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Learning The BasicsHousing Tax Credit “101”
March 5-6, 2009The Blackstone Hotel
Chicago, IL
Susan Pristo Reaman
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
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
IRS Oversight and GuidanceUnder LIHTC Program (cont’d)
• Provide Legal Advice to IRS Examination Division
– Technical Advice Memorandum
– Chief Counsel Advice
– Informal Advice
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
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
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.
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
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
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