"We got the reservation letter -- what's the actual sequence of dates SDHDA holds us to between now and getting a Form 8609, does South Dakota's QAP actually spell out the federal 10 percent test, and what happens to the award if we're late on any of it?"
The reservation-to-carryover chain, in SDHDA's own numbered phases
| Requirement | Deadline | What's due |
|---|---|---|
| Reservation Fee | Within 60 days of notification of reservation | 3% of the annual tax credit amount reserved, non-refundable |
| Reservation Requirements Phase 1 | January 31 of the year following notification of award | Signed pro forma for the Extended Use Period; executed ownership entity agreement plus SD Secretary of State certificate of registration; Federal Employer ID Number |
| Reservation Requirements Phase 2 | June 1 of the year following notification of award | Financing/syndication documentation; attorney's opinion of ownership; title commitment or recorded warranty deed (or a BIA Title Status Report for tribally leased land); building surveys/plats; final stamped plans; executed Owner's and Architect's Certification; construction contract; management plan; appraisal(s); physical/capital needs assessment for acquisition-rehab deals |
| Carryover Requirements, including the 10% Test | November 15 of the Allocation Year (or November 15 of the FOLLOWING year if the reservation itself was issued after June 30 of the Allocation Year) | Owner certifications (expected placed-in-service date, intent to maintain set-aside/rents); independent CPA certification of reasonably expected basis; Owner Cost Certification and independent CPA/tax-attorney Cost Certification of expenditures exceeding 10% of total project costs |
| Final Cost Certification / Placed in Service | 180 days after Project Completion | 16-item package: recorded DLURA, certificate(s) of occupancy, owner and independent-CPA cost certifications, lien-holder consents, tenant listing, final finance documents, AIA G704 substantial-completion certificate, final architect field report, contractor's final draw request, compliance-training documentation, allocation fee |
| Final Allocation / Form(s) 8609, same calendar year | Documentation must reach SDHDA before November 1 | Complete Final Cost Certification/Placed in Service package, so SDHDA can issue IRS Form(s) 8609 before year end |
The 60-day Reservation Fee clock and the January 31 Phase 1 documentation clock both start from the same event -- notification of reservation -- but run different lengths and cover different obligations; treat them as two separate deadlines, not one.
The federal 10 percent test: named and detailed, with a real late-reservation extension
Unlike QAPs that never mention it by name, South Dakota's spells out its own "10% Test Requirements" directly (§ VI.C.5): an Owner Cost Certification of "a certified line-item expenditure of more than 10% of the total project costs," plus a CPA's Cost Certification -- "Audited line-item expenditures of more than 10% of the total project costs by an independent CPA and/or tax attorney on approved SDHDA forms with a statement of non-affiliation with the developer and owner." If developer fee is counted toward that 10%, it "cannot exceed 20% of the carryover basis amount," and the developer must document to the CPA that the fee "has been earned and paid."
The QAP also gives a real extension for a late-issued reservation: "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." That is a genuine one-year extension, not a rounding rule -- a reservation issued in, say, October of the Allocation Year gets more than 13 months to hit the 10% test rather than the roughly six weeks a standard November 15 deadline would otherwise leave.
What the QAP does not do, anywhere in its own text, is restate the separate federal requirement that a carryover-allocated building generally must be placed in service by the close of the second calendar year following the year the allocation was made (IRC § 42(h)(1)(E)(ii)). South Dakota's silence on that specific rule mirrors a gap this research has flagged in other states' QAPs -- it does not mean the rule doesn't apply, only that this document does not restate it; the deadline still has to be tracked against federal law and SDHDA's own carryover allocation agreement, not this QAP's text.
The 180-day cost-certification window has its own year-end trap
"Project Completion" is a defined term -- construction of all buildings finished and all units ready for occupancy, verified by certificate(s) of occupancy. From that date, owners have 180 days to submit the full Final Cost Certification/Placed in Service package (§ VI.D). Separately, though, § I.M states that SDHDA "must receive the documentation prior to November 1st to issue IRS Form(s) 8609 before year end." Read together, those two provisions do not always give a project the full 180 days it might expect: a project that reaches Project Completion any time after roughly early May has a 180-day window that runs past November 1, meaning the fastest way to get a current-year 8609 is not "wait until day 180" but "beat November 1," full stop. A project completing construction in July, for example, has roughly 120 days of practical runway to assemble the entire 16-item package -- not the 180 days the section heading might suggest -- if a same-year 8609 is the goal. Missing November 1 does not forfeit the 8609 outright; it simply rolls issuance into the following calendar year.
