Low income housing organization doesn't meet safe harbor rules but still qualifies as exempt.

Nonprofit and Church Legal Trends - Free Edition - March April 2007 (free edition)

IRS rulings and procedures set out rules under which organizations providing low income housing will automatically qualify as charitable. These are called the “safe harbor” rules, if you fall under these rules then you’re fine. These safe harbor rules allow exempt organizations to provide a certain amount of housing for income groups other than low income. At least 75% of the units must be occupied by low income residents and either at least 20% of the units must be occupied by very-low income residents or 40% of the units must be occupied by residents that do not exceed 120% of the area’s very-low income limits.

But what if you can’t meet those safe harbor limits? Would you still be exempt? The subject of this ruling was only able to obtain income certification from about 60% of the households in one development. Thus, it doesn’t have enough information to determine whether or not it meets the safe harbor test. Can it still be exempt? Yes, it can still be exempt. If an organization doesn’t meet the safe harbor test, it would then have to meet a “facts and circumstances” test.