IRS Official Discusses LIHTC Compliance Issue, Current Guidance Projects

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Tax Credit Advisor, February 2009: IRS senior program analyst Grace Robertson clarified the applicability of the tax credit tenant income certification rules to existing projects that receive a new allocation of tax credits and are resyndicated, in comments during the recent HFA Institute conference in Washington, DC sponsored by the National Council of State Housing Agencies.

She also reported on several current compliance guidance projects.

Under the federal low-income housing tax credit (LIHTC) program, owners must determine and initially certify that an applicant qualifies as a low-income household before they may occupy a tax credit unit.

Robertson said that when an existing housing credit project is resyndicated (i.e., a new allocation of tax credits is obtained and syndicated), new initial tenant income certifications do not have to be done for the existing low-income tenants in order for the new credits to be claimed, provided there is an extended use agreement that is continuously in place. This applies even if a new owner purchasing the property for an acquisition/rehab transaction enters into a new extended use agreement that replaces the original extended use agreement, so long as there is no break in coverage between the two agreements.

“We’re trying to make this as easy as possible to not to have to disrupt families from their housing,” Robertson explained at one panel session.

Initial tenant income certifications would be required, however, for pre-1990 tax credit projects that are resyndicated, since extended use agreements weren’t required for projects awarded housing credits during 1987-89.

Current Projects

Robertson also reported that the IRS will be coming out with a revised version of the so-called 8823 Guide. Originally issued in January 2007, this document provides guidance to state allocating agencies on recognizing and reporting – using IRS Form 8823 – various types of noncompliance with LIHTC program requirements, as well as the correction of noncompliance. She expressed hope that the revised guide will be finalized and released by late June.

Robertson, during one panel session, described numerous possible revisions to the current guide. Some result from changes made last year by the U.S. Department of Housing and Urban Development (HUD) to HUD Handbook 4350.3. Many others are necessitated by LIHTC program amendments made by the Housing and Economic Recovery Act of 2008. (For background on amendments, see Tax Credit Advisor, September 2008, p. 1.)

Separately, Robertson told the Tax Credit Advisor that she will be preparing an updated “audit techniques guide” for the LIHTC program. She indicated that a draft is supposed to be completed by 9/30/09 for internal review, and that a draft version will subsequently be made available for public comment. After comments are received and evaluated, the guide will be finalized and released.

Robertson invited LIHTC program participants now to send her an email (to [email protected]) with their comments and suggestions regarding the revised audit techniques guide (e.g. suggestions for issues to be addressed).

The IRS’ most recent version of the LIHTC audit techniques guide (June 1999) was once posted on the Service’s Web (http://www.irs.gov), but was taken down after parts became obsolete. The document provides guidance and instruction to IRS agents in how to conduct examinations and audits of federal income tax returns where the LIHTC is a central issue.

Finally, Robertson told the conference that suspected incidents of owner or tenant fraud under the LIHTC program should now be reported to a new IRS “whistleblower’s office. She said individuals should complete and sign IRS Form 211 (available on the IRS Web site) and return it to the specified address.