Income And Asset Determination (24 C.F.R

5.609). (1) General Information. (a) Gross annual income (annual income) is used to determine if the household falls within the Income Limits and to determine the Total Tenant Payment (TTP), the amount of the rent the program participant is responsible for paying. The income of every household member who resides in the assisted unit, including most persons who are temporarily absent but included in the unit size calculation, will be included when calculating income. (b) Definition of Annual Income. Annual income is the amount of income that is used to determine a family’s eligibility for assistance and ongoing rent calculation. Annual income means all amounts, monetary or not, that go to or are on behalf of the family head or spouse (even if temporarily absent) or to any other family member, or all amounts received from a source outside the household, or in other words, income received or earned within a twelve-month (12) period. Annual income includes amounts derived (during the twelve-month period) from assets to which any member of the family has access. Annual income includes all amounts that are not specifically excluded by regulation 1. Applicants. For applicants, annual income is all amounts anticipated to be received or earned during the twelve-month (12) period following admission, since EIV income information is not available for applicants. 2. Participants. For participants, annual income is all amounts actually received or earned during the most recent 12 months of income information available in EIV. (Notice PIH 2013-03 (HA), January 22, 2013). (c) Calculating Income (24 C.F.R. 5.609). The following procedures are observed when calculating income: 1. Applicants. (i) Current Circumstances. Generally, current circumstances are the basis of anticipated income, unless the self-declaration or verification forms indicate an upcoming change or income fluctuates. Projected annual income is determined by annualizing current income. Income that may not last for a full twelve (12) months (e.g., unemployment compensation) should be calculated assuming current circumstances will last a full twelve (12) months. If changes occur later in the year, an interim recertification can be conducted to change the household’s rent. However, if information is available on changes expected to occur during the year, this information is used to determine the total anticipated income from all known sources HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 during the year. Therefore, if the anticipated income from the employer shows a raise in pay, which will occur four (4) months from the effective date of the recertification, income is calculated at the old rate for four (4) months and at the new rate for eight (8) months. (ii) Previous Year’s Income. The previous year’s income may be utilized to determine the amount of income to be anticipated when current income cannot be clearly verified or determined, such as: (I) When a household member has a sporadic annual work history (factory production work, temporary services, teacher’s aides, etc.). (II) The household composition changes, and thus, household income is sporadic (a particular member moves into and out of the household frequently). (III) For employment, unemployment, and social security income an Enterprise Verification System (EIV) report for the prior year may be used, supplemented with current documents where possible. Another preferred document for employment income is the previous year’s W-2 Wage and Tax statement or the Social Security Earnings Statement for the prior year when the participant has the same employment at the time of the certification or recertification. (IV) When bonuses are anticipated, but the employer does not know how much the bonus will be, the bonuses from last year are used. (V) When child support income is court-ordered, but the amount received fluctuates and does not consistently match the court order, the reports available from DHS’s child support online system are appropriate documentation to determine annual child support income. (iii) Annualized Income Conversion. All income is converted from periodic amounts to an annualized figure to complete rent calculations. (I) The two following methods may be used to do this and vary depending upon the circumstances of the household. I. Annualize current income and if the income changes after the initial move-in or recertification, conduct an interim if the income changes. II. Average known sources of varying income to compute an annual income calculation; no interim is processed. (II) In cases where a person works a nine-month schedule, to reduce administrative burden, the THDA will annualize the income over a 12-month period and not conduct an interim unless the person verifies they are separated from the employer permanently. (III) Periodic income is converted to annual income using the following calculations: I. Multiply weekly amount by 52. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 II. Multiply bi-weekly amounts by 26. III. Multiply monthly amounts by 12. IV. Multiply hourly amounts by the number of hours worked per week to get the weekly amount. (iv) Irregular Income. Some circumstances present challenges to estimating anticipated income, including situations where a participant has sporadic work or seasonal income or a participant who is self-employed. In all instances, the THDA will make a reasonable judgment as to the most reliable approach in estimating what the participant will receive during the year. In many of these challenging situations, mid-year or interim recertifications may be required to reflect changing circumstances. 2. Participants. The THDA has chosen to calculate annual income for participants based on Notice PIH 2013-03 (HA), January 22, 2013, which allows Public Housing Authorities to use actual past income to calculate subsidy levels. Since the THDA is determining annual income based on actual past income, the THDA must use the most recent 12 months of income information available in Enterprise Income Verification (EIV) System, when available. Since the EIV report will give actual earnings data verified by a third party, the program participant is no longer required to provide third-party documentation (e.g., paystubs, payroll summary report, unemployment monetary benefit notice), instead the participant’s declaration of income on the Personal Declaration, signed by all adult household members, will suffice. (i) Comparison between EIV and Personal Declaration. The THDA will total the EIV income information, as well as any non-wage information, for the most recent 12 months of income that are available in EIV and will compare this total to the information provide on the Personal Declaration. (I) Substantially the Same. If the information provided by the participant is substantially the same (less than $2400 annually or $200 per month) as what is contained in EIV, this is the participant’s annual income. (II) Differs Substantially. If the source(s) or amount of income reported by the participant and contained in EIV differs substantially, the THDA must revert to using projected, anticipated income and conduct further verification, which may include at a minimum, four current, consecutive pay stubs. Other acceptable tenant-provided documentation (generated by a third-party source) include, but are not limited to: payroll summary report, employer notice/letter of hire/termination, SSA benefit verification letter, bank statements, child support payment stubs, welfare benefit letters and/or printouts, and unemployment monetary benefit notices. (ii) Full Twelve Months Not Available in EIV. If there are not 12 consecutive months of income information available in EIV, then the THDA must revert to using projected, anticipated income here as well. (iii) Change in Circumstances or Dispute. If there has been a change in circumstances for an applicant or participant household or the household disputes the EIV-reported income information and is unable to provide HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 acceptable documentation to resolve the dispute, the THDA must request written third-party verification. (I) Example. If a program participant lost his/her job, changed jobs, or reduced their hours in the months subsequent to the time period covered in EIV, the THDA must use, at the participant’s request, the more recent income information verified by participant provided third- party documentation (e.g., paystubs, payroll summary report, unemployment monetary benefit notice) or through written third-party verification, which reflects the new or current work circumstance. (iv) Sources Not Available in EIV. The THDA must continue to verify income from sources not available in EIV. However, the THDA must use the same time period for both wage and non-wage income. For example, if the THDA uses EIV information from July 2011 to June 2012 for the purpose of verifying income from wages, the THDA must use the same time period for any nonwage income. (v) Participant Requests Use of Anticipated Income. At their discretion, participants may request that anticipated income be used instead of past income. For example, if a participant recently retired, the participant may request that anticipated income be used to calculate their rental subsidy level, since the anticipated income will result in a higher subsidy. (d) Minimum Income/Expenses Requirement. The THDA follows HUD Rental Integrity Monitoring guidance when determining income. There is no minimum income requirement, but income reported must be reasonable in relationship to financial commitments reported by the household. For example, if the household reports no income, it is not reasonable that all bills/debts are paid in a timely manner. The THDA will review the Personal Declaration to compare self-declared paid current expenses to reported income for reasonability. If the THDA finds that the household has claimed less income than non-delinquent expenses, the household will be required to report the additional income sources and amounts available to cover their currently paid expenses. If the household refuses to cooperate, the THDA may tally the amount of paid current monthly expenses and count this amount as monthly income, using the Personal Declaration as verification of the income. (e) A household claiming zero income will have an interim contact every ninety (90) days until the household shows some type of income. (2) Income Considerations by Member Type (24 C.F.R. 5.609). (a) Income of Adults. The annual income of the head, spouse or co-head, and other adult members of the family must be counted. In addition, persons under the age of eighteen (18) who have entered into a lease under state law are treated as adults and their annual income must be counted. These persons will be either the head, spouse, or co- head; they are sometimes referred to as emancipated minors. (b) Income of Dependents. A dependent is a family member who is under eighteen (18) years of age, is disabled, or is a full-time student. The head of the family, spouse, co- head, foster child, or live-in aide are never dependents. Some income received on behalf of family dependents is counted and some is not. 1. Earned income of minors (family members under eighteen) is not counted. 2. Benefits or other unearned income of minors is counted. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 3. When more than one family shares custody of a child, and both families live in assisted housing, only one family at a time can claim the dependent deduction. The family that counts the dependent deduction also counts the unearned income of the child. The other family claims neither the dependent deduction nor the unearned income of the child. (c) Income of Full-Time Students. When full-time students who are eighteen (18) years or older are dependents a small amount of their earned income will be counted. The THDA will count the earned income to a maximum of four hundred eighty dollars ($480) per year. If the income is less than $480, all of the income will be counted. If the earned income exceeds $480, only $480 will be counted and the amount that exceeds the $480 will be excluded. 1. A head, spouse or co-head can never be classified as a full-time student dependent. All income of a full-time student, eighteen years of age or older, is counted if that person is the head of the family, spouse, or co-head. 2. For full-time students with financial assistance under the Higher Education Act of 1965, see Student Income-Grants & Scholarships below for additional guidance in the treatment of this income. (d) Income Received for the Care of Foster Children & Adults. Payments received by the family through the official relationships with local welfare agencies, specifically provided for the care of the foster child or adult, is not counted. (e) Income of Permanently Absent Household Members. Income of persons permanently absent will not be counted. The head of household must sign a certification that the member is permanently absent and the household will be required to verify that a member is permanently absent. 1. Tax records, rental leases, utility bills, department of motor vehicle (DMV) records, criminal records, and other forms of computer-generated or third-party verification may be utilized to determine if a person is permanently or temporarily absent from the household. (f) Income of Temporarily Absent Household Members. Income of temporarily absent household members who are included in the unit size calculation is counted. This includes all household members who are working out of town or are temporarily absent from the unit for any other reason (see below for military deployment). If the family wishes to remove an adult from the household, the policies above under permanent absence will be followed. 1. The THDA will count the income of the spouse of the head of the household, even if the spouse is not currently considered a household member, when the following applies: (i) The spouse is temporarily absent; (ii) The head of household files a joint income tax return with the spouse, unless the head of household can specifically verify that he did not have access to the joint income; or (iii) The spouse shares access to resources, such as checking or savings account with the head of household or another adult household member. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (iv) The gross income, including all pay and allowances, is counted as income, regardless of the amount actually sent to the household members remaining in the unit. (g) Income of Deployed, Active Duty Military Personnel (24 C.F.R. 5.609(b)(8)). All regular pay, special pay, and allowances of a member of the Armed Forces, whether or not living in the unit, who is head of the family, spouse, or other person whose dependents are residing in the unit is counted. 1. Hostile Fire Pay Exception. Special pay received by a person serving in the Armed Services who is exposed to hostile fire is an exception and is excluded from income under 24 C.F.R. 5.609(c)(7). Hostile fire pay is also called imminent danger pay and should be labeled as such on an armed forces member’s leave and earnings statement. (h) Income of Confined Household Members (24 C.F.R. 982.54(d)(10)). An individual permanently confined to a nursing home or hospital may not be named as head, spouse or co-head, but may continue as a household member at the family’s discretion. If a household member is confined to a nursing home or hospital on a permanent basis, the household may elect one of the following choices: 1. Include the income of the confined household member; accept any deductions for which the individual would qualify and maintain the same subsidy size; or 2. Exclude the income; not qualify for any deductions for the individual; accept a reduced subsidy size (if applicable). (i) Persons Receiving SSI Who Have a Designated Payee. For persons receiving Social Security Insurance (SSI) who are required to have a designated payee, their TTP calculation will be based on the net income available to the tenant. Net income is defined here as the tenant’s gross income minus the actual fee amount charged by the designated payee. This fee is typically ten (10) percent of the person’s SSI and is an administrative or processing fee. Expenses for the tenant that the payee pays out of the SSI amount is not excluded from net income and must be counted. (3) Income Inclusions. (a) Earned Income. Earned income sources includes income from wages, own business, self-employment and other earned sources. 1. Wages (24 C.F.R. 5.609(b)(1)). (i) Gross income of adults is counted. (ii) $480 of the gross earned income of adult students is counted. (iii) Earned income of minors (under 18) is not included. 2. Own Business/Self Employment (24 C.F.R. 5.609(b)(2)). Income from self- employment or operation of a business is counted using the calculation of net income equals gross income less expenses. (i) If the applicant or participant filed taxes in the prior year, they must supply a copy of their tax return. The information in the tax return will be used to determine current business income. If the applicant or participant cannot HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 provide the prior year’s tax return, they must supply other documents that verify gross income and expenses. (I) Expenditures for business expansion or amortization of capital indebtedness may not be used as deductions in determining net income. (II) An allowance for depreciation of assets used in a business or profession may be deducted, based on straight line depreciation, as provided in Internal Revenue Service regulations. (III) Any withdrawal of cash or assets from the operation of a business or profession will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested in the operation by the family. (b) Payments in Lieu of Earnings (24 C.F.R. 5.605(b)(5)). This income category includes payments to individuals who are not working because they have lost their jobs or have been injured on the job and are included in annual income when they are received either in the form of periodic payments or as a lump sum that represents the delayed start of a periodic payment. They include: 1. Unemployment. 2. Workers’ Compensation. 3. Severance Pay. 4. Payments in lieu of earnings are excluded from income if they are received as a one-time settlement payment (e.g. for a claim dispute or a permanent work- related injury), but may be included as an asset. (c) Social Security & Supplemental Security Income (Periodic Amounts) (24 C.F.R. 5.605(b)(4)). The gross amount of any Social Security, SSI or SSDI benefit, before any type of garnishment or deduction (i.e. deduction for medical insurance), is counted as income for both adults and minors. 1. A reduction in a social security or SSI payment because of a prior overpayment is not considered a deduction from the usual full amount. When social security or SSI benefits are reduced for this reason, only the actual amount received during the reduction period is to be included in annual income. (d) Child Support and Alimony (24 C.F.R. 5.609(b)(7)). Child support and alimony specified in a divorce or separation agreement or child support order is counted unless the household provides appropriate verification that they are not receiving the support, or are receiving a different amount. 1. Alimony and child support paid by a household member to someone outside the household is not deducted from the gross annual income. 2. When a person that has been making financial contributions to an assisted household is added to the household composition, the household income is recalculated to include that person’s income. The amount of money contributed by the new member is included in the total household income. Thus, money previously shown as contributions such as child support and alimony, even if it is still ordered by the court, is no longer included separately as income. The HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 contribution amount is not included because it is now declared as other income and verified and included in the total household income. 3. For child support income, documentation that a child support enforcement order has been attempted through the Department of Human Services (DHS), another enforcement agency, or independent enforcement efforts must be provided. 4. When determining the amount of child support to count as annual income, the following factors will be considered: (i) The amount of child support ordered by the court in a divorce or separation agreement or child support order; or (ii) Up-front verification or other computer-generated documentation showing the payments received over the last twelve (12) months; or (I) If the amount received differs consistently from the court-ordered amount, the actual amount received will be used. In this case, the most appropriate documentation is verification from the Department of Human Services Child Support office of actual monthly amounts of child support received (e.g. Child Support Payment Summary). (iii) The amount of child support verified through third-party verification methods by the child support provider or the amount self-declared by the applicant or participant when UIV, computer-generated documentation, or third-party verification from the child support provider is not received. (I) These are only acceptable when child support is not ordered or enforced by the court, but rather when the two parties have a verbal agreement for support. In this case, the appropriate THDA verification form should be used. 5. Annualizing Child Support. When annualizing the child support received, the amount currently received will be considered, not the amount ordered by a court order, when the amount received differs consistently from the court-ordered amount. (i) Notification Requirement. The household must notify the THDA within fourteen (14) calendar days of any changes in child support payments. (ii) Payments Ceased. If the applicant or participant claims the payments have ended, this should be demonstrated through a computer-generated document, like the DHS child support summary, or through verification of an employment loss, a death, or an imprisonment of the child support provider, etc. (iii) Payments Received for Twelve Months or More. (I) If the household has received child support for the past twelve (12) months, but current verification shows a decrease or temporary stop in child support payments, the current circumstances should be used to calculate child support by multiplying the current amount by 12, but the household must notify the THDA within 14 days of a change in the child support received. The applicant or participant should be able to demonstrate that the payments have decreased or HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 temporarily stopped either through computer-generated documentation or third-party verification. I. Example. Child support of $100 per month has been ordered. If the DHS child support summary shows that child support was $100 per month for 6 months, but during the past 3 months, the support paid was $25 per month, the $25 will be used as the monthly amount received for annualizing child support. So, in this case, $25 multiplied by 12 equals an estimated annual amount of $300. (II) However, if the household has been receiving child support for the last twelve (12) months, but the amount of child support received fluctuates frequently, then the entire last twelve (12) months will be considered for the annual amount. In order to determine the estimated monthly amount, add together the amounts received each month and divide the total by 12. I. Example. Child support of $100 per month has been ordered. The child support received is $100 in January, $50 February, $25 March, $100 April, $100 May, $125 June, $25 July, $125 August, $50 September, $125 October, $75 November, $100 December. In order to determine the estimated annual amount, add all 12 months together which equals $1,000. Then, in order to determine the estimated monthly amount, divide the 12-month total of $1,000 by 12, which equals $83.33 per month. (iv) Payments Received for Less than Twelve Months. (I) If child support has been received for less than 12 months, but the amount received has remained consistent, just multiply the amount received each month by 12 to get the estimated annual child support. I. Example. Child support of $100 per month has been ordered. The child support received is $100 in January, $100 February, and $100 March, then multiply $100 by 12 to get the estimated annual amount of $1,200. (II) If the child support has been received for less than 12 months and the amount received has fluctuated, the amount received should be totaled and divided by the total months payments were received in order to determine the monthly amount and then multiplied by 12 to get the estimated annual amount. I. Example. Child support of $100 per month has been ordered. Child support has been periodically received for the past 6 months, but the amounts received have fluctuated. $100 was received each month for 3 months, $25 was received each month for 2 months, and $0 was received for 1 month. In this case, the total child support received over the 6-month time period is $350. In order to determine the monthly amount of child support, divide $350 by 6 months, which equals an estimated monthly amount of $58.33. Then to determine the HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 estimated annual child support, multiply $58.33 by 12, which equals an estimated annual amount of $699.96. (e) Unearned Income/Recurring Contributions or Gifts (24 C.F.R. 5.609(a), (b)(7), and (c)(9)). Contributions and gifts from persons outside the household are counted as income when: 1. The contribution is recurring; or 2. Determined necessary to meet declared monthly expenses. 3. Regular, recurring contributions or gifts are counted, but casual contributions or sporadic gifts are not counted. 4. Rent and utility payments paid on behalf of the household and other cash or non- cash contributions provided on a regular basis to the household or on behalf of the household are included. (f) Contributions to Company Retirement/Pension Funds (24 C.F.R. 5.603(d)). Contributions to company retirement and pension funds are handled in the following manner: 1. While an individual is employed, only the amounts the household actually withdraws without retiring or terminating employment are counted as income. 2. After retirement or termination of employment, any amount the employee elects to receive as a lump sum, plus periodic payments, is counted. (g) Withdrawal of Cash or Assets from an Investment. The withdrawal of cash or assets from an investment received as periodic payments will be counted as income. 1. However, lump-sum receipts from pension and retirement funds are counted as assets, not income. (h) Student Income-Grants and Scholarships (24 C.F.R. 5.609(c)). (i) Lump-Sum Payments (24 C.F.R. 5.609(b)(4), (c)(3), (c)(14)). Generally, lump-sum amounts received by a family, such as inheritances, insurance settlements, or proceeds from sale of property are considered assets, not income. The following lump- sum payments are included in income. 1. Lump-sum payments caused by delays in processing periodic payments for unemployment or welfare assistance. 2. Lottery winnings paid in periodic payments. 3. See § 0770-01-05-.19(8)(a) on Asset Inclusions for the treatment of all other lump-sum payments. (j) Treatment of Welfare Income Changes Resulting from Welfare Program Requirements. When a request for an income reexamination and rent reduction due to a reduction in Families First income is received, the THDA will verify with the local division of the Department of Human Services (DHS) whether the household’s benefits have been reduced because of non-compliance with economic self-sufficiency requirements, work activities requirements, or fraud. Verification may be obtained, in written form, directly HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 from the local DHS office, or through the ACCENT computer system. The verification will be maintained in the tenant file. 1. If verification is obtained from the DHS that the household’s benefits have been reduced because of non-compliance with economic self-sufficiency requirements, work activities requirements, or fraud, the household’s income will not be reduced for purposes of calculating the household’s Total Tenant Payment. Instead, the household’s welfare income must be “imputed” during the term of the welfare benefits sanction. The THDA will verify with the DHS the term of the sanction. 2. The exclusion or reduction of rent contribution does not apply when the household loses welfare benefits because of a durational time limit, such as the five-year time limit for receipt of Families First benefits. 3. To impute welfare benefits reduction, the THDA will perform the following calculation: (i) Determine the amount of welfare income received prior to the sanction; (ii) Determine the term of the sanction; and (iii) Offset the amount of additional income the household receives that starts after the welfare sanction. If additional income received after the welfare sanction begins is equal to the amount of welfare income received prior to the sanction, the imputed welfare income is equal to $0. (iv) Example. If a household receives $142.00 in welfare benefits prior to sanction for noncompliance, then the DHS identifies the term of the sanction as 3 years, and the household begins receiving $100 monthly income from the head of household’s babysitting, the imputed welfare income is $42.00. The THDA would count $100 per month in employment income and $42.00 per month in imputed welfare income during the three (3) year sanction period (or until a change in income is reported). (4) Income Exclusions. (a) Income for Families First Job Training Participants. Incremental earnings and benefits resulting from participation in a Families First job training program are disregarded or excluded. 1. Definition of Incremental Income. Incremental income is defined as the increase in the total amount of welfare, benefits, and earnings of a household member prior to enrollment in the training program over the welfare, benefits and earnings of the household member after enrollment in the training program. (i) Example. If a household reported $185.00 per month in TANF prior to their enrollment in a job training program, and reported $385.00 in TANF and job training earnings after enrollment in the job training program, the total amount of income excluded is $200 dollars ($385 minus $185), not $385 dollars. The amounts excluded by this provision are excluded only for the period during which the household member participates in the job training program. 2. Training may include, but is not limited to, the following: HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (i) Classroom training in a specific occupational skill; (ii) On-the-job training with subsidized wages; (iii) Basic education; 3. If the following questions can be answered affirmatively, then the incremental earnings and benefits resulting from participation in a Families First job training program are excluded. (i) Does the program have clearly defined goals and objectives? (ii) Does the program enhance the individual’s ability to obtain employment? (iii) Does the program take place in a series of sessions over a specific period of time? (iv) Is the program designed to lead to a higher level of proficiency? (v) Does the program have performance standards to measure proficiency? (b) Earned Income Disallowance for Households with a Person with Disabilities (EID) (24 C.F.R. 5.617). 1. The EID is a special income exclusion, extended to qualified households that include a person with disabilities who chooses to work or earn additional income, where the additional income is temporarily excluded from income so that it does not result in a rent increase. 2. The purpose of the exclusion is to encourage persons with disabilities to be self- sufficient. 3. Qualified households consist of households that include a previously unemployed person with disabilities who has earned, in the twelve (12) months prior to employment, no more than would be received for ten (10) hours of work per week for fifty (50) weeks at the established minimum wage and whose: (i) Annual income increases as a result of the employment of a person with disabilities who was previously unemployed for one or more years prior to their current employment; or (ii) Annual income increases as a result of increased earnings by a person with disabilities who is participating in any economic self-sufficiency or other job training program; or (iii) Annual income increases as a result of new employment or increased earnings of a person with disabilities during or within six months after receiving cash assistance, benefits or services under any state program for temporary assistance for needy families funded under Part A of Title IV of the Social Security Act, as determined by DHS. (I) The TANF program is not limited to monthly income maintenance, but also includes such benefits and services as one-time payments, wage subsidies and transportation assistance—provided that the total amount over a six-month period is at least $500. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 4. The temporary disallowance is limited to two twelve-month (12-month) exclusion periods, one full and one partial, and a lifetime limit of forty-eight (48) months (four (4) years). The terms are not required to be consecutive, but must fall within the lifetime, 48-month period. (i) Example. A person could use his first 12-month exclusion period during the year 2016, and then wait until the year 2018 to use his second 12-month exclusion period. In this case, however, both 12-month terms must fall between the years 2016 and 2020. 5. The disallowance/exclusion of an increase in annual income is applied as follows: (i) Initial Twelve-Month Exclusion. During the initial twelve-month period, beginning on the date a member of a household who is a person with disabilities of a qualified family is first employed, or the household first experiences an increase in annual income attributable to the employment, and the household reports the income, the THDA will exclude from annual income any increase in income of the family member who is a person with disabilities as a result of employment over prior income of that family member. (ii) Second Twelve-Month Exclusion: During the second-twelve month period after the date a household member who is a person with disabilities of a qualified family is first employed, or the family first experiences an increase in annual income attributable to employment and the household reports the income, the THDA will exclude from annual income of a qualified family fifty percent (50%) of any increase in income of such household member as a result of employment over income of that family member prior to the beginning of such employment. (iii) Maximum Four-Year Disallowance. The disallowance of increased income of an individual household member who is a person with disabilities as provided above is limited to a lifetime, 48-month period. Both the first twelve-month exclusion and the second only apply to a maximum of twelve months for each disallowance during the 48-month period starting from the initial exclusion. 6. Inapplicability to Admission. The disallowance of increases in income as a result of employment of persons with disabilities under this section does not apply for purposes of admission to the program, including the determination of income eligibility or any income targeting that may be applicable. 7. Failure to Timely Report Earned Income that would qualify for a Disallowance. If a household fails to timely report a change in employment income, but it is determined that the income could have been excluded due to the Earned Income Disallowance, no repayment will be required. 8. If a household claims the earned income disallowance (disabled members only) for a source of income, both the source and the income must be verified. (c) There are other certain types of income that are specifically excluded by regulation and are not counted towards the household’s Total Tenant Payment (TTP). Specific income exclusions include: HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 1. Income from the employment of children (including foster children) under the age of eighteen (18) years; 2. Income of a live-in aide (as defined at 24 C.F.R. 5.403); 3. Payments received for the care of foster children, foster adults through official foster care relationships with local welfare agencies or kinship payments; 4. Earnings in excess of $480 for each full-time student 18 years of age or older other than the head, spouse, or co-head; 5. The special pay to a family member serving in the armed forces who is exposed to hostile fire; 6. Amounts received by a family that are specifically for, or in reimbursement of, the cost of medical expenses for any family member are excluded from annual income; 7. Any low-income subsidy received by an individual enrolled in the Medicare prescription drug plan program is excluded from annual income; 8. Temporary, nonrecurring, or sporadic income of any kind, including employment income; (i) The key element that causes the exclusion of this income is that it is neither reliable nor periodic. For example, the income of an individual who works occasionally as a handyman is neither reliable nor periodic if it cannot be anticipated and no historic, stable pattern of income exists. 9. The value of food stamps provided under the Food Stamp Act of 1977; 10. Adoption assistance payments in excess of $480 per adopted child are excluded from annual income; 11. Amounts received by participants in publicly assisted programs that are specifically for, or in reimbursement of, out-of-pocket expenses incurred (for special equipment, clothing, transportation, child care, etc.) and that are made solely to allow participation in a specific program; 12. Amounts paid by a state agency to a family to offset the cost of services and equipment needed to allow a developmentally disabled family member to live at home; 13. Amounts received by a person with a disability that are disregarded for a limited time for purposes of SSI eligibility and benefits because they are set aside for use under a plan to attain self-sufficiency (PASS) are excluded from annual income; 14. The value of any child care provided or arranged (or any amount received as payment for such care or reimbursement for costs incurred for such care) under the Child Care and Development Block Grant Act; 15. Payments or allowances made under the Department of Health and Human Services’ Low-Income Home Energy Assistance Program; HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 16. Earned income tax credit (EITC) refund payments received on or after January 1, 1991, including advanced earned income credit payments; 17. Amounts received in the form of refunds or rebates under state or local law for property taxes paid on a dwelling unit are excluded from annual income (i.e. state homestead exemptions); 18. Payments received on or after January 1, 1989, from the Agent Orange Settlement Fund or any other fund established pursuant to the settlement in In Re Agent product liability litigation, M.D.L. No. 381 (E.D.N.Y.); 19. Any allowance paid under the provisions of 38 U.S.C.§ 1805 to a child suffering from spina bifida who is the child of a Vietnam veteran is excluded from annual income; 20. Any amount of crime victim compensation received under the Victims of Crime Act Reparation payments made by a foreign government pursuant to claims filed under the law of that government by persons who were persecuted during the Nazi era; 21. Payments to volunteers under the Domestic Volunteer Services Act of 1977 Programs funded under this act include: (i) Programs for seniors, such as the Retired Senior Volunteer Program (RSVP), Foster Grandparent. (ii) Program (FGP), Senior Companion Program (SCP), and the Older American Committee Service Program. (iii) National Volunteer Antipoverty Programs, such as Volunteers in Service to America (VISTA), Peace Corps, Service Learning Program, and Special Volunteer Programs. 22. Small Business Administration programs, such as the National Volunteer Program to Assist Small Business and Promote Volunteer Service to Persons with Business Experience, Service Corps of Retired Executives (SCORE), and Active Corps of Executives (ACE); 23. Payments received from programs funded under Title V of the Older Americans Act of 1985 (i.e. Green Thumb); 24. Allowances, earnings, and payments to AmeriCorps participants under the National and Community Service Act of 1990; 25. Amounts received under a resident service stipend are excluded from annual income. A resident service stipend may not exceed $200 per month, and no individual may receive more than one such stipend during the same period of time. If a resident service stipend exceeds $200 per month, the entire amount must be included in annual income; 26. Payments received under the following claims settlement acts are excluded from annual income: (i) Alaska Native Claims Settlement Act. (ii) Maine Indian Claims Settlement Act of 1980. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (iii) Income derived from certain sub-marginal land of the United States that is held in trust for certain Indian tribes. (iv) Income derived from the disposition of funds to the Grand River Band of Ottawa Indians. (v) The first $2,000 of per capita shares received from judgment funds awarded by the Indian Claims Commission or the U.S. Claims Court and the interests of individual Indians in trust or restricted lands, including the first $2,000 per year of income received by individual Indians from funds derived from interests held in such trust or restricted lands, are excluded from annual income. (vi) Payments by the Indian Claims Commission to the Confederated Tribes and Bands of Yakima Indian Nation or the Apache Tribe of Mescalero Reservation. 27. Amounts received under training programs funded in whole or in part by HUD; 28. Incremental earnings and benefits resulting to a family member from participation in qualifying state or local employment training programs (including training programs not affiliated with a local government) or from training as resident management staff are excluded from annual income. See § 0770-01-05-.19(4)(a) for additional information on Families First Job Training Program; 29. Any participants who are eligible for and have received the $250 stimulus payment as a part of the 2009 American Recovery and Reinvestment Act (ARRA); and 30. Deferred periodic amounts from supplemental security income (SSI) and social security (SS) benefits that are received in a lump-sum amount (lump-sum distributions are treated as an asset); (5) Adjusted Income Allowances/Deductions (24 C.F.R. 5.611). Adjusted income is annual income minus allowances or mandatory deductions for dependents, elderly household allowance, child care, medical and handicap expenses/deductions. (a) Dependent Allowance (24 C.F.R. 5.611, 5.603(d)). The dependent allowance is $480 for each household member who is under eighteen (18) years of age, is age 18 or over and a person with a disability, or 18 or over and a full-time student. The only requirement is that the THDA verify that the family members identified as dependents or elderly/disabled persons meet the statutory definitions. 1. The head, spouse, foster child or live-in attendant is never counted as a dependent. (b) Elderly/Disabled Household Allowance (24 C.F.R. 5.611, 5.403(a)). The elderly/disabled household allowance is $400 per household for all families in which the head or spouse is at least sixty-two (62) years of age or under age 62 and a person with a disability. 1. The $400 is a household deduction (only one per household, even if both head and spouse are elderly or have a disability). HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 2. A household may have a member who is elderly or disabled, but if this person is not the head or spouse, the household does not qualify for the deduction. (c) Medical Expenses, Reasonable Attendant Care, and Auxiliary Apparatus Expenses. The sum of these, to the extent that the sum exceeds three (3) percent of annual income, must be deducted from annual income. 1. Unreimbursed Medical Expenses Deduction (24 C.F.R. 5.609(a)(2), 5.603, 5.611). The Unreimbursed Medical Expense Deduction is allowed only for households in which the head or spouse is at least sixty-two (62) years old or disabled. (i) If the household is eligible for a medical expense deduction, the medical expenses of all household members are counted. (ii) Verification. The THDA must verify that the household is eligible for the deduction, the costs to be deducted are qualified medical expenses, the expenses are not paid for or reimbursed by any other source, and costs incurred in past years are counted only once. (I) Eligible Household. The medical expense deduction is permitted only for households in which the head, spouse, or co-head is at least age sixty-two (62) or a person with disabilities. The THDA will verify that the household meets the definition of an elderly or disabled household. (II) Qualified Expenses. To be eligible for the medical expenses deduction, the costs must qualify as medical expenses. When it is unclear as to whether or not to allow an item as a medical expense, the IRS Publication 502 is used as a guide. These may include: I. Services of doctors and health care professionals. II. Services of health care facilities. III. Medical insurance premiums. IV. Prescription medication. V. Non-prescription medicines that are prescribed by a doctor with a specific dosage. VI. Transportation to treatment. VII. Dental expenses, eyeglasses, hearing aids, batteries, etc. VIII. Live-in or periodic medical assistance. IX. Monthly payment on accumulated medical bills. X. Medical care of a permanently institutionalized household member if his/her income is included in annual income. XI. Allowable medical expense is that portion of total medical expenses in excess of three percent of annual income. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (iii) Unreimbursed Expenses. To be eligible, the household must certify that the medical expenses are not paid or reimbursed to the household from any source. The Personal Declaration serves as a self-certification. (iv) Expenses Incurred in Past Years. When anticipated costs are related to ongoing payment of medical bills incurred in past years, the THDA will verify: (I) The anticipated repayment schedule; (II) The amounts paid in the past; and (III) Whether the amounts to be repaid have been deducted from the household’s annual income in past years. (v) Amount of Expense. The amount of the expense will be verified using the following (dependent upon the type of expense and verification available): (I) Computer-generated documents or written verification by a doctor, hospital or clinic personnel, dentist, pharmacist, etc., of the estimated medical costs to be incurred by the applicant or participant, regular payments due on medical bills, and the extent to which those expenses will be reimbursed by insurance or a government agency; (II) EIV or SSA written confirmation (current benefit letter) of Medicare premiums to be paid by the applicant over the next twelve (12) months; (III) Computer-generated documents or written verification from the insurance company or employer for health insurance premiums to be paid by the applicant or participant; (IV) Receipts, canceled checks, or pay stubs that indicate health insurance premium costs, etc., that verify medical costs and insurance expenses also likely to be incurred in the next twelve (12) months; (V) Copies of payment agreements with medical facilities or canceled checks that verify payments made on outstanding medical bills that will continue over all or part of the next 12 months; and/or (VI) Receipts or other computer-generated record (pharmacy statement) of medical expenses incurred during the past twelve (12) months that can be used to anticipate future medical expenses. The THDA may use this approach for “general medical expenses” such as non- prescription drugs and regular visits to doctors or dentists but not for one-time, non-recurring expenses from the previous year. (VII) If computer-generated documents or third-party verification is not possible, written certification from the medical provider as to costs anticipated to be incurred during the upcoming twelve (12) months will be used. 2. Disability Reasonable Attendant Care and Auxiliary Apparatus Expenses Deduction (24 C.F.R. 5.611(c)). HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (i) A household may deduct anticipated expenses for care attendants and “auxiliary apparatus” for members with a disability if such expenses: (I) Are associated with a household member with disabilities; (II) Are necessary to enable a household member, which may be the person with a disability, to work; (III) Sum of medical expenses, attendant care, and auxiliary apparatus expenses exceed three percent of Annual Income; (IV) Expenses are unreimbursed by any other source; and (V) Do not exceed the earned income of the household member(s) enabled to work. (ii) Eligible Disabled Household Member. The costs must be incurred for attendant care or auxiliary apparatus expense associated with a person with disabilities. The THDA must verify the existence of the disability. (iii) Is Required or Enables Household Member(s) to Work. The expenses claimed must actually be required or enable a household member or members, possibly the disabled household member(s), to work. (I) The THDA will seek third-party verification from a knowledgeable physician indicating that the person with disabilities requires attendant care or an auxiliary apparatus, or that the attendant care or auxiliary apparatus enables another household member or members to work. (II) If third-party verification has been attempted and is either unavailable or proves unsuccessful, the household must certify that the disability assistance expense is needed or frees a household member or members (possibly including the household member receiving the assistance) to work. (iv) Three Percent of Annual Income. There is a special calculation required for households who are eligible for both disabled and medical expenses. Three (3) percent of the annual income must first be deducted from the handicap expense and any remainder is then deducted from the total medical expense. (v) Unreimbursed Expenses. The costs of the attendant care or auxiliary apparatus must not be reimbursed by another source. (I) The THDA will seek third-party verification from an attendant-care provider that, to the best of the provider’s knowledge, the expenses are not paid by or reimbursed to the household from any source; and (II) The household will be required to certify that attendant care or auxiliary apparatus expenses are not paid by or reimbursed to the household from any source. (vi) Attendant Care. Expenses for attendant care will be verified through: HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (I) A doctor’s certification that the assistance of an attendant is medically necessary (form THDA HM-291); (II) The attendant’s written confirmation of hours of care provided and amount and frequency of payments received from the family or agency (or copies of canceled checks the family used to make those payments); and (III) The applicant’s or participant’s certification as to whether any of those payments have been or will be reimbursed by outside sources. (vii) Auxiliary Apparatus. Auxiliary apparatus includes items such as wheelchairs, ramps, adaptation to vehicles, special equipment to enable a blind person to read or type, etc., if the apparatus is directly related to permitting the person with the handicap or disability to work. Expenses will be verified through: (I) Computer-generated billing statements for purchase of auxiliary apparatus, or other evidence of monthly payments or total payments, that will be due for the apparatus during the upcoming twelve (12) months; (II) Third-party verification of anticipated purchase costs of auxiliary apparatus; or (III) If computer-generated documents or third-party verification is not possible, written certification by the household member of estimated apparatus costs for the upcoming twelve (12) months. (d) Child Care Allowance (24 C.F.R. 5.603). 1. Reasonable child care expenses for the care of children, including foster children, under the age of thirteen (13), may be deducted from annual income if all of the following are true: (i) The costs claimed are not reimbursed by another source; (ii) The costs enable a household member to pursue an eligible activity; (iii) The costs are for an allowable type of childcare; and (iv) The costs are reasonable, as defined below. 2. Not Reimbursed by Another Source. Verification will be attempted through computer-generated documentation from the childcare provider. Any document must list the childcare provider’s name, address and phone number, child(ren)’s names who are cared for and the daily, weekly or monthly childcare expenses. (i) If the document provided to verify expenses does not clearly show that the household paid for the full expenses associated with the childcare, the family must certify on the Personal Declaration that the childcare expenses are not paid by or reimbursed to the household from any other source. (ii) If appropriate computer-generated documents are not provided, third-party written verification will be attempted through childcare provider identified by the household using the THDA’s Verification of Childcare Expenses form. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 The THDA form includes the childcare provider’s name, address, and phone number, and asks if any other sources reimburse any of the childcare, other than a household member. 3. Pursuing an Eligible Activity. The THDA must verify that the household member(s), which the household has identified as being enabled to seek work, pursue education, or be gainfully employed, are actually pursuing those activities. The THDA will verify information about how the schedule for the claimed activity relates to the hours of care provided, the time required for transportation, the time required for study for students, the relationship of the household member(s) to the child, and any special needs of the child that might help determine which household member is enabled to pursue an eligible activity. (i) Seeking Work. Whenever possible, the THDA will use documentation from a state or local agency that monitors work-related requirements (e.g., welfare or unemployment). In such cases, the THDA will request verification from the agency of the member’s job seeking efforts to date and require the household to submit to the THDA any reports provided to the other agency. (I) In the event third-party verification is not available, the THDA will provide the household with a form on which the household member must record job search efforts. The THDA will review this information at each subsequent reexamination for which this deduction is claimed. (ii) Furthering Education. The THDA will ask that the academic or vocational educational institution verify that the person permitted to further his education by the childcare is enrolled and provide information about the timing of classes for which the person is registered. A computer-generated document that shows the appropriate information about enrollment and dates and times of classes is acceptable. If acceptable computer- generated documents are not available, third-party verification from the school is required (form THDA HM-360). (iii) Gainful Employment. The THDA will seek verification from the employer of the work schedule of the person who is permitted to work by the childcare. In cases in where two or more household members could be permitted to work, the work schedules for all relevant household members may be verified. 4. Allowable Type of Childcare. The type of care to be provided is determined by the household but must fall within certain guidelines. The THDA will verify that the type of childcare selected by the household is allowable. (i) The THDA will verify that the fees paid to the childcare provider cover only childcare costs (e.g., no housekeeping services or personal services) and are paid only for the care of an eligible child (e.g., prorate costs if some of the care is provided for ineligible household members). (ii) The THDA will verify that the childcare provider is not an assisted household member. Verification will be made through the head of household’s declaration of household members who are expected to reside in the unit. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (I) Another example is that childcare expenses cannot be excluded when a minor household member is being paid by the head of household or other employed adult household member to care for other minor household members. For instance, the head of household cannot pay her sixteen-year-old child, who lives with her in the assisted residence, to care for other younger siblings. This amount may not be deducted. (iii) If accurate and complete documentation is provided, the THDA will not make a determination of “adequate child care provided within the home” based on another adult being present within the unit while child care services are provided. 5. Reasonableness of Expenses. (i) Only reasonable childcare costs can be deducted. The actual costs the household incurs will be compared with equivalent types of care in the same locality to ensure that the costs are reasonable. (ii) If the household presents a justification for costs that exceed typical costs in the area, the THDA will request additional documentation, as required, to support a determination that the higher cost is appropriate. (iii) The expenses incurred to enable a household member to work must not exceed the amount earned. 6. Child support payments to guardians or estranged partners on behalf of a minor who is not living in the household are not deducted as child care payments. 7. Payments to a minor child who lives in the assisted household for caring for other minor children in the household are not deducted. For example, a head of household pays her sixteen-year-old child, who lives with her in the assisted residence, to care for other younger siblings while she is working. (6) Asset Considerations (24 C.F.R. 982.516). Annual income includes amounts derived from assets to which family members have access. (a) What is considered an Asset? 1. Assets are items of value that may be turned into cash. A savings account is a cash asset. The bank pays interest on the asset. The interest is the income from that asset. 2. Some participants have assets that are not earning interest. A quantity of money under a mattress is an asset since it is a thing of value that could be used to the benefit of the participant, but under the mattress it is not producing income. 3. Some belongings of value are not considered assets. Necessary personal property is not counted as an asset. (b) Determining Income from Assets. The calculation to determine the amount of income from assets to include in annual income considers the following: 1. The Total Cash Value of the Family’s Assets. The “cash value” of an asset is the amount a family would receive if the family turned a noncash asset into cash. The cash value is the market value, or the amount another person would pay to HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 acquire the asset, less the reasonable expenses that would be incurred in selling or converting the asset to cash, such as the following: (i) Penalties for premature withdrawal; (ii) Broker and legal fees; and (iii) Settlement costs for real estate transactions. 2. The Amount of Income Those Assets Are Earning or Could Earn, Typically Interest Income. (i) Example. A family has a certificate of deposit (CD) in the amount of $5,000 paying interest at 4%. So, $5,000 x 0.04 = $200 in annual income. In this case, the penalty for early withdrawal is three months of interest, which must be considered when determining the cash value of the asset. First, the “cash” value of the asset must be calculated and then the reasonable costs to convert the asset to cash deducted. Three months interest must be deducted from the total asset to determine the cash value to count as an asset. $200/12 months = $16.67 interest per month. $16.67 x 3 months = $50.01. $5,000 - $50 = $4,950 cash value of CD (counted toward total family assets). 3. The rule for calculating income from assets differs depending on whether the total cash value of family assets is less than five thousand dollars ($5,000), or is $5,000 or more. (i) When the net household assets are less than $5,000, the actual income from the asset is used. (I) The THDA will accept a family’s declaration of the amount of assets of less than $5,000, and the amount of income expected to be received from those assets and will not request supporting documentation (e.g. bank statements) from the family to confirm the assets or the amount of income expected to be received from those assets. (ii) When the net household assets are $5,000 or more, the THDA must obtain supporting documentation (e.g. bank statements) from the family to confirm the assets and the amount used is the greater of the following: (I) Actual income from the assets; or (II) The imputed value of the assets based upon passbook rate approved by HUD, which is a percentage of the value of family assets based upon the current passbook savings rate as established by HUD. (III) First, to begin the calculation, the cash value of all assets will be added. Then the total cash value of assets will be multiplied by .02. The product is the “imputed income” from assets. Then, the actual income from all assets will be added. The greater of the imputed income from assets or the actual income from assets is included in the calculation of annual income. (7) Asset Inclusion/Exclusions. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (a) Asset Inclusions. Household assets include the following: 1. Amounts in savings and checking accounts. 2. Stocks, bonds, savings certificates, money market funds, and other investment accounts, such as 401K accounts. 3. IRA, Keogh and similar retirement savings accounts, even though withdrawal would result in a penalty. 4. Contributions to company retirement/pension funds: (i) While an individual is employed, only the amounts the household can withdraw without retiring or terminating employment are counted. (ii) After retirement or termination of employment, count as an asset any amount the employee elects to receive as a lump sum. (iii) Include in annual income any benefits received through periodic payments. 5. Equity in real property (real estate) or other capital investments. Equity is the estimated current market value of the asset less the unpaid balance on all loans secured by the asset and reasonable costs that would be incurred in selling the asset. 6. Cash value of trusts that are available to the household, not including irrevocable trusts. 7. Assets that, although owned by more than one person, allow unrestricted access by the household (such as joint checking or savings accounts). 8. Lump-sum receipts such as inheritances, capital gains, social security, lottery winnings, insurance settlements and other claims. 9. Personal property held as an investment, such as gems, jewelry, coin collections, antique cars, etc. 10. Cash value of life insurance policies. Whole life insurance has a cash value, but term life insurance does not have a cash value. 11. Assets disposed of for less than fair market value during the two years preceding the certification or recertification. The difference between the market value and the actual payment received is counted. (b) Asset Exclusions. The following household assets are not included: 1. Personal property. 2. Interest in Indian trust lands. 3. Assets not accessible by the household. In the case that a household member is listed as a beneficiary or is a joint holder of an asset that he claims he does not have access to, third-party verification will be obtained to verify the inaccessibility of the asset to the household member. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 4. Assets that are a part of an active business or farming operation. (8) Calculating Income from Assets-Specific Types. (a) Checking & Savings Accounts. The full amount of the average balance of any checking account is counted toward total family assets, but for any savings account the full amount of the most recent balance is counted toward total family assets. (b) Balances Held in Retirement Accounts. 1. Balances held in retirement accounts are counted as assets if the money is accessible to the family member. For individuals still employed, accessible amounts are counted even if withdrawal would result in a penalty. However, amounts that would be accessible only if the person retired are not counted. After retiring or terminating employment, count as an asset any amount the employee elects to receive as a lump sum. 2. IRA, Keogh, and similar retirement savings accounts are counted as assets, even though withdrawal would result in a penalty. 3. Include in annual income any retirement benefits received through periodic payments. 4. Example of Balances Held in an IRA or 401K Retirement Account. Bill Smith’s 401K account balance is $35,000. He is able to terminate his participation in the retirement plan without quitting his job, but if he did so he would lose a part of his employer’s contribution and would pay a penalty fee. The total cash he could withdraw, $18,000, is the amount that is counted as an asset. (c) Annuities. 1. Income after the holder begins receiving payments. (i) When verifying an annuity, the THDA will ask the verification source whether the holder of the annuity has the right to withdraw the balance of the annuity. For annuities without this right, the annuity is not treated as an asset. (ii) In cases where annuity payments have commenced, usually the holder cannot receive payment as a lump sum, therefore proof a holder is receiving payments will be sufficient to establish that the annuity is not an asset unless the THDA receives information to the contrary. 2. Calculations when an annuity is considered an asset. (i) When an applicant or participant has the option of withdrawing the balance in an annuity, the annuity will be treated like any other asset. It will be necessary to determine the cash value of the annuity in addition to determining the actual income earned. (ii) In most instances, an annuity from which payments have not yet been made is earning income on the balance in the annuity. A fixed annuity will earn income at a specified fixed rate similar to interest earned by a CD. A variable annuity will earn or lose, based on market fluctuations, as in a mutual fund. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (iii) The THDA will verify with the insurance agent or other appropriate source: (I) The right of the holder to withdraw the balance (even if penalties are involved). (II) The basis on which the annuity may be expected to grow during the coming year. (III) The surrender or early withdrawal penalty fee. (IV) The tax rate and the tax penalty that would apply if the family withdrew the annuity. (iv) The cash value will be the full value of the annuity, less the surrender, or withdrawal, penalty, and less any taxes and tax penalties that would be due. (v) The actual income is the balance in the annuity times the percentage (either fixed or variable) at which the annuity is expected to grow over the coming year. (This money will be reinvested into the annuity, but it is still considered actual income.) (vi) The imputed income from the asset is calculated only after the cash value of all family assets has been determined. The imputed income of assets is calculated on the total cash valuate of all assets. (d) Real Estate Investments. If a family owns real estate, it may be necessary to consider the family’s equity in the property, as well as the expense to sell the property. 1. To determine the family’s equity, subtract amounts owed on the property from its market value, so market value minus the mortgage loan amount owed equals the amount of equity in the property. 2. The cash value is calculated by subtracting the expense of selling the property (sales commissions, settlement costs, transfer taxes, etc.) from the amount of equity, so equity minus the expense of selling equals the cash value. 3. Example. Juanita Player owns a rental house with a market value of $100,000. She owes $60,000. The cost to dispose of this house would be $8,000. The cash value is determined by taking the $100,000 market value and subtracting the $60,000 mortgage amount, which equals $40,000 equity in the property. Then after subtracting the $8,000 it costs to dispose of the property, the cash value in this case is $32,000. (e) Trusts. 1. How to Treat Trusts. (i) The basis for determining how to treat trusts relies on information about who has access to either the principal in the account or the income from the account. (I) Revocable Trusts. If any member of the participant family has the right to withdraw the funds in the account, the trust is considered to be an asset and is treated as any other asset. The cash value of the trust (the amount the family member would receive if he or she HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 withdrew all that could be withdrawn) is added to total net assets. The actual income received is added to actual income from assets. (II) Non-revocable Trusts. If no family member has access to either the principal or income of the trust at the current time, the trust is not included in the calculation of income from assets or in annual income. (ii) If only the income, and none of the principal, from the trust is currently available to a family member, the income is counted in annual income, but the trust is not included in the calculation of income from assets. (I) Non-revocable Trust as an Asset Disposed of for Less than Fair Market Value. If a tenant sets up a non-revocable trust for the benefit of another person while residing in assisted housing, the trust is considered an asset disposed of for less than fair market value. I. If the trust has been set up so income from the trust is regularly reinvested in the trust and is not paid back to the creator, the trust is calculated as any other asset disposed of for less than fair market value for two years and not taken into consideration thereafter. (II) Non-revocable Trust Distributing Income. When a tenant places an asset in a non-revocable trust, but continues to receive income from the trust, the income is added to annual income and the trust is counted as an asset disposed of for less than market value for two years. Following the two-year period, the owner will count only the actual income distributed from the trust to the tenant. (III) Payment of Principal from a Trust. The beneficiary of a trust may receive funds from the trust in different ways. A beneficiary may receive the full value of a trust at one time. In that instance the funds would be considered a lump-sum receipt and would be treated as an asset. A trust set up to provide support for a person with disabilities may pay only income from the trust on a periodic basis. Occasionally, however, a beneficiary may be given a portion of the trust principal on a periodic basis. When the principal is paid out on a periodic basis, those payments are considered regular income or gifts and are counted in annual income. (IV) Special Needs Trusts. A special needs trust is a trust that may be created under some state laws, often by family members for disabled persons who are not able to make financial decisions for themselves. Generally, the assets within the trust are not accessible to the beneficiary. I. If the beneficiary does not have access to income from the trust, then it is not counted as part of income. II. If income from the trust is paid to the beneficiary regularly, those payments are counted as income. (f) Life Insurance. The cash value of life insurance policies is counted toward family assets. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (g) Assets Owned Jointly. 1. If assets are owned by more than one person, prorate the assets according to the percentage of ownership, but if no percentage is specified or provided by a state or local law, prorate the assets evenly among all owners. 2. If an asset is not effectively owned by an individual, do not count it as an asset. (i) An asset is not effectively owned when the asset is held in an individual’s name, but: (I) The asset and any income it earns accrue to the benefit of someone else who is not a member of the family; and (II) That other person is responsible for income taxes incurred on income generated by the assets. (h) Lump-Sum Receipts Counted as Assets. Lump-sum payments or additions to household assets, such as inheritances, insurance payments (including payments under health and accident insurance, social security and worker’s compensation), capital gains, lottery proceeds paid in a single payment (ongoing regular lottery proceeds are counted as income), and cash from the sale of assets are not included in income. They may be included in the asset calculation, depending on when they are received and whether or not they are retained. 1. Commonly, when a family receives a large amount of money, a lump-sum payment, the family will put the money in a checking or savings account, or will purchase stocks or bonds or a CD. If the family has retained any of the lump sum in a verified asset account, such as a checking or savings account, the amount will be counted as an asset. 2. If the family has received a lump sum during the previous twelve (12) months, but they self-certify that they have not retained any of the amount received, the amount will not be counted. A lump-sum payment is counted as an asset only as long as the family continues to possess it. If the family uses the money for something that is not an asset (i.e., a car or a vacation or education) the lump sum must not be counted. 3. Lump-sum payments caused by delays in processing periodic payments (unemployment, welfare assistance) are counted as income, as are ongoing regular lottery proceeds. (i) Personal Property. Personal property held as an investment such as gems, jewelry, coin collections, antique cars, etc. (j) Assets Disposed of for Less than Fair Market Value. At every certification and recertification, applicants and participants must declare, on the Personal Declaration, every asset that has been disposed of for less than fair market value during the two years preceding the certification or recertification. If the household disposes of more than $1,000 in assets during a twelve-month period, the amount must be imputed and counted as income. 1. The amount counted as an asset is the difference between the cash value and the amount actually received. If the household declares that they have, the circumstances surrounding the transaction is verified. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (i) Any asset that is disposed of for less than its full value is counted, including cash gifts as well as property. To determine the amount that has been given away, the cash value of the asset is compared to any amount received in compensation. (I) Imputed income is the difference between the actual amounts received and the fair market value, minus any costs incurred when selling the asset. Imputed income is included in household income for two years from the date when the asset was disposed. (ii) Assets placed in non-revocable trusts are considered as assets disposed of for less than fair market value except when the assets placed in trust were received through settlements or judgments. (iii) Generally, assets disposed of as a result of divorce or separation are not considered as assets disposed of for less than fair market value. (iv) Assets disposed of as a result of foreclosure or bankruptcy are not considered as assets disposed of for less than fair market value. (9) Verification. Any assets and income reported by the household must be verified. (a) Verifying Income. When a household claims income of any amount from any type or source, unless the income may be excluded, an attempt to verify the income either through up-front income verification (UIV) sources, appropriate computer-generated documents from a third-party source, or by third-party written verification methods must be attempted. If UIV, appropriate computer-generated documents, or third-party written verification is unsuccessful, all attempts to verify the income must be tracked on the Verification Tracking Log, and the THDA will use third-party oral or tenant self- certification as verification. 1. Earned Income. (i) Wages. The following are acceptable documents for verifying wages in order of hierarchy level: (I) HUD EIV report with current, supplemental documents, preferably computer-generated. I. The most recent four (4) consecutive, current pay stubs showing employee’s gross pay per pay period and frequency of pay. II. If the employee has been employed for less than four (4) pay periods, they may provide all of the pay stubs they have received up to the date of the reexamination appointment in consecutive order and the THDA will send the THDA Employer Verification Form to the employer for completion. III. Computer-generated payroll report. (II) Work Number report. (III) The THDA Employment Verification form completed and signed by the employer. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (IV) Social Security Earnings Statement (form 7004) from most recent prior year, if other sources of current wage income are not available. (V) Copy of the most recent prior year’s tax return if other sources of current wage income are not available. (ii) Tips. Unless tip income is included in a household member’s W-2 by the employer and the household supplies a copy of the most recent tax return, tips should be included in the amounts declared for self-employment income. Persons who work in industries where tips are standard will be required to include an estimate of tips received for the prior year and tips anticipated to be received in the coming year on their Personal Declaration. The information in the Personal Declaration will document the amount of tips. (iii) Business and Self-Employment Income. (I) Business owners and self-employed persons are required to provide all of the following when available: I. An audited financial statement for the previous fiscal year if an audit was conducted. II. If an audit was not conducted, a statement of income and expenses must be submitted and the business owner or self- employed person must certify to its accuracy. III. All schedules completed for filing federal and local taxes in the preceding year. IV. If accelerated depreciation was used on the tax return or financial statement, an accountant’s calculation of depreciation expense, computed using straight-line depreciation rules. V. If the aforementioned documents are not available: A. Documents such as manifests, appointment books, cash books, bank statements and receipts from the prior six (6) months (or lesser period if not in business for six months) will be used as a guide to project income for the next twelve (12) months. VI. If a household member has been self-employed for less than three (3) months, the THDA will accept the household member’s certified estimate of income and schedule an interim reexamination in three (3) months. A. If the self-employment has been from three (3) months to twelve (12) months, the household must provide documentation of income and expenses for such period and the THDA will use the information provided to project income. VII. At any reexamination, the THDA may request documents that support submitted financial statements such as manifests, appointment books, cash books or bank statements. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (II) Any tips should be included in the amounts declared for self- employment income. (iv) Child Care Business. If an applicant/participant is operating a licensed daycare business, income will be verified as with any other business. Follow above guidance under Business/Self Employment Income. (I) However, if the day care is operating as a “cash and carry” operation, which may or may not be licensed, verification of income received may be more difficult. I. The applicant/participant must complete the THDA Verification of Child Care Business form that shows the name of the child’s guardian, phone number, number of hours child is being cared for, method of payment (check, cash, credit, etc.) and the signature of the client certifying to amounts paid for child care. II. If the household owning the business has filed a tax return, they will be required to provide it. 2. Unemployment Compensation. The following are acceptable documents for unemployment compensation verification in order of hierarchy level. (i) Computer-generated letter or report from the unemployment office to confirm benefit status and payments. The Tennessee Department of Labor provides web-based unemployment reports for beneficiaries. (ii) The four (4) most recent unemployment payments. If unemployment period is less than four pay periods, all of the payments received up to the date of the reexamination appointment, in consecutive order, may be provided. (iii) ACCENT computer report showing the amount of benefits the household is currently receiving. (iv) If an EIV report includes employment at an employer where the participant claims to be no longer employed, the participant must provide a computer- generated document to verify the separation date of the employment, unless the unemployment documents clearly document the separation date from the employer on the EIV report. (I) If a computer-generated letter is not provided, the THDA must initiate third-party methods to verify the separation before excluding the employment from annual income or not counting the income as a discrepancy for repayment. 3. Social Security/SSI Benefits (Periodic Payments and Payments in Lieu of Earnings). (i) For applicants: (I) Current Social Security Administration (SSA) benefit verification letter for each household member receiving SS/SSI benefits, dated within sixty (60) days of the request date, since Enterprise Income Verification (EIV) reports are not available for applicants at initial move-in. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (ii) For participants: (I) HUD EIV report. Social security information in EIV is updated every three (3) months for participants. I. Therefore, supplemental information is not necessary unless the participant disputes the EIV report, in which case, a current SSA benefit letter, dated within sixty (60) days of a request by the THDA, must be provided to the THDA to supplement the EIV report information. (iii) If an applicant or participant is unable to provide a current benefit letter dated within the deadline, the household must request a benefit verification letter and submit it to the THDA within fourteen (14) days of receipt. 4. Alimony or Child Support. Verification method is dependent upon whether there is a court decree or not. (i) If payments are court-ordered and paid through a state or local agency: (I) Appropriate verification is a record of payments for the past twelve (12) months and any known information about the likelihood of future payments from the web-based Tennessee DHS Child Support Summary (TCSES) or other online child support system. I. The household is required to submit their member identification number for any online system. (ii) If payments are court-ordered, but not paid through a state or local agency: (I) Copy of a separation agreement, settlement agreement, court decree, etc. stating amounts and types of support and payment schedules and/or copy of the latest check or payment stubs. (iii) If payments are not court-ordered, but the participant declares they receive support: (I) Third-party written verification from the person paying the support, i.e. the THDA Child Support Verification form for child support payments. I. If the written verification is not returned, a self-certification of amount received and of the likelihood of support payments being received in the future. 5. Recurring Contributions/Gifts. Applicants and participants are required to disclose all forms of income including recurring gifts from household members, friends and others. The THDA must verify this income and include it when determining the Total Tenant Payment and Housing Assistance Payment. (i) The person(s) providing the support will be mailed the THDA Verification of Family Support form stating the amount of support paid each month. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (ii) The THDA will compare the amount the household declared they were receiving on the Personal Declaration to the amount shown on the Verification of Family Support and use the higher of the amounts provided. (I) If gift amounts vary, an average taken over six (6) months may be used for calculations. (iii) If the household cannot or will not provide the contact information for the person(s) providing recurring support or the third-party verification is not returned, the Personal Declaration or another statement may be used as a self-certification. (iv) When a household reports that they are no longer receiving the gifts, the household must complete a new Personal Declaration as part of the recertification process and the person(s) who had been providing the gifts will be mailed a new Verification of Family Support form to verify the gifts to the household have ceased. 6. Student Income (Part-Time and Full-Time Student(s)). See 0770-01-05-.19(4)(c) and 0770-01-05-.15 for Student Status Eligibility discussion. 7. Interest Income from Sale of Real Property. Any interest income from the sale of real property pursuant to a purchase money mortgage, installment sales contract, or similar arrangement must be included as household income and verified by the THDA. (i) The applicant/participant must provide a letter or printed statement from an accountant, attorney, real estate broker, the buyer, or a financial institution stating interest due for next twelve (12) months. (ii) The applicant/participant may provide an amortization schedule showing interest for the twelve (12) months following the effective date of the certification or recertification in lieu of a letter. (iii) A copy of the check paid by the buyer is not sufficient since appropriate breakdown of interest and principal are not included. (b) Assets and Income from Assets. The applicant or participant must provide original computer-generated documents, such as bank statements or quarterly investment reports, for each asset account. 1. The applicant or participant must provide appropriate original computer- generated documents for each asset account. 2. Checking and Savings Accounts. (i) For checking accounts, the most recent bank statement is required for review and copy. (ii) For savings accounts, the most recent bank statement is required for review and copy. 3. Stocks, Bonds, 401K and other Investment Accounts. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (i) The applicant or participant must provide the most recent, computer- generated statement showing the balance of the account or fund and any interest earned during the period. (ii) The document should be dated within sixty (60) days of the request, unless the investment manager provides quarterly or less frequent statements. The document should not be dated earlier than six (6) months from the effective date of the examination, unless proof is provided that statements are only available annually. 4. Retirement or Pension Accounts. (i) Before Retirement. The applicant or participant must provide an original, computer-generated document from the entity holding the account. (I) The document should be dated within sixty (60) days of the request, unless the investment manager provides quarterly or less frequent statements. The document should not be dated earlier than six (6) months from the effective date of the examination, unless proof is provided that statements are only available annually. (ii) Upon Retirement. The applicant or participant must provide an original, computer-generated statement from the entity holding the account that reflects any distributions of the account balance, any lump sums taken, and any regular payments. (I) The document should be dated within sixty (60) days of the request, unless the investment manager provides quarterly or less frequent statements. The document should not be dated earlier than six (6) months from the effective date of the examination, unless proof is provided that statements are only available annually. (iii) After Retirement. The applicant or participant must provide an original, computer-generated document from the entity holding the account that reflects any distributions of the account balance, any lump sums taken, and any regular payments. (I) The document should not be dated earlier than twelve (12) months from the effective date of examination. 5. Real Estate Investments. (i) Current Market Value of the Property. (I) If the THDA can locate information online regarding the current market value of the property, then the information will be considered up-front income verification. (II) If online information cannot be located for property located within or outside the state of Tennessee, a computer-generated statement or letter showing the current market value of the property from the applicable property assessor’s office is acceptable. (ii) Unpaid Balance of any Loans. The balance may be verified by a current statement, dated within sixty (60) days of the request, from the financial or lending institution that holds the loan(s). HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 6. Net Income from Rental Property. The household must provide: (i) A current, executed lease for the property that shows the rental amount or certification from the current tenant; and (ii) A self-certification from the household members engaged in the rental of property providing an estimate of expenses for the coming year and the most recent IRS Form 1040 with Schedule E (Rental Income). (I) If a Schedule E was not prepared, the household members involved in the rental of property must provide a self-certification of income and expenses for the previous year and the THDA will request documentation to support the statement (including tax statements, insurance invoices, bills for reasonable maintenance and utilities, and bank statements or amortization schedules showing monthly interest expense), if needed. 7. Cash Value of Trusts (including revocable trusts). The balance may be verified by a current statement, dated within sixty (60) days of the request, showing the balance of the trust and any interest earned during the period. 8. Assets Disposed of for Less than Fair Market Value. The household must certify whether any assets have been disposed of for less than fair market value in the preceding two years. (i) The THDA will only verify the value of assets disposed of if: (I) The THDA does not already have a reasonable estimation of value from previously collected information; or (II) The amount reported by the household in the certification appears to obviously be an error. (III) Verification will be based on the methods described above under Real Estate Investments. (IV) A self-certification will be accepted from a household as verification if computer-generated documents are not available. 9. Life Insurance Policies. A computer-generated statement showing the name of the insurance company, policy number, type of insurance (whole or term), and cash balance if the insurance is whole life is acceptable unless the family can provide an updated statement dated within (sixty) 60 days of the request. If the life insurance company provides quarterly or less frequent statements, the most recent statement is acceptable. The document should not be dated earlier than six (6) months from the effective date of the examination unless the tenant provides proof that statements are only available annually. 10. Lump-Sum Receipts. (i) Included. Lump-sum amounts that represent the delayed start of a periodic payment for anything other than SSI, SS, and VA disability benefits are included in annual income. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (ii) Excluded. Any lump-sum receipts that do not represent the delayed start of a periodic payment, including lottery winnings, that are received in a single lump sum, are excluded from annual income. However, such lump-sum receipts may or may not be counted as assets, depending on when they are received and whether or not they are retained. (I) Lump-sum amounts representing a delayed start of period payments for SSI, SS, and VA. (II) HUD regulations describe excluded amounts as “lump-sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and worker’s compensation), capital gains and settlement for personal or property losses.” The list of examples here is not intended to be complete. (c) Special Considerations/Exclusions. 1. Income Received from Training Programs. Special rules also apply to HCV participants who receive welfare assistance from a government program that requires a family member to participate in an economic self-sufficiency program. Economic self-sufficiency program is defined broadly as any program designed to encourage, assist, train, or facilitate the economic independence of HUD- assisted families. Programs that satisfy this definition include: (i) Job training, employment counseling, workfare, work placement, and apprenticeship programs. This also includes incremental amounts from qualifying state of local employment training programs. (ii) In the Tennessee TANF programs, it is rare that persons participating in DHS job training programs receive income associated with a qualifying job training program under the HUD definition. Therefore, the THDA will seek information from the family regarding their participation in job training programs, and on a case by case basis determine the treatment of income for families who receive welfare assistance and participate in a job training program. 2. Zero Annual Income Status. Families declaring zero household income must complete a THDA Zero Income Statement form for each adult household member reporting no income and will have an interim contact every ninety (90) days until the household reports some type of income. There is no minimum income requirement, but income reported must be reasonable in relationship to financial commitments reported by the household. For example, if the household reports no income, it is not reasonable that all bills/debts are paid in a timely manner. (i) If a family reports an interim change in income at a time other than annual, all adult household members with no income will be required to complete zero income documentation, even if they have already done so at the recertification. 3. Income from Excluded Sources. The THDA must obtain verification for income exclusions only if, without verification, the THDA would not be able to determine whether the income is to be excluded. For example, if a 16-year-old household member has a job at a fast food restaurant, the THDA will confirm its records verify the child’s age, but will not send a verification request to the restaurant. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 4. The THDA will reconcile differences in amounts reported by the household and UIV, computer-generated documents or third-party verifications only when the excluded amount is used to calculate the family share (as is the case with the earned income disallowance). In all other cases, the THDA will report the amount to be excluded as indicated on documents provided by the household or any self- certification.