Certified Veterans Lending Specialist (CVLS)

Correct: Under Section 45 of the Internal Revenue Code, the Production Tax Credit (PTC) is a performance-based incentive. To qualify, the electricity must be produced from a qualified resource (wind) at a qualified facility and sold to an unrelated person. The credit is available for a 10-year period beginning on the date the facility is placed in service. Proper documentation of the ‘placed in service’ date and the arm’s-length nature of the sale to an unrelated party are critical for regulatory compliance.

Incorrect: The option regarding nameplate capacity is incorrect because the PTC is based on actual kilowatt-hours produced and sold, not the potential capacity of the equipment. The option regarding eligible basis describes the Investment Tax Credit (ITC) rather than the PTC; while some wind projects can elect the ITC, the PTC itself is not basis-derived. The option regarding sales to related parties is incorrect because Section 45 specifically requires the electricity to be sold to an unrelated person to qualify for the credit.

Takeaway: The Production Tax Credit is a production-based incentive that requires the sale of electricity to an unrelated party over a 10-year period starting from the facility’s placed-in-service date.

Correct: The Work Opportunity Tax Credit (WOTC) program requires that employers submit IRS Form 8850 to the State Workforce Agency (SWA) no later than the 28th calendar day after the individual begins work. This is a strict statutory deadline; failure to meet it results in the denial of the credit for that specific hire. Therefore, the internal control policy must be aligned with this 28-day requirement to ensure the credit union can legally claim the credits.

Incorrect: The option regarding quarterly batching is incorrect because a quarterly schedule would inevitably cause many applications to miss the 28-day federal deadline. Relying solely on the signature date is insufficient because the law specifically requires the submission (postmark or electronic filing) to occur within the 28-day window, not just the completion of the form. Extending the processing window to 60 days is incorrect as it directly contradicts federal law and would lead to the systematic disqualification of all WOTC claims processed under that policy.

Takeaway: To qualify for the Work Opportunity Tax Credit, employers must submit the required certification request to the State Workforce Agency within 28 days of the employee’s start date.

Correct: Under the Inflation Reduction Act (IRA) updates to Section 30D, several strict threshold requirements must be met for vehicles placed in service after 2022. The immediate priority is to ensure the vehicle meets the North American final assembly requirement, and that the transaction stays within the price caps (MSRP of $80,000 for vans/SUVs/pickups; $55,000 for others) and the taxpayer’s Modified Adjusted Gross Income (MAGI) limits ($300,000 for joint filers; $225,000 for head of household; $150,000 for others). Failure to meet any of these results in zero credit eligibility.

Incorrect: The 200,000-unit manufacturer limit was repealed by the IRA for vehicles sold after December 31, 2022, making that check irrelevant for 2023 purchases. For individuals, the Section 30D credit is generally non-refundable and cannot be carried forward or back to other tax years; it is a ‘use it or lose it’ credit for the year the vehicle is placed in service. Finally, the North American assembly requirement is a statutory prerequisite that cannot be bypassed by the manufacturer’s agreement with the IRS.

Takeaway: Post-IRA eligibility for the Clean Vehicle Credit depends on a combination of vehicle assembly location, MSRP limits, and taxpayer income thresholds.

Correct: Implementing a secondary review by an independent compliance officer is the most effective control. WOTC compliance requires the submission of IRS Form 8850 to the State Workforce Agency (SWA) within 28 days of the employee’s start date. An independent review ensures that the certification process is objective and that any potential conflicts of interest—such as hiring relatives specifically to capture tax credits or falsifying eligibility—are identified and mitigated before the legal filing occurs, preserving the integrity of the bank’s tax reporting.

Incorrect: Outsourcing to a third-party agency does not absolve the bank of its responsibility for the accuracy of the tax credit claims or the underlying ethical concerns of nepotism. Limiting claims to employees with 400 hours of service relates to the calculation of the credit amount (increasing it from 25% to 40% of qualified wages) but does not address the reporting integrity or the conflict of interest during the initial certification phase. Suspending the collection of Form 8850 for related applicants would result in a failure to comply with federal tax law requirements for those individuals, as the form is a mandatory prerequisite for claiming the credit.

Takeaway: Effective WOTC reporting requires independent verification of certification documents to ensure that eligibility is determined objectively and is free from internal conflicts of interest or recruitment bias.

Correct: Under IRS Revenue Procedure 2014-49, LIHTC property owners may provide temporary housing to individuals displaced by a federally declared disaster even if those individuals do not meet the standard income limits. However, this relief is not automatic; the state housing credit agency must approve the relief, and the owner must maintain specific documentation, including a self-certification from the displaced individual, to protect the project from credit recapture during the temporary relief period.

