You should be most concerned with evaluating the fund manager for their competence and experience investing money on behalf of investors in projects like those in which the fund will invest. The preservation of your tax benefits is secondary to the quality of the fund manager, because if the manager is flawed, the tax benefits become irrelevant. However, for investments where the fund manager passes the due diligence test, the key is to make sure your fund manager will provide investors with a certification that they are compliant with the regulations at each measurement date and that each investment the fund has made is also compliant with the regulations. The certification should come from a third party independent of the fund manager and the third-party service provider should represent they have adequate information to support their conclusions. The fund may have a fund administrator who provides this service. The law requires that the investment must be compliant for the entire duration of the investor's holding period. Record retention is critical so that the exclusion of the gain upon disposition cannot be challenged by the IRS. As part of your due diligence, it is critical to verify the presence of the independent third-party providing the verification services and the engagement of that entity by the fund manager.
