GAO Issues Second Report on LIHTC Program

The Government Accountability Office (GAO) recently issued the second of three reports on the Low-Income Housing Tax Credit program entitled, “Low Income Housing Tax Credit: Some Agencies’ Practices Raise Concerns and IRS Could Improve Noncompliance Reporting and Data Collection.” The GAO’s review of the LIHTC program was requested by Senator Chuck Grassley, who serves as Chairman of the Senate Judiciary Committee. The first of GAO’s three reports on LIHTC was released last July and recommended joint administration of the LIHTC program by HUD and the IRS.

This second report focused on allocating agencies’ administration and oversight of the LIHTC program. In the report, GAO recommends that IRS clarify when agencies must file Form 8823 reports of noncompliance or building disposition. Second, the report called on the IRS to ensure that staff members from the small business and self-employed division of the IRS participate in the physical inspection alignment initiative of the Rental Policy Working Group. Through the Rental Policy Working Group, HUD collects and analyzes housing data, including LIHTC inspection results. According to the GAO report, the IRS was not previously aware of this data collection effort. And finally, the report recommended that the IRS commissioner should evaluate how the IRS could use HUD’s Real Estate Assessment Center (REAC) databases to reassess reporting categories and analyze categories of noncompliance information.

The report also concluded that the IRS continues to exercise lax oversight of state and local agencies. In particular, it found that the IRS does not review allocating agencies’ qualified allocation plans and their practices for awarding discretionary 130 percent tax credit basis boosts.

GAO’s third report is due early next year. The third report will focus on development costs and the role of syndicators.