What actually forces a return of the award: two different standards, and neither is a single missed-date default
| Mechanism | Governing standard | Consequence |
|---|---|---|
| Monthly status reports | Due by the 20th of each month (§ I.J) | $250 fine on the third late report and every late report after that; fines must be paid before Form(s) 8609 will be issued |
| Recapture of Reservations | § I.K -- broad, discretionary: "unable to provide satisfactory evidence of progress toward the project completion" | SDHDA may recapture the reservation; no single missed date is named as an automatic trigger |
| Changes to Project | § III.L -- any unapproved "significant change" (unit-count reduction, bedroom/square-footage cuts, financial-feasibility change, density increase, amenity change, or anything that might have changed the original ranking) | The Board "may require a return of the reservation/allocation" -- this is the QAP's actual, named clawback mechanism |
| Final Cost Certification/Placed in Service lateness | § VII.E -- past the 180-day deadline | $500 flat fine plus $25 for each additional business day late; must be paid before Form(s) 8609 issuance |
South Dakota's QAP does not name a single deadline-driven rescission clause tied to one specific document the way some states do. Its real operative clawback is the broader Changes to Project significant-change standard, layered on top of a separately vaguer, progress-based Recapture standard.
What else is due on this clock, and what locked in permanently at reservation
Two of these obligations are easy to underbudget precisely because they are not one-time closing costs. The 7% (or 10%) allocation fee is sized off the full annual credit amount, not a flat administrative charge, and it lands at final allocation -- a substantial, easy-to-miss cash requirement late in the process. The replacement and operating reserves, meanwhile, are not deposits a sponsor can plan to release after cost certification; they are permanent Extended Use Period obligations that follow the project through any later change of ownership.
The Extended Use Period election is also worth flagging here because of when it actually locks in: the 40-year option is a scoring choice made at application (worth 20 points under § V.A.2), not something to reconsider once the reservation is in hand -- by the time a sponsor reaches this phase, that election, like the Qualified Contract waiver, is already fixed.
Where this goes wrong
- Treating the 60-day Reservation Fee deadline and the January 31 Reservation Requirements Phase 1 deadline as the same clock. Both nominally start at notification of reservation but run different lengths and cover different obligations.
- Assuming South Dakota's QAP is silent on the federal 10 percent test the way some other states' QAPs are. It names and details the test directly (§ VI.C.5), including the rule that developer fee counted toward the 10% cannot exceed 20% of the carryover basis amount.
- Missing the one-year extension for late-issued reservations. A reservation received after June 30 of the Allocation Year has until November 15 of the FOLLOWING year to meet the 10% test -- not the standard November 15 of the same Allocation Year.
- Assuming the federal two-year placed-in-service deadline for a carryover allocation (IRC § 42(h)(1)(E)(ii)) is restated somewhere in this QAP. It is not; the document is silent on that specific federal rule and relies on it by reference.
- Planning construction completion around the full 180-day Final Cost Certification/Placed in Service window without checking it against November 1. SDHDA must receive that documentation before November 1 to issue Form(s) 8609 before year end, which can cut the effective window well short of 180 days for a project completing construction in the back half of the year.
- Looking for a single deadline-driven rescission clause tied to one named document, the way some other states' QAPs structure it. South Dakota's actual operative clawback is the broader Changes to Project significant-change standard (§ III.L), on top of a separately vague, progress-based Recapture of Reservations standard (§ I.K) -- neither is a simple missed-date default.
- Underbudgeting the 7% (10% for bond deals) allocation fee due at final allocation, or the $50-per-development-plus-$30-per-unit annual monitoring fee that runs for the entire Extended Use Period.
- Assuming the Qualified Contract exit right under IRC § 42(h)(6) is still available at this stage. It was already permanently waived by accepting the reservation, for both 9% and bond-financed 4% deals.
- Treating the replacement reserve ($400/unit/year, 3% trended) and operating reserve (six months of expenses plus debt service) as one-time closing deposits. They are permanent Extended Use Period obligations that must stay with the project through any later ownership transfer.
- Assuming the 40-year Extended Use Period can be elected after the reservation is issued. It is a scoring choice made at application (worth 20 points) that becomes a fixed, locked-in post-award obligation well before this phase begins.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies