IRS Releases Draft LIHTC Audit Guide for Comment

By
2 min read

The Internal Revenue Service is soliciting public comments on the draft of a new IRS low-income housing tax credit (LIHTC) audit technique guide.

Once finalized, the guide will be used by IRS examiners in auditing the tax returns of owners of LIHTC properties, which are generally partnerships.

IRS official Grace Robertson, who wrote the draft guide, told a Washington conference on January 15 that the audit technique guide will complement – not replace – the existing so-called 8823 guide. The latter IRS publication provides guidance to state housing credit agencies on how to complete a form (IRS Form 8823) to report incidences of noncompliance at tax credit properties to the Service.

The 312-page draft guide, released in late December, has 20 chapters and 10 appendices, including five chapters alone on eligible basis issues. Some of the other topics covered are the applicable fraction, applicable percentage, extended use agreement, the first year certification, and what an IRS examiner should do to conduct a thorough audit.           Robertson said owners of LIHTC properties could go through the guide – looking at the topics, discussions, and lists – to see what specific documentation they would need to have ready to be prepared for an IRS audit if one occurs. “You can anticipate what issues you need to prepare for in advance of an audit should you ever fall in that category,” she said.

A final version of the guide will be posted on the IRS Web site after the submitted comments are reviewed by the IRS and the draft is revised. Comments should be emailed by March 28 to [email protected].

Compliance expert A. J. Johnson, president of A. J. Johnson Consulting Services, Inc., recommends that LIHTC developers, owners, and property managers review the draft guide and submit comments.

“If any developer, any participant in the program, doesn’t read the IRS audit guide they’re not thinking clearly, because this guide indicates what matters to the IRS,” said Johnson. “And if we don’t know what matters to them we’re not going to know how to operate the properties.”

            (A copy of the draft audit technique guide may be viewed at http://tinyurl.com/kgxflvd)