The following reporting requirements apply to all Housing Finance Corporation (HFC) Multifamily Residential Developments claiming an ad valorem tax exemption under Section 394.905 of the Texas Local Government Code and to which Sections 394.9026 and 394.9027 of Texas Local Government Code apply, regardless of when approved or acquired.

1. (1) All Multifamily Residential Developments owned by an HFC as defined by this subchapter must submit an Audit Report as described in this paragraph.

   1. (A) No later than June 1 of each year, with approved extensions as described in subparagraph (B) of this paragraph each HFC User must submit to the Department an Audit Report from an Auditor, obtained at the expense of the HFC User. The Audit Report determines whether the Multifamily Residential Development was in compliance with Sections 394.9026 and 394.9027 of the Texas Local Government Code for the immediately preceding Tax Year.
   2. (B) Audit Report extension requests must be submitted to hfc@tdhca.texas.gov no later than May 1 of each reporting year. The request for an extension must include an explanation of the reason and the requested submission date, not to exceed 60 days from the June 1 reporting deadline. Within seven calendar days of receiving the request, the Department will respond to the request and issue a determination of approval or denial for an extension.

   3. (C) Prior to submission of the first Audit Report for a Development, the HFC User must provide the Auditor with a copy of the following:

      1. (i) Underwriting assessment as published on the HFC website and as conducted pursuant to Section 394.905(b)(3) of Texas Local Government Code, if applicable;
      2. (ii) Resolution or order required by Section 394.031(d) and Section 394.037(a-1)(2), if applicable;
      3. (iii) Board meeting minutes, public hearing transcript or adopted resolution, or other document evidencing approval of the Development, if applicable;
      4. (iv) Regulatory Agreement; and
      5. (v) A one-time exemption application submitted to the Texas Comptroller's office.
      6. (vi) The Auditor will include these with the first Audit Report. These items being submitted are the responsibility of the HFC User; if the Auditor indicates in their Audit Report that the HFC User has not provided the documents required in this subparagraph, a compliance finding will be issued.

   4. (D) The first Audit Report for a Development must be submitted no later than June 1 of the Tax Year following:

      1. (i) The date of acquisition by the HFC for an occupied Development; or
      2. (ii) The date a newly constructed Development first becomes occupied by one or more tenants.
      3. (iii) For a Development acquired prior to May 28, 2025, the first Audit Report must be submitted no later than June 1, 2026.
2. (2) A Multifamily Residential Development is not entitled to an ad valorem tax exemption for any Tax Year in which the HFC User has not timely submitted the full Audit Report by the deadline, with approved extensions as required by Section 394.9027 of the Texas Local Government Code.

3. (3) All Audit Reports must comply with subparagraphs (A) to (C) of this paragraph:

   1. (A) be for at least the full prior reporting year ending December 31 and include a rent roll for the same period.
   2. (B) include contact information for all Responsible Parties.
   3. (C) be completed and submitted in the Department prescribed manner.
4. (4) The HFC User must submit an annual service fee to the Department by June 1 of each year of the greater of $35 per Restricted Unit that is included in the sample described in §10.1204(2) of this subchapter or $500 for Developments subject to an Audit Report. This fee shall be tendered by check, money order, or via an online payment system (if provided by the Department), payable to the Texas Department of Housing and Community Affairs. This fee, when received in connection with an Audit Report, is earned and is not subject to refund.
5. (5) No later than 60 days after the receipt of the Audit Report, the Department will post a summary of the Audit Report on its website including a detailed description of any noncompliance with this rule found by the Auditor and indication that such notice does not constitute a final determination. A copy of the summary of the Audit Report will also be provided to all Responsible Parties.

6. (6) If noncompliance is identified by the Auditor in the Audit Report, no later than 120 days after receipt of the Audit Report by the Department, the Department will issue a monitoring report notice and make it available on the website. A copy of the monitoring report will also be provided to all Responsible Parties.

   1. (A) The monitoring report will include a detailed description of any noncompliance with Section 394.9026(c) and at least one option for corrective action to resolve the noncompliance. The HFC User will be given 180 days from the issuance of the monitoring report notice to correct the noncompliance. At the end of the 180 days, the Department will post a final report on its website.
   2. (B) If there is any noncompliance with Section 394.9026(c) that is not corrected within the 180-day corrective action period, the Department will notify the Responsible Parties, and Chief Appraiser, and the Texas Comptroller in writing and recommend a loss of ad valorem tax exemption under Section 394.905 Texas Local Government Code respective to the Tax Year being Audited.
7. (7) The qualification of the Auditor must be submitted with each Audit Report. Qualifications must include experience auditing housing compliance, a current Certified Occupancy Specialist (COS) certification or an equivalent certification, and resume. The Auditor may not be affiliated with or related to any Responsible Parties. Additionally, a current or previous Management Agent that has or had oversight of the Development or is/was responsible for reviewing and approving tenant files does not qualify as an Auditor under these rules. HFC Users may not engage the same individual as Auditor for a particular Development for more than three consecutive years. After the third consecutive Audit Report by the same Auditor, the HFC User must engage a new Auditor for the submission of at least two annual Audit Reports before re-engaging with a prior Auditor.
8. (8) Audit Reports and supporting documentation and required forms must be submitted though the Departments File Serve System. To obtain access to this system the HFC User or Auditor must request access by emailing hfc@tdhca.texas.gov.

Source Note:The provisions of this §10.1203 adopted to be effective March 26, 2026, 51 TexReg 1836.