The Internal Revenue Service’s oversight of the Low-Income Housing Tax Credit program has been “minimal,” according to a new report by the Government Accountability Office.
Since 1986, the IRS has conducted only seven audits of 56 state housing finance agencies, or HFAs, on which the IRS relies to administer and oversee the program. HFAs are state-chartered authorities that have been established to meet affordable housing needs. Federal internal control standards call for monitoring to be performed continually in the course of normal operations and be ingrained in agency operations.
Oversight of HFAs has been minimal, partly because the LIHTC is viewed as a peripheral program in the IRS in terms of its mission and priorities for resources and staffing, the GAO noted, according to the report. But without such reviews, the IRS cannot determine the extent of noncompliance and other issues at HFAs.
The GAO report also said the state entities increasingly have missed the deadline to submit their annual report to the IRS and “often submit incomplete or inaccurate forms.”
The IRS jointly administers other programs: the Historic Rehabilitation Tax Credit with the National Park Service and the New Markets Tax Credit with the Community Development Financial Institutions Fund in the Treasury Department. The federal agencies that work with the IRS to oversee these programs have missions consistent with the purposes of these programs, the GAO noted. They also conduct monitoring, report on performance, and collect data.
For example, officials of both agencies told the GAO that their staff members routinely conduct site visits and other project reviews. In these cases, the IRS is able to benefit from the other federal agencies' policy and subject-matter expertise. Likewise, the Department of Housing and Urban Development's experience in administering affordable housing programs and working with HFAs may benefit the IRS in its administration and oversight of the LIHTC program, the GAO pointed out.
The GAO said that joint administration of the LIHTC program with HUD could better align program responsibilities with each agency's mission and more efficiently address existing oversight challenges. Under joint administration, the IRS could retain responsibilities consistent with its mission (as it does in the other two tax credit programs). For example, the IRS could continue to enforce taxpayer compliance.
John Dalrymple, deputy commissioner of services and enforcement at the IRS, said the IRS has reviewed the results of hundreds of audits and determined that there was not widespread noncompliance. “We determined that the isolated noncompliance observed did not warrant shifting resources away from other compliance efforts to provide ongoing manual tracking of audit results and issue trends.”
Sen. Chuck Grassley, R-Iowa, had asked the GAO to conduct the review of the Low-Income Housing Tax Credit program. “This report confirms what we’ve seen again and again,” he said in a statement. “The federal government is good at giving out money and tax breaks and terrible at checking on results. No one at the IRS or HUD seems to have any way of knowing whether a multi-billion-dollar program for low-income housing has worked as intended. This doesn’t bring accountability, and it may or may not deliver affordable housing for people in need. The agencies need to step up their oversight for the sake of low-income people who need housing and the taxpayers who deserve accountability.”
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