Learning The Basics Housing Tax Credit “101”

1. Learning The BasicsHousing Tax Credit “101” March 5-6, 2009The Blackstone Hotel Chicago, IL Susan Pristo Reaman

2. IRS Oversight and GuidanceUnder LIHTC Program • IRS Small Business/Self-Employed Division Examination Division • Oversees compliance of housing credit program and enforcement of IRC § 42 • Works with State Housing Agencies in the administration and monitoring of housing projects under the LIHTC program. • Selects projects for audit

3. IRS Oversight and GuidanceUnder LIHTC Program (cont’d) • Office of Chief Counsel IRS, National Office Washington, DC • Associate Chief Counsel, Pass-throughs and Special Industries, Branch 5 • Issues Guidance for LIHTC through: • Private Letter Rulings • Revenue Rulings • Revenue Procedures • Income Tax Regulations • Notices

4. IRS Oversight and GuidanceUnder LIHTC Program (cont’d) • Provide Legal Advice to IRS Examination Division • Technical Advice Memorandum • Chief Counsel Advice • Informal Advice

5. IRS Oversight and GuidanceUnder LIHTC Program (cont’d) • Department of Treasury Office of Tax Policy • Works with Congress to develop and draft Tax Legislation. • Implements Executive Branch policy including policy under the LIHTC program • Works with IRS Office of Chief Counsel to interpret, draft, and review all published guidance including: • Revenue Rulings • Income Tax Regulations • Notices

6. IRS Oversight and GuidanceUnder LIHTC Program (cont’d) • Office of Tax Policy and IRS Guidance Priority List • Agreement between Treasury Department, IRS Commissioner, and IRS Chief Counsel to issue priority guidance within the Business Plan year which runs from July 1 to June 30 • Based upon new laws and requests from IRS and Taxpayers on issues needing published IRS Guidance. See, Notice 2008-47, 2008-18 IRB 869 • Plan is periodically updated • Current LIHTC listed items: • Relief from certain § 42 LIHTC requirements due to severe storms and flooding in Missouri (Published 7/16/2008 IRB 2008-31 Notice 2008-66 • Final regulations on the requirements for a qualified contract • Guidance under § 42

7. IRS Oversight and GuidanceUnder LIHTC Program (cont’d) • Private Letter Ruling (PLR) Process • A private letter ruling is a ruling on a particular taxpayer’s proposed transaction • May not be used as precedent • Taxpayer must follow PLR procedures under Revenue Procedure 2009-1, 2009-1 IRB 1.

8. IRS Oversight and GuidanceUnder LIHTC Program (cont’d) • Income Tax Regulations Process • Regulations may arise from: • New legislation • IRS or taxpayer’s request for guidance on a particular tax issue • Regulation is drafted by IRS Chief Counsel Attorneys • Reviewed by Treasury Attorneys • Proposed Regulation is published and provides for comment period and public hearing • After review of comments, final regulations are published

9. IRS Oversight and GuidanceUnder LIHTC Program (cont’d) • Audits of LIHTC Properties • IRS has internal process for audit selection • Issuance of Form 8823 – “Low-Income Housing Credit Agencies Report of Non-Compliance or Building Disposition” may result in an audit of low-income housing project • Legal issues that may arise in the course of an audit may be resolved through a request for Technical Advice from IRS Chief Counsel • Requests for Technical Advice procedures are found in Revenue Procedure 2009-2, 2009-1 IRB 87

10. IRS Oversight and GuidanceUnder LIHTC Program (cont’d) • Audit Process • An Examination audit finding of tax deficiency may be appealed • Taxpayer works with Appeals Officer for settlement • Taxpayer that does not agree with Appeals Officer may file petition in Tax Court without paying tax deficiency (interest runs on unpaid tax deficiency) • Taxpayer that pays tax deficiency may file claim for refund in District Court