IRS Publication 5913 – IRS Publication 5913 serves as a critical resource for state housing agencies tasked with monitoring compliance in the Low-Income Housing Credit (LIHC) program under Internal Revenue Code (IRC) Section 42. This Audit Technique Guide outlines standardized procedures for identifying, auditing, and reporting instances of noncompliance or building dispositions using Form 8823. Designed to ensure consistent application of LIHC rules across states, it helps agencies report significant issues to the IRS, facilitating better program administration and enforcement.
In this SEO-optimized article, we’ll explore the purpose, scope, key sections, and practical implications of IRS Publication 5913. Whether you’re a state agency official, property owner, or tax professional involved in affordable housing, this guide will provide valuable insights into maintaining compliance and avoiding penalties.
What Is the Low-Income Housing Credit Program?
The LIHC program, established under IRC Section 42, incentivizes the development and preservation of affordable rental housing for low-income households. State housing credit agencies allocate tax credits to qualified projects, which owners can claim over a 10-year period, provided the properties meet specific income and rent restrictions during a 15-year compliance period (often extended to 30 years via agreements).
Key requirements include:
- Income Limits: Units must be rented to households earning no more than 50% or 60% of the Area Median Gross Income (AMGI), depending on the elected minimum set-aside (e.g., 20/50 or 40/60).
- Rent Restrictions: Gross rents cannot exceed 30% of the imputed income limit for the unit size.
- Compliance Monitoring: State agencies conduct desk audits, on-site inspections, and tenant file reviews at least every three years, covering at least 20% of low-income units.
Noncompliance can lead to credit disallowance, recapture, or penalties, making tools like Publication 5913 essential for oversight.
Purpose and Scope of IRS Publication 5913
Released in its current form in January 2024, IRS Publication 5913—titled “Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition Audit Technique Guide”—provides operational definitions for 17 categories of noncompliance listed on Form 8823. Its primary goals are to:
- Standardize how state agencies identify and categorize noncompliance.
- Guide the filing of Form 8823 for issues like tenant eligibility, rent overcharges, or building suitability.
- Ensure accurate reporting to the IRS, which may trigger audits or notifications to owners.
The guide applies to all LIHC projects during the compliance period, including mixed-use developments, acquisitions/rehabilitations, and 100% LIHC properties (where annual recertifications may be waived post-July 30, 2008). It references HUD Handbook 4350.3 for income calculations, Uniform Physical Condition Standards (UPCS) for inspections, and Treasury Regulations like §1.42-5 for monitoring standards. However, it does not cover tax consequences for owners and emphasizes that it’s not legal authority—users should consult IRC §42 and related updates for accuracy beyond the revision date.
State agencies must notify owners of issues, allowing up to 90 days (extendable to 6 months) for corrections before filing Form 8823. The guide stresses professional judgment, random sampling, and evidence retention for 6 years.
Key Sections and Noncompliance Categories in Publication 5913
Publication 5913 is structured into an overview, Form 8823 instructions, auditing guidelines, category-specific chapters, and sections on building dispositions and miscellaneous topics. Below is a breakdown of major noncompliance categories (from line 11 on Form 8823), with definitions, examples, and correction tips.
Noncompliance Categories Table
| Category | Description | Common Examples | Correction Tips |
|---|---|---|---|
| 11a: Household Income Above Limit at Move-In | Initial tenant income exceeds AMGI limits. | Undocumented assets or employment income. | Verify and recertify; report if unresolved. |
| 11c: Violations of UPCS or Local Standards | Units or buildings unsuitable for occupancy (e.g., health/safety hazards). | Mold, exposed wires, or fire damage. | Repair and re-inspect within 180 days; prioritize life-threatening issues. |
| 11d: Owner Failed to Provide Annual Certifications | Missing or inaccurate annual compliance certifications. | Incomplete submissions to state agencies. | Submit perfected certifications promptly. |
| 11e: Changes in Eligible Basis or Applicable Fraction | Reductions due to grants, conversions, or subsidies not accounted for. | Failure to reduce basis for federal grants. | Adjust basis; seek IRS ruling if needed. |
| 11f: Project Failed Minimum Set-Aside | Fewer qualified units than required (e.g., below 20/50). | Systemic eligibility errors. | Restore by renting to qualified tenants. |
| 11g: Gross Rent Exceeds Limit | Rents over 30% of imputed income, including utilities. | Outdated utility allowances. | Update allowances annually and adjust rents. |
| 11h: Not Available to General Public/Fair Housing Violations | Discrimination or restricted access. | Denying Section 8 vouchers. | Revise policies and train staff. |
| 11i: Violations of Available Unit Rule | Over-income households not replaced properly. | Renting to non-qualified after income increase. | Prioritize qualified rentals. |
| 11l: Occupied by Nonqualified Full-Time Students | Units with ineligible students (no exceptions like single parents). | Entire household as full-time students. | Evict or qualify under exceptions. |
| 11p: Project No Longer in Compliance | Total program cessation (e.g., fraud or credit return). | Egregious violations leading to recapture. | Resume participation or face recapture. |
For full details on all 17 categories, download the official PDF from the IRS website.
Auditing and Evidence Guidelines
State agencies use random sampling for 20% of units, expanding if issues arise. Evidence includes third-party verifications (valid up to 120 days), tenant certifications, and workpapers retained for 6 years. Special rules cover household changes, utility allowances (updated annually per HUD methods), and first-year credits.
The Reporting Process: Form 8823 and Building Dispositions
When noncompliance is detected, agencies notify owners and file Form 8823 within 45 days after the correction period if issues persist. For building dispositions (sales, foreclosures), report via line 13, including details on new owners and continued compliance expectations. The IRS processes these forms, potentially sending notifications or initiating audits. Owners can correct retroactively if due diligence is shown, but egregious cases may trigger fraud referrals.
Updates and Revisions in IRS Publication 5913
The January 2024 revision incorporates changes from the Housing Assistance Tax Act of 2008, such as removing below-market loans as subsidies and updating utility allowance rules. As of 2026, no major updates have been noted, but users should check IRS.gov for the latest version, as changes to IRC §42 or HUD guidance could affect accuracy.
Why IRS Publication 5913 Matters for Affordable Housing Stakeholders?
For state agencies, it ensures uniform reporting and reduces errors. Property owners benefit by understanding audit risks and correction timelines, helping avoid credit loss. Tax professionals can use it to advise on compliance strategies, such as annual utility reviews or proper tenant documentation. Consistent adherence promotes the LIHC program’s goal: providing safe, affordable housing.
Frequently Asked Questions About IRS Publication 5913
- What is Form 8823? It’s the form state agencies use to report LIHC noncompliance or dispositions to the IRS.
- How long do owners have to correct issues? Up to 90 days, extendable to 6 months for good cause.
- Does Publication 5913 apply to all LIHC projects? Yes, during the compliance period, with exceptions for certain financed properties.
- Where can I download the guide? From the official IRS website at https://www.irs.gov/pub/irs-pdf/p5913.pdf.
By staying informed about IRS Publication 5913, stakeholders can navigate the complexities of low-income housing credit compliance effectively, ensuring the program’s long-term success. For personalized advice, consult a tax expert or your state housing agency.