Compliance Conversation with the IRS

1
Compliance Conversation with the IRS

• Presented by Grace Robertson
• Washington, DC
• January 8, 2007

2

• States have the most powerful tools and the
  greatest responsibilities for planning and
  implementing rental housing policy in the U.S.
• State policy makers shape the way in which
  affordable housing rental housing is distributed
  geographically and to different types of families
  and individuals.
• From HUD Report
• Prepared by Abt Associates, Inc.
• Reported in Tax Credit Advisor August 2006

3
Topics

• Form 8823 Guide
• Current Topics
• Audit Activity
• Compliance Initiatives
• LIHC Newsletters

4
(No Transcript)
5
Guide for Completing Form 8823

• Suggested by state housing agencies/NCSHA
• Needed to provide guide for consistently
  reporting noncompliance by all state agencies
• 10 states participated in original drafting of
  chapters
• Project initiated in March 2000
• Project completed January 2007

6

• Background
• Reconciling different needs
• Reconciling different perspectives
• Within boundaries of Internal Revenue Code
• Reliance on official, formal guidance
  regulations, revenue procedures, revenue rulings,
  notices, etc.
• Identifying addressing issues of merit
• Establishing measurable criteria, time periods
  deadlines

7

• Milestones
• Review by all state agencies
• Review by owners and industry
• New Form 8823, with different set of categories
  of noncompliance, enhanced analytical
  capabilities, and technological advancements
• New Revenue Ruling 2004-82 (QA)
• New Revenue Procedures 2003-82 2005-37
• Rev. Proc. 2004-38 Form 8877
• Reg. 1.42-10, Utility Allowance, is under
  revision

8

• Guide
• 26 chapters
• Scope is limited to the preparation of Form 8823
  for submission to the IRS
• Guide is not formal IRS guidance. The contents
  cannot be used or cited as authority for setting
  or sustaining a technical position
• Guide includes footnotes and references that can
  be cited as authority
• Taxpayers remain responsible for evaluating the
  tax consequence of noncompliance

9
Current Topics

• Adding New Member to Existing Household (Chapter
  4)
• Moving Households Between Buildings (Chapter 4)
• Fees Gross Rents (Chapter 11)
• Compliance with Extended Use Agreement (Chapters
  16 23)
• Utility Allowances (Chapter 18)

10
Audit Activity

• Top 4 issues are
• Property disposition not reflected on tax return,
• No LIHC recapture by taxpayer upon disposition,
• IRS certification under IRC 42(l) i.e., no
  Forms 8609 issued by state agency, and
• Violations of the physical inspection standards

11

• Remaining Issues
• Investor Returns
• Incorrect Rents Nonqualifying Households
• General Public Use Rule
• Material Participation by Nonprofit Entities
• Minimum Set-Aside
• Eligible Basis Grants
• Extended Use Agreements
• No Longer Participating in the Program
• Project Meltdowns
• Credit Computation

12
Compliance Initiatives

• No special LIHC audit initiatives
• Majority of audits selected through LIHC program
  administered by Small Business/Self-Employed
  Division
• May be selected for other program initiatives not
  related to the IRC 42 credit
• May be selected by another division LMSB,
  Exempt Organizations, etc.

13
LIHC Newsletters

• Includes disclaimer The content of this
  newsletter should not be used or cited as
  authority for setting or sustaining a technical
  position. Look for references to formal
  guidance.
• Newsletters prior to January 2007 may include
  outdated information.
• To be included on the e-mail distribution list,
  send a request to Grace.F.Robertson_at_irs.gov

14
Contact Information

• Grace Robertson
• Phone [phone]
• Fax [phone]
• E-Mail Grace.F.Robertson_at_irs.gov

15
Thank You!!!