IRS Form 8823 – IRS Forms, Instructions, Pubs 2026 – In the realm of affordable housing, the Low-Income Housing Tax Credit (LIHTC) program stands as a cornerstone initiative, incentivizing developers to create housing for low-income households through federal tax credits. Administered by the Internal Revenue Service (IRS) under Section 42 of the Internal Revenue Code, the program relies on state housing finance agencies to monitor compliance and report issues. At the heart of this oversight is IRS Form 8823, officially titled the “Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition.” This form ensures the integrity of the LIHTC program by alerting the IRS to any deviations from program rules or changes in property status.
Whether you’re a property owner, manager, developer, or state agency professional, understanding Form 8823 is essential to avoid credit recapture, penalties, and loss of program benefits. In this SEO-optimized guide, we’ll break down the form’s purpose, filing requirements, key sections, common noncompliance issues, and best practices—drawing from official IRS resources and industry expertise as of 2026.
What Is the Low-Income Housing Tax Credit (LIHTC) Program?
The LIHTC program, established by the Tax Reform Act of 1986, provides dollar-for-dollar tax credits to developers who build or rehabilitate affordable rental housing. States allocate credits based on population, and projects must reserve a portion of units for low-income tenants—typically those earning 60% or less of the area median income (AMI). Compliance periods span 15 years initially, often extended to 30 years via extended use agreements.
State housing credit agencies (HCAs), such as housing finance authorities, oversee compliance through regular inspections and certifications. If issues arise, they use Form 8823 to notify the IRS, helping maintain program accountability and prevent abuse.
The Purpose of IRS Form 8823
Form 8823 serves as the official mechanism for HCAs to report two main events:
- Noncompliance: Any violation of LIHTC rules, such as income limits, rent caps, or property maintenance standards.
- Building Disposition: Changes in ownership or status, like sales, foreclosures, or destructions, which could impact the project’s ongoing eligibility for credits.
By filing this form, agencies ensure the IRS can review tax returns, assess audit potential, and potentially recapture credits if noncompliance persists. Even corrected issues must be reported if they were identified, promoting transparency. The form is filed per building, identified by a unique Building Identification Number (BIN) from IRS Form 8609.
Recent revisions to the form, last updated in June 2023, include refined checkboxes for noncompliance categories and clearer instructions for attachments. As of 2026, no major structural changes have been announced, but agencies should check IRS bulletins for procedural updates.
Who Must File Form 8823 and When?
Only authorized state HCAs file Form 8823—not property owners or taxpayers directly. Owners are responsible for self-certifying compliance annually via IRS Form 8609-A, but agencies handle reporting based on monitoring reviews.
Filing triggers include:
- Identification of noncompliance during audits, physical inspections, or file reviews.
- Correction of previously reported issues.
- Building dispositions, regardless of compliance status.
Deadlines are strict: Submit no later than 45 days after the end of the correction period (typically 30-60 days provided to owners) or after becoming aware of a disposition. Amended returns can be filed if needed, by checking the box at the top of the form.
Forms are mailed to the IRS Philadelphia Service Center. Electronic filing isn’t standard, but some states use digital tools for internal tracking.
How to Complete IRS Form 8823: Step-by-Step Breakdown?
Filling out Form 8823 requires precise details from the project’s Form 8609 and monitoring records. Here’s a detailed overview of its sections:
Header and Building Information (Lines 1-6)
- Enter the building’s name, address, and BIN.
- Note any changes from the original Form 8609.
- This section ensures the IRS can match the report to the correct property.
Owner Information (Lines 7-12)
- Provide the owner’s name, address, and taxpayer ID (EIN or SSN).
- For multiple owners, attach a schedule.
- Accuracy here is crucial for IRS follow-up audits.
Credit and Project Details (Lines 13-15)
- Report the total credit allocated to the BIN.
- If part of a multi-building project, note the total buildings.
- Detail residential units: total, low-income, those with issues, and units reviewed.
Noncompliance Details (Lines 16-19)
- Specify the date noncompliance began and was corrected (if applicable).
- Check if this filing corrects a prior report.
- Select “Out of Compliance” or “Noncompliance Corrected.”
- Choose from 17 specific issues (a-q), such as:
- Household income exceeding limits at move-in (11a).
- Failure to recertify tenant income (11b).
- Violations of Uniform Physical Condition Standards (UPCS) or local codes (11c).
- Rent exceeding limits (11g).
- Units occupied by nonqualified students (11l).
- Attach explanations for certain categories (e.g., casualty losses or transient use).
Additional Information and Building Disposition (Lines 20-21)
- Provide supporting details if needed.
- For dispositions, select type (sale, foreclosure, etc.), date, and new owner info.
Contact and Certification (Lines 22-23)
- Include agency contact details.
- Sign under penalty of perjury.
Always file a separate form per building. For guidance, refer to the IRS Audit Technique Guide for Form 8823, which details audit procedures and correction examples.
Sample IRS Form 8823 (for illustrative purposes; always use the latest version from IRS.gov).
Common Types of Noncompliance and How to Avoid Them
Form 8823 highlights 17 noncompliance categories, but eight pose the highest risk for credit loss or recapture:
- Income Limits at Initial Occupancy (11a): Households exceeding AMI thresholds disqualify units.
- Income Recertification Failures (11b): Annual verifications must be documented properly.
- Physical Inspection Violations (11c): Includes health/safety hazards under UPCS.
- Rent Limit Exceedances (11g): Gross rents can’t surpass program caps, adjusted for utilities.
- Available Unit Rule Violations (11i): Over-income tenants must be managed without displacing qualified ones.
- Vacant Unit Rule Issues (11j): Vacancies must be marketed to low-income applicants.
- Utility Allowance Miscalculations (11m): Allowances must reflect actual costs.
- Student Occupancy Rules (11l): Full-time students are generally ineligible unless exceptions apply.
To mitigate risks, conduct regular self-audits, train staff on HUD Handbook 4350.3 for income calculations, and respond promptly to agency notices. State manuals, like Illinois’ 2025 LIHTC Compliance Manual, emphasize aligning with the most restrictive rules if multiple funding sources are involved.
Building Dispositions: Reporting Sales, Foreclosures, and More
Dispositions must be reported even if the building remains compliant, as they may trigger recapture events. Provide new owner details to allow the IRS to track continued compliance. Failure to report can lead to agency penalties and owner liabilities.
Consequences of Noncompliance Reported on Form 8823
Upon receiving Form 8823, the IRS may:
- Review the owner’s last three tax returns.
- Audit the project for recapture potential.