Sign Up For Novogradac Industry Alert Emails

Q&A: How do we Account for Unborn Children?

Published by Charlie Rhuda, CPA on Thursday, March 2, 2017

Journal cover March 2017   Download PDF

Question: How does property management account for unborn children when preparing a tenant’s initial or annual recertification for low-income housing tax credit (LIHTC) properties? Does the treatment of unborn children change if the mother voluntarily discloses that she anticipates placing the child for adoption?

Answer: According to Chapter 3 of HUD Handbook 4350.3: Occupancy Requirements of Subsidized Multifamily Housing Programs, the property manager must include unborn children of pregnant women when determining family size for income limits. If the mother and unborn child(ren) will be moving in before giving birth, then yes, the unborn child(ren) must be counted in household size. It is important to note that the property manager is not allowed to inquire as to whether or not the tenant is pregnant. Unless the tenant voluntarily discloses that she is pregnant, the property manager may not inquire. Furthermore, unlike verifying the identification of children or adult household members, the owner does not need to obtain any verification other than the mother’s voluntary self-certification (see the excerpt from the HUD 4350.3 Guide on page 41). 

On a standard low-income housing tax credit (LIHTC) rental application there is a question that asks the tenant, “Do you anticipate any changes in household composition in the next 12 months?” The responses to this question assist the property manager in knowing whether or not a tenant is pregnant. If the tenant states “yes,” the property manager is allowed to ask about the situation surrounding the change in composition. The property manager should follow up the question by inquiring what the change will be. 

Since unborn children are counted as household members, they must be listed on the Tenant Income Certification (TIC). Most property management software requires Social Security numbers in order to add a household member to the TIC. The unborn child will not have a Social Security number at the time of certification, therefore the property manager can enter all zeros (000-00-000) as a placeholder until the child’s Social Security number is issued after birth. The household member’s name would be “Unborn Child” to clearly indicate that the tenant is not yet born. If the property management software requires a birthdate, the property manager can enter the child’s expected due date. Concerning the student status, the property manager would select “no.” At the time of the household’s next annual recertification, the TIC should be updated with all actual tenant information for the child.

In the case of a woman voluntarily stating that she is pregnant, but plans to place the child for adoption, it is probably best that the child is included in the household size because sometimes the adoption may not go through and often the adoption process might extend past the 12-month time period. If for some reason the mother decides not to place the child for adoption once the child is born, the household will remain in compliance, as the unborn child was already accounted for. If however, the unborn child was not included in the household size, and the mother opted not to place the child for adoption, the household would be noncompliant, as the household income limit would not reconcile with the appropriate household size. From another perspective, if the family is in the process of adopting a child, but the adoption is not yet final, the property manager could include that child in the family’s household size for the purpose of determining the appropriate income limit.

Conclusion: When preparing annual certifications for LIHTC properties, you must always keep in mind that the certification is supposed to represent what is going to occur in the upcoming 12 months. Just as if we would include anticipated income in our income calculation, we should include anticipated household members when determining the appropriate household size for calculation applicable income limits.

 

Learn more about Novogradac's expertise and many services