Incorrect: Reclassifying units as market-rate would reduce the qualified basis of the property, leading to a loss of credits and potential recapture. Suspending the Next Available Unit Rule across the entire portfolio without regard for federal disaster declarations or specific agency guidance violates Section 42 requirements. Permanent waivers of income certifications are not granted for disaster relief; the relief is temporary and specific to the recovery period defined by the IRS and the state agency.

Takeaway: LIHTC disaster relief compliance requires specific state agency authorization and documented certification of displacement to allow non-qualified tenants without triggering credit recapture.

Correct: According to VA Pamphlet 26-7, Chapter 8, a veteran is exempt from the funding fee if they are in receipt of disability compensation. If the Certificate of Eligibility (COE) indicates a ‘Pending’ status, the lender is not permitted to waive the fee based on that status alone. The lender must either verify that the COE has been updated to ‘Exempt’ or obtain a formal VA disability award letter indicating the veteran is entitled to compensation. This approach ensures that the Loan Estimate is issued with the most accurate information available, complying with both VA verification standards and TRID disclosure requirements, while allowing for the waiver if the veteran provides the necessary official documentation that may not yet be reflected in the webLGY system.

Incorrect: Relying on a signed statement of intent or an affidavit is insufficient because VA regulations specifically require government-issued documentation (the COE or an award letter) to grant a funding fee waiver. A policy to always charge the fee regardless of secondary documentation like an award letter is overly restrictive and fails to provide the best service to the veteran who may already have proof of exemption. Relying solely on the Automated Underwriting System (AUS) is inappropriate because the AUS data is pulled from the same source as the COE; if the COE is ‘Pending,’ the AUS will not provide the necessary verification to override that status without manual intervention and documentation review.

Takeaway: When a Certificate of Eligibility shows a pending disability status, the funding fee must be disclosed and charged unless the lender verifies a formal VA disability award letter or an updated exempt status.

Correct: Under Section 25C, the Energy Efficient Home Improvement Credit is specifically reserved for individuals making improvements to their principal residence located in the United States. Because the improvements were made to properties that were not the primary residence of the entity or individual claiming the credit (and were instead treated as corporate perks), they fail the fundamental residency requirement of the Internal Revenue Code.

Incorrect: While equipment must meet certain efficiency standards, the lack of a Department of Energy certificate is a secondary technicality compared to the residency requirement. The $5,000 limit is not a standard aggregate limit for corporate entities under Section 25C, which is primarily an individual credit. While the classification as gifts and entertainment creates corporate tax deduction issues, it is the specific residency requirement of Section 25C that disqualifies the credit itself.

Takeaway: The Energy Efficient Home Improvement Credit (Section 25C) requires that the property improved must be the taxpayer’s principal residence.

Correct: To maintain eligibility for the LIHTC, a project must meet a minimum set-aside requirement. The owner must elect either the 20-50 test (20% of units occupied by tenants at or below 50% of Area Median Income) or the 40-60 test (40% of units at or below 60% of AMI). Failure to maintain this set-aside throughout the compliance period results in the project losing its status as a qualified low-income housing project, leading to credit recapture.

Incorrect: Option B is incorrect because land costs are strictly excluded from the eligible basis under LIHTC rules. Option C is incorrect because being in a Qualified Census Tract (QCT) allows for a basis boost but does not exempt an owner from the fundamental requirement of tenant income certification. Option D is incorrect because exceeding the state’s maximum per-unit cost limit would typically disqualify a project from receiving an allocation or reduce the eligible basis, rather than being a requirement for eligibility.

Takeaway: Maintaining the elected minimum set-aside and adhering to rent restrictions are the primary ongoing requirements for an owner to remain eligible for the Low-Income Housing Tax Credit.

Correct: The State Workforce Agency (SWA) is the only entity authorized to issue the official certification (such as Form 9061 or 9062) that an individual belongs to a WOTC targeted group. Employers must submit the required forms to the SWA within 28 days of the employee’s start date. The SWA’s role is to verify the documentation provided and provide the certification necessary for the employer to legally claim the credit on their tax returns.

Incorrect: The SWA does not conduct pre-hire interviews for private firms; the employer is responsible for the initial screening and hiring process. The SWA also does not calculate the final tax credit amount, as that is a function of the firm’s tax department or external accountants using IRS Form 5884. Finally, SWAs are state government agencies and do not provide legal defense or indemnification for private entities during federal IRS audits.

Takeaway: The State Workforce Agency (SWA) serves as the central authority for certifying employee eligibility for the Work Opportunity Tax Credit (WOTC), which is a mandatory prerequisite for an employer to claim the credit.