Post-award readiness clock — Michigan

Three Evaluations, not one Carryover milestone

Where some states' QAPs build a single, heavily branded "Carryover Allocation Agreement" milestone into their post-award vocabulary, Michigan's QAP instead names three sequential Evaluations, each governed by its own QAP section. First Evaluation (Section XI) is the award of the Reservation itself, contingent on MSHDA determining the application is competitive. Second Evaluation (Section XII) is the 10 percent test/10% Certification step, due within 12 months of the allocation date. Final Evaluation (Section XIII) covers the review that precedes IRS Form 8609 issuance, tied to the project being placed in service. The word "Carryover" does appear in the QAP — in the non-transferability language of Section XV and the Exchange of Credit provision of Section XVI — confirming MSHDA does treat the Second Evaluation output as the carryover documentation a 9 percent deal needs, even though the QAP's own vocabulary foregrounds "10% Certification" rather than "Carryover Allocation Agreement" as the operative term.

The 9 percent and 4 percent tracks diverge specifically at Second Evaluation: a 9 percent award requires "evidence, acceptable to MSHDA and in accordance with any applicable federal regulations, from a Certified Public Accountant that the taxpayer has incurred 10% of the project's reasonably anticipated basis within 12 months of the allocation date," plus the items on the 10% Certification Exhibit Checklist. A 4 percent award instead submits the Commitment Exhibit Checklist — explicitly "with the exception of the Independent Accountant's Report" — meaning 4 percent deals are not required to produce the CPA-certified 10 percent test that 9 percent deals must. Both tracks state the same consequence for missing their respective checklist: "Failure to provide such documentation may result in the allocation being rescinded."

The 12-month clock, and no stated extension for it

The QAP's language on the 10 percent test is unconditional on timing: 9 percent owners must incur 10 percent of reasonably anticipated basis "within 12 months of the allocation date," full stop. Compare that to Section IV's general waiver authority, which lets MSHDA waive "any requirements and/or conditions that are not mandated by Section 42 of the IRC... on a case-by-case basis, including project-specific deadlines." The 10 percent test itself is a federal statutory mandate under Section 42(h)(1)(E) of the Internal Revenue Code, not a Michigan-specific QAP policy choice — which means it plausibly sits outside what MSHDA's own discretionary waiver power under Section IV can reach in the first place, independent of whether MSHDA would be willing to grant an extension as a matter of practice.

The one extension mechanism this QAP does spell out in detail applies to something else entirely: curing a post-award noncompliance finding under Exhibit VI, where "the owner shall have a minimum of 30 days from the date of notification to cure the noncompliance," and "in extraordinary circumstances, and only if MSHDA determines that there is good cause, an extension of up to six months to complete a cure for noncompliance may be granted." Nothing comparable appears attached to the 12-month 10 percent Certification deadline in the documents reviewed here. A team running behind on its 10 percent test should treat the 12-month date as effectively hard and confirm MSHDA's current practice directly and in writing, rather than assuming the noncompliance-cure extension language extends by analogy to a different deadline it does not, on its own terms, address.

Progress reporting is a separate, ongoing obligation layered on top of the 10 percent test: "Following a LIHTC award, project owners must move forward with closing on financing sources and commencement of construction in a timely manner. Owners must submit progress reports to MSHDA quarterly." The consequence for falling behind here is scored rather than purely administrative — "Failure to submit accurate progress reports on a timely basis may result in negative points on future applications or a loss of the award" — which means a slow-moving deal can carry a scoring penalty into an entirely separate future funding round, not just risk the award in hand.

Rescission risk doesn't end at 10% Certification

Section XV bars an owner from changing anything a scoring award depended on — unit mix, targeted AMI, a design feature that earned points — "unless extraordinary and well-documented circumstances would warrant it," and a change that would drop the project's score below its original competitive position "may cause the allocation of LIHTC to be rescinded or an assessment of negative points on future applications." The same section makes Reservations and Carryover Allocations non-transferable, either to another entity or within the same entity on a change of control or general-partner interest, absent MSHDA's express written consent — and states plainly that this is deliberate: "it being the explicit intention of the QAP to prevent one party from obtaining such a Reservation and/or Carryover Allocation in order to sell or broker its interest in the proposal (except for syndication purposes)." MSHDA's consent for such a transfer is not expected unless the transferee submits a new application that scores no worse than the original.

Section XVI (Exchange of Credit) gives MSHDA a separate, discretionary escape valve: it may let an owner return an allocation and reissue a Carryover Allocation without a new competition, evaluated as "a facts and circumstances test." That flexibility isn't free — "Projects that receive an award of 2026 or 2027 credit will be charged a fee equal to 5% of the annual LIHTC award. Projects originally funded with 2026 or 2027 credit will be charged a fee equal to 10% of the annual LIHTC award for a second exchange" — and the request has its own hard date: "Exchanges must be requested not later than November 1 of the current year."

Fees stack at two more points after the award

The 7 percent reservation/allocation fee described in Section XVII is computed on one year's credit amount, not the full multi-year award — a distinction worth being precise about, since reading "7% of the annual LIHTC dollar amount" as 7 percent of the ten-year aggregate would overstate the fee roughly tenfold. The QAP splits it explicitly: "Owners will pay a sum equal to 3% of the annual LIHTC dollar amount at the time of Reservation. The remaining 4% shall be paid at the time of the 10% Certification."

The compliance monitoring fee is not a one-time cost even though it's framed as covering "the initial 15-year compliance monitoring period": once that period ends, the extended-use period carries its own ongoing $25/unit/year charge, and a project with significant or repeated noncompliance findings faces an additional $50/unit fee on top of both. MSHDA also reserves a sliding-scale fee, described only by reference to a separate Fee Schedule Policy Bulletin, for an owner who fails to have a representative present for a scheduled tenant file audit or physical inspection.

After 8609: physical inspections, tenant file audits, and the one real extension the QAP describes

MSHDA's own inspection obligations begin on a fixed clock: physical inspections and tenant file audits of a LIHTC project "will commence no later than the end of the second calendar year following the year the last building in the project is placed in service and will be conducted at least once every 3 years thereafter throughout the initial 15 year compliance period" — continuing, at a MSHDA-determined frequency, through the extended-use period after that. Each inspection covers all buildings and common areas plus at least 20 percent of the low-income units; each file audit covers the certification, supporting documentation, and rent record for 20 percent of the low-income units. MSHDA "retains the right to perform an on-site inspection and/or file audit of any low-income building at any time or frequency" beyond that floor.

When MSHDA finds noncompliance, the owner gets "a minimum of 30 days from the date of notification to cure," with the discretionary good-cause extension up to six months noted above — the one extension process this QAP actually describes in detail. MSHDA then reports to the IRS on Form 8823 "no later than 45 days after the end of the correction period, and no earlier than the end of the correction period." Critically, an MSHDA compliance finding doesn't bind the federal government in either direction: "neither a finding of noncompliance nor a determination that noncompliance has been cured is binding on the Internal Revenue Service," and owners "may still be subject to an IRS audit and the possibility of loss or recapture of Housing Credits" even after MSHDA has signed off.