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Guide for Completing Form 8823 - page 7 / 197





7 / 197

not the only method for selecting for audit tax returns on which the low-income housing credit has been claimed and, at the examiner’s discretion, the audit may be expanded to include additional issues or tax returns.

*Authority of Guide*

*The guide is not a legal authority. The guide provides state agencies with a single accumulative reference of current legal authorities needed for determining whether a state agency must file Form(s) 8823 with the IRS under Treas. Reg. §1.42-5(e)(3), along with guidelines and examples of the law’s application to specific fact patterns.

  • 1.

    The scope of the guide is limited and does not address the tax consequences of noncompliance. Taxpayers are responsible for evaluating the tax consequences of noncompliance with IRC §42.

  • 2.

    The guide should not be used or cited by taxpayers as authority for setting or sustaining a technical position when filing tax return for any tax period for which the taxpayer is subject to IRC §42 requirements.4 Taxpayers can rely upon and cite the Internal Revenue Code and formal IRS guidance5 as referenced extensively in the text and footnotes.

3. The guide, or chapters of the guide, may become obsolete if the underlying authority is revised subsequent to the Guide’s revision date. Examples include: (1) IRC §42 is revised by Congress, (2) the IRS provides formal guidance, or (3) HUD revises the definition or treatment of income as explained in HUD Handbook 4350.3, Chapter 5.

The guide (or chapter) is obsolete as of the effective date of the revised legal authority. State agencies and owners should disregard affected text and legal references.

The Guide’s revision date is identified on the cover, in the index, and at the bottom of every chapter page.*

Purpose of Guide

The fundamental purpose of this guide is to provide standardized operational definitions for the noncompliance categories listed on Form 8823. It is important that noncompliance is consistently identified and categorized. Resulting benefits include:

  • 1.

    Consistent interpretation and application of IRC §42 requirements among states;

  • 2.

    Consistent reporting of noncompliance to the IRS; and

noncompliance was corrected. From the IRS’ point of view, the owner’s responsiveness is indicative of due diligence, but does not preclude initiating an audit.

4 *In limited circumstances, pending the release of formal IRS guidance, the guide may specifically state that guidelines presented in the guide will be used by the IRS to evaluate a taxpayer’s compliance. See Chapter 14 for an example.*

5 *For example, Treasury regulations, revenue procedures, revenue rulings, and notices can be relied upon as formal IRS guidance. Although often providing insight into IRS interpretation, private letter rulings are binding only for the taxpayer who requested the ruling and should not be cited as authority.*


Revised October 2009

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