What Developers Should Look for in a Tax Credit Cost Certification Partner
In a conversation with SMB CPAs Partner Matt Blackwell, CPA, about tax credit cost certifications, one thing stood out: the work is about much more than getting the numbers right at the end of a project. Experience with Low-Income Housing Tax Credits (LIHTC) and Historic Tax Credits (HTC) can help developers spot documentation gaps, address questions about eligible costs, and resolve potential issues before certification is due.
As Matt’s insights highlight, the right CPA partner does more than understand the program requirements. They understand the project, communicate clearly, and get involved early enough to help prevent avoidable complications.
Cost certification requires a careful review of project expenses, including determining which costs qualify under program rules and verifying that the necessary documentation is in place. Missing invoices, insufficient proof of payment, or ineligible costs can complicate certification and potentially affect the credits available.
For developers pursuing LIHTC or HTC, choosing a CPA with the right experience can make a meaningful difference. Here are five things to consider when evaluating a cost certification partner.
1. Look for Experience With Your Specific Tax Credit Program
LIHTC and HTC cost certifications require specialized knowledge. General real estate accounting experience doesn’t necessarily mean a CPA understands the rules governing these programs.
For LIHTC projects, a CPA must determine eligible basis, which helps establish the amount of tax credits available. Certain projects may qualify for a basis boost, while other expenses must be excluded from the eligible basis. The CPA needs to understand how program rules apply to individual costs and how those decisions affect the credit calculation.
HTC projects require a different analysis. The CPA must identify qualified rehabilitation expenditures, distinguish qualifying costs from ineligible ones, and verify that expenses are supported by the required documentation.
State-specific requirements add another layer of complexity, particularly for developers working across multiple states.
What to ask:
- How many certifications have you completed for my tax credit program?
- Which states have you worked in?
- Who will perform the and review the work?
Look for a firm with relevant experience and a track record of identifying questions and documentation gaps before they become problems.
2. Choose a CPA Who Can Identify Issues Early
One difference between a CPA who processes a cost certification and one who partners with a developer is when they get involved.
When a CPA first reviews a project at the end, there may be limited opportunities to address problems. An invoice may be missing, an expense may not qualify, or documentation for costs incurred before construction may be incomplete. Even legitimate expenses may be difficult to certify without adequate supporting records.
For example, a developer may overlook an invoice for work completed before construction began. A CPA who reviews costs as the project progresses has a better opportunity to identify the gap and request the necessary documentation before certification is due.
Early involvement gives the accounting team more time to address questions about cost eligibility and determine the appropriate next steps.
What to ask:
- What’s the best way to share information and documentation with you to keep the process running smoothly?
- How do you review project costs before the certification is due?
- If you identify a potentially ineligible cost or missing documentation during construction, how will you communicate that to our team?
Look for a partner who can explain a clear process for reviewing costs, knows how to flag potential issues, and works with your team to address issues throughout the project.
3. Look Beyond the Certification Itself
Cost certifications are connected to other tax and accounting requirements. Developers should look for a CPA who understands how the certification relates to tax returns, credit calculations, and applicable year-end audit requirements.
This broader perspective can help keep reporting consistent and reduce the effort required to coordinate providers who may not have a complete picture of the project..
What to Ask:
- Ask whether the firm can prepare the related tax returns and perform or coordinate applicable audit work.
- Clarify who will handle each responsibility and how the team will share information.
You may not need every service from one firm, but your certification partner should understand the broader requirements and recognize when another part of the process needs attention.
For developers with projects in multiple states or overseeing a pipeline of tax credit developments, a CPA with experience across multiple projects can also help establish consistent processes.
4. Ask How They Manage Documentation and Communication
A successful cost certification depends on having the right documentation to support project expenses. Project draws, invoices, and proof of payment are especially important. Developers should also maintain records for relevant costs incurred before construction begins.
What to Ask:
- Rather than waiting until certification is due, ask how the CPA wants documentation delivered
- How often do they review it?
- How do they track missing information or outstanding questions?
Regular reviews help identify gaps while there’s still time to address them. They also give the CPA an opportunity to raise questions about costs and explain when additional documentation may be needed.
When an expense requires further review, the CPA may need to work with the developer, attorney, or other project stakeholders to determine the appropriate costs.
Look for a partner who communicates clearly, identifies outstanding items, and works effectively with your project team.
5. Understand How They’ll Help Keep the Project Moving
Leaving cost certification work until the end can create a backlog of expenses and documentation to review just when the developer needs to finalize the certification.
Keeping costs and documentation up to date can make the final review more efficient and help prevent avoidable delays. Depending on the project’s financing and equity arrangements, completing certification may also be an important step towards receiving expected equity contributions or repaying project debt.
A good partner sets clear expectations, communicates outstanding items, and helps your team understand what needs to happen next.
What to Ask
- What are the plans to keep project information current?
- How frequently will they review draws and supporting records?
- What does your team need to provide along the way?
Choose a Partner Who Understands the Project Beyond the Numbers
A qualified tax credit cost certification partner brings more than accounting expertise. They understand the program-specific requirements, know where documentation gaps and cost questions can arise, and can work with the development team to address issues before the final certification.
SMB CPAs bring experience across approximately 50 LIHTC projects and more than 100 Historic Tax Credit projects, spanning a range of project sizes and complexities across multiple states. Our HTC experience includes projects in Massachusetts, Maryland, South Carolina, Oklahoma, Kansas, Colorado, Iowa, Indiana, Nebraska, and Missouri, while our LIHTC work includes projects in Missouri, Arkansas, Kansas, Oklahoma, and Texas. This multistate experience helps our team navigate program-specific requirements and identify potential documentation issues throughout the certification process.
In addition to cost certification, SMB offers related tax and accounting services, including tax returns, bookkeeping, and financial projections. Our goal is to make the process as straightforward as possible by helping clients understand what’s needed, keeping project information organized, and working through questions as they arise.
Preparing for a tax credit project?
Use our Tax Credit Cost Certification Partner Checklist [DOWNLOAD LINK] to evaluate potential CPA partners, prepare for your initial conversation, and identify the questions worth asking before the certification process begins.