"We got the award letter from IFA. What's actually due, by when, and what happens if we miss the ten percent test?"
Award day starts two clocks under one QAP
The Iowa Finance Authority is designated the state's housing credit agency and required to adopt a Qualified Allocation Plan satisfying IRC Section 42 — Iowa Code Section 16.35 — but the day-to-day post-award requirements live entirely inside the QAP text itself, not in a numbered administrative rule. The rule that used to incorporate the QAP by reference, Iowa Administrative Code 265-12.1, was rescinded in its entirety effective March 26, 2025. IFA runs the 9% competitive credit and the 4% credit paired with tax-exempt bonds as two separate documents with two separate clocks, both cycling on the same 2026-2027 allocation years.
| Milestone | 9% program (2026 round) | 4% program (2026 round) |
|---|---|---|
| Application due | March 11, 2026 | August 5, 2026 |
| Board reservation recommendation | June 2026 Board meeting | November 4, 2026 Board meeting |
| Award/42(m) letter | Award letter sets the Reservation Date | IRC Section 42(m) letter |
| Reservation fee due | Within 30 days of the Reservation Date | Within 30 days of the 42(m) letter |
| Carryover / Bond Cap step | Carryover Allocation Agreement issued on or about September 1, 2026 | Bond Cap (Form A) allocation occurs in calendar year 2027 |
| Core deadline | Carryover-10% Test Application due on or about August 1, 2027 | Bond closing within 120 days of the Volume Cap Allocation, or by December 24, 2027 |
| Placed-in-service deadline | December 31, 2028 | 24 months from the bond issuance date |
| IRS Form 8609 application due | November 1 of the first credit year | November 1 of the first credit year |
Acceptance itself isn't a fixed count. The 9% QAP states that "the acceptance of the reservation and reservation fee shall be due no later than the date stated in the award letter" (Section 7.6); the 4% QAP says the same thing but ties the date to "the Section 42(m) letter" instead (Section 6.5). Neither document publishes the actual number of days anywhere — it's whatever IFA writes into that specific letter.
What's due in the first thirty days, and how to appeal
| Program | Fee | Amount | Due |
|---|---|---|---|
| 9% | Reservation Fee | 1% of the total 10-year Tax Credit amount | Within 30 calendar days of the Tax Credit Reservation Date |
| 9% | Application Submission Fee | $1,000 (nonprofit) / $2,000 (other) | At Application submission |
| 9% | Application Review Fee | $750 (nonprofit) / $1,500 (other) / $2,500 (Scattered Site) | Within 5 business days of the submission due date |
| 4% | Reservation Fee | 1.25% of the total 10-year Tax Credit amount | Within 30 calendar days of the IRC Section 42(m) letter |
| 4% | Bond Inducement Resolution Fee | $1,000 (requests ≤$10M) / $2,500 (requests >$10M) | With the Bond Inducement Resolution Application |
| 4% | Tax Credit Application Fee | $3,500 ($5,000 for Scattered Site Projects) | At Application submission |
Both programs give a disputing Applicant the same three-step appeal clock: written notice of appeal within 7 days of the Tax Credit Reservation Date, the substantive appeal within 21 days, and a Director's ruling within 30 days of that filing (9% Section 7.9; 4% Section 6.6). The decision is final except as Iowa Code Sections 17A.19 through 17A.20 allow.
Carryover allocation and the ten percent test — the 9% side only
To qualify for a carryover allocation, the 9% QAP requires satisfying "the requirements set forth in Section 42(h)(1) and Treasury Regulation 1.42-6" (Section 9) — the federal test does the substantive work; Iowa's own administrative deadline runs a month ahead of it. Carryover Allocation Agreements for the 2026 round issue on or about September 1, 2026, and the Carryover-Ten Percent Test Application package is due back to IFA "on or about August 1, 2027 (11 months following the date of Carryover Agreement)" — one month inside the federal 12-month wall, which gives IFA processing room before the statutory deadline actually runs out.
| Rule | Detail |
|---|---|
| Timing | Request must be filed before the submission due date — not after |
| Fee if approved | $5,000 late-submission invoice |
| Scoring cost | -1 point to the Developer/GP-MM (and affiliates) in the next 9% round for having requested and received the extension — QAP Section 6.4B(2) |
| Ceiling | IFA "may not extend the submission deadline beyond the one-year requirement as set forth by the IRS" |
Site control at the 10% test mark is more forgiving than a title requirement: Section 9.1 accepts either ownership or "a lease term of at least 35 years, including all parking," as long as that control is continuous and uninterrupted through IRS Form 8609 issuance.
None of this touches the 4% program. Bond-financed buildings sit outside the paragraph (1) requirements of IRC Section 42(h) by operation of Section 42(h)(4)(B) — no state credit ceiling allocation, no carryover, no 10 percent test. Iowa's own 4% QAP reflects that: the phrase "10 percent test" never appears in it, and "Carryover allocation" shows up exactly once, as a disqualifying-history item in the ineligibility criteria, not as a requirement of the 4% process.
The bond cap and the closing clock — the 4% side only
An award of 4% Tax Credits is not, by itself, a claim on anything a bond issuer controls. The QAP says so twice: "An award of 4% Tax Credits does not constitute a reservation and/or allocation of Bond Cap" (Section 1.2), and a Board-approved bond inducement resolution "does not constitute a commitment by IFA to approve or fund the proposed... Project... or a commitment by IFA to issue bonds" (Section 2.1). Winning the tax credit round and winning the Bond Cap allocation are two separate approvals on two separate tracks, and either one can still fail after the other has succeeded.
| Requirement | Detail |
|---|---|
| Headline test | At least 25% of aggregate basis (land + building) financed with tax-exempt bonds |
| Sub-condition | At least 5% of aggregate basis must be financed with bonds issued after December 31, 2025 |
| Origin | One Big Beautiful Bill Act, Pub. L. 119-21 (signed July 4, 2025), lowering the test from 50% to 25% |
| Bond Cap Limit per project | Lesser of 35% of aggregate basis or $25 million |
| Consequence of exceeding the limit | Every listed Qualified Development Team member loses points in future rounds |
The allocation of Bond Cap itself runs on IRC Section 146 and Iowa Code Chapter 7C (the Private Activity Bond Allocation Act), and it happens on a delay: for a Project awarded in 2026, the Volume Cap Application (Form A) is submitted after the Tax Credit award, but the actual allocation doesn't occur until calendar year 2027.
| Step | Timing |
|---|---|
| Volume Cap Application (Form A) | Submitted after the Tax Credit award; allocation occurs in the calendar year following the award year |
| Volume Cap Allocation (Form B) | Issued by IFA once Form A is processed |
| Closing deadline | Within 120 days of the Form B allocation date, or by December 24 of that allocation year |
| If missed | The Bond Cap allocation is no longer valid; IFA may reassign the Bond Cap |
| Placed-in-service deadline | 24 months from the bond issuance date (IFA may allow an exception, case-by-case, at its discretion) |
What failure costs, and who it hits
Failure to comply with the post-reservation requirements "may result in revocation of the Tax Credit Reservation, denial of the Carryover Allocation, withholding of the IRS Form 8609, or the issuance of an IRS Form 8823" — language that opens the Post Reservation Requirements section of the 9% QAP. The 4% QAP's parallel section is worded almost identically but drops the carryover clause entirely — "revocation of the Tax Credit Reservation, withholding of the IRS Form 8609, or issuance of an IRS Form 8823" — consistent with the 4% program never running a carryover allocation in the first place.
| Trigger |
|---|
| Returned a full credit Allocation, or failed to comply with a Carryover allocation |
| An uncorrected IRS Form 8823 or equivalent state notice of noncompliance |
| A history of repeated Tax Credit allocation or compliance issues, even without an uncorrected 8823 |
| Allowed an affordable rental property to enter foreclosure |
| Not in good standing with any affordable rental housing program administrator, state agency, or local authority |
The scoring penalties that attach specifically to post-award missteps are narrower and land on a smaller group: a Developer or GP/MM (and affiliates) loses 1 point for a material change requested and approved after the award, and loses another point for a Carryover-10%-Test extension requested and approved — both under Section 6.4B. That's a tighter net than a state that also reaches management agents, consultants and guarantors.
If a Project genuinely can't make the federal placed-in-service deadline because of a casualty loss outside the scope of Revenue Procedure 2014-49, IFA may let the Ownership Entity return the credits in exchange for a binding commitment to a future year's allocation, capped at the original amount (Section 12.1 on the 9% side; Section 7.7 on the 4% side) — the one form of relief built into either QAP.
After closing: the paperwork tail to Form 8609
Closing doesn't end the clock — it starts the paperwork tail that actually gets a project to Form 8609.
| Requirement | Deadline | Program |
|---|---|---|
| Post Closing Submittal (site ownership evidence, final closing documents) | Within 30 days of Syndicator/Direct Investor closing | 4% only |
| Prior-to-placed-in-service documents (AFHMP package, Iowa Housing Search listing, PHA vacancy-notice commitment, lease addendum) | At least 120 days before the first Unit places in service | Both |
| IRS Form 8609 Application package | No later than November 1 of the first credit year (extension available if requested before the deadline; $5,000 fee if approved) | Both |
| Executed Form 8609 returned to IFA | Within 60 days of IFA sending the IFA-completed Form 8609 | Both |
| Marketable title evidence | Submitted with the 8609 Application — attorney title opinion or Iowa Title Guaranty certificate | Both |
Thirty years of rent and income restriction is set the moment the LURA records — years before the last unit is even placed in service.
Where this goes wrong
- Assuming a fixed day-count for reservation acceptance the way a 20-day statute would give you. Iowa's QAP ties acceptance of the reservation and reservation fee to "the date stated in the award letter" (9% Section 7.6) or "the Section 42(m) letter" (4% Section 6.5) — an administratively set date that isn't published anywhere until IFA writes it into your specific letter.
- Citing Iowa Administrative Code 265-12.1 as the source of QAP requirements. That rule, which used to incorporate the QAP by reference, was rescinded in its entirety effective March 26, 2025 (ARC 8902C) — the QAP is now Board-adopted policy under Iowa Code Section 16.35 with no corresponding numbered rule.
- Treating the 4% (bond) program as if it owes a 10 percent test or carryover allocation. Bond-financed buildings sit outside IRC Section 42(h)(1) under Section 42(h)(4)(B); Iowa's 4% QAP never uses the phrase "10 percent test," and mentions a "Carryover allocation" only once, as a disqualifying-history item.
- Treating a 4% Tax Credit award as if it reserves Bond Cap. The QAP says so twice, explicitly: an award of 4% Tax Credits "does not constitute a reservation and/or allocation of Bond Cap," and a Board-approved bond inducement resolution is not a commitment to fund the project or issue bonds either.
- Filing the Carryover-10%-Test extension request late. It must be filed before the submission due date, not after — and even a timely, approved extension costs the Developer/GP-MM a scoring point in the next 9% round (Section 6.4B(2)), on top of the $5,000 fee.
- Assuming IFA can push the 10% test deadline as far as a project needs. IFA's own guidance is explicit: it "may not extend the submission deadline beyond the one-year requirement as set forth by the IRS."
- Missing the Bond Cap closing backstop. A 2026 awardee whose Bond Cap allocation issues must close within 120 days of that allocation or by December 24, 2027 — miss both and the allocation is no longer valid, with IFA free to reassign it.
- Satisfying the headline 25 percent bond test while missing its sub-condition. At least 5% of aggregate basis must specifically come from bonds issued after December 31, 2025 — a project that hits 25% entirely with pre-2026 bonds still fails.
- Assuming a ground lease can't satisfy the 10% test's site-control requirement. Iowa accepts a lease of at least 35 years, including parking, as an alternative to ownership — provided it runs continuously and uninterrupted through IRS Form 8609 issuance.
- Treating the 120-day prior-to-placed-in-service documents as an 8609-time task. The AFHMP package, the Iowa Housing Search listing, the PHA vacancy-notice commitment, and the accessible-unit lease addendum are all due 120 days before the FIRST unit places in service — well before construction is complete.
- Sitting on the IFA-executed Form 8609. Once IFA completes Part A and sends it back, the Ownership Entity has only 60 days to complete Part B and return the fully executed form — and its terms must match the LURA exactly.
- Requesting Bond Cap above the per-project limit as a one-time ask. Exceeding the lesser of 35% of aggregate basis or $25 million costs every listed Qualified Development Team member points in future rounds, not just the current deal.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies