewhere: if cost certification shows less credit was actually used than allocated and the owner does not return the excess, a penalty equal to 10% of the unused credit applies whenever 8609s are issued more than 180 days after the end of the first credit-period year (2026 QAP §11.901(15)). A slow cost-certification cycle doesn't just delay the 8609 on an under-used allocation — it can cost real money on top of the delay.

Lease-up decides the credit, permanently

The core mechanic here is federal and identical to every state: qualified basis and applicable fraction are fixed at the end of the first credit year (26 CFR §1.42-5(b)(1)(viii)). An unqualified household occupying a unit in year one permanently reduces the applicable fraction for the entire 15-year Compliance Period.

Texas's own reporting rhythm starts right behind lease-up. The Annual Owner's Compliance Report and Annual Owner's Financial Certification are due April 30 every year — one combined date, not a split spring filing. Quarterly Unit Status Reports are due the 10th of January, April, July, and October, reporting occupancy as of the last day of the prior month (10 TAC §10.607(e)–(f)).

One number worth carrying back into this phase, because it is fixed the moment the LURA is recorded, not years later: Texas's affordability floor is 30 years, matching the federal minimum — not a mandatory 55. It only runs longer, to 35, 40, or 45 years, if the Applicant took Extended Affordability scoring points back at application. Whichever term that was is what gets recorded in the same document that has to be in place before this phase's 8609 can issue, so it is worth confirming against the actual Application record rather than assumed.

Missing a date, and the narrow ways out

Texas's relief provisions are more granular than a single enumerated list, and they are explicit about what they do not cover.

Force Majeure is not a general hardship clause. The QAP requires the owner to affirmatively rule out its own negligence and show mitigation was actually attempted — a cost spike or a labor shortage alone will not clear it without that showing.

Negative points are Texas's version of the mechanism that turns one missed date into a multi-round problem, though the exposure is smaller than a system that assesses up to 10 points per violation: staff may recommend, and the Board may impose, ineligibility for the next round or a deduction capped at 2 points per application, for missing Carryover or the 10% Test, missing a federal commitment or expenditure deadline, missing an elected Readiness-to-Proceed date, or violating the Department's Adherence to Obligations rule (2026 QAP §11.9(f)).

This is not theoretical. TDHCA's own 2026 Award and Waiting List file lists five developments that returned previously-awarded credit mid-cycle this program year alone: Nova Lofts in Houston ($144,397), Parkside at Buffalo Bayou ($2,000,000), Eden Heights ($12,631), Woodcrest Apartments ($1,627,133), and Westwind of Plainview ($1,058,716) — each originally awarded in a 2022–2024 round and returned in 2026. That single year's file is the only Award and Waiting List data reviewed for this guide, so it establishes that returns happen, not a base rate across years.

A separate, sponsor-level consequence sits behind repeated returns: an Applicant whose controlling entity has had credit returned and reallocated twice, without ever commencing construction, becomes ineligible for the next round, with only a narrow restoration if construction commences by the following May (2026 QAP §11.202(1)(O)). This is also the exact subsection the Governor modified on the way to final adoption of the 2026 QAP, so its precise current wording is worth re-checking each program year rather than assumed stable.

Extension requests on Carryover, the 10% Test, Construction Status Reports, or Cost Certification carry no fee if filed at least 30 calendar days before the original deadline; late or last-minute requests cost $2,500, escalating $500 per subsequent extension on the same activity — and a Carryover extension can never be pushed past December 1 of the year the Commitment was issued (10 TAC §10.405(c)).

What the sources do not settle

Four things are genuinely open here, and this phase's schedule should treat them as inputs, not knowns.

Whether TDHCA's fixed July 1-following-year 10% Test deadline ever falls short of the full 12 months IRC §42(h)(1)(E)(ii) allows was not independently resolved — it depends on exactly when the allocation is deemed made against a specific deal's Carryover Allocation Agreement execution date, a comparison this research did not run.

No verified Texas-specific construction, lease-up, or 8609-issuance duration benchmark exists at all. TDHCA's public applicant and award-list archive was not locatable past 2022 at the time this guide was researched, which is also the precondition for ever assembling that distribution from TDHCA's own records.

Whether Texas has adopted any state-level response to the 2025 federal change tightening the 25%/50% bond-financing test — an analogue to a percentage-of-basis bond cap — is unresolved. No such ceiling was found in the 2026 QAP or the 2026 Multifamily Housing Revenue Bond Rules; that could mean Texas's bond program isn't oversubscribed enough to need rationing this way, that rulemaking on the point postdates this research, or that TDHCA simply leaves bond sizing to bond counsel's own tax opinion.

The post-Compliance-Period unit-inspection-sample rule described above comes from a TDHCA Subchapter F draft dated September 2024; the Board approved a further amendment package on January 15, 2026 that was not independently re-fetched for this guide. Treat the specific inspection-sample figures as provisional pending reconfirmation against the current rule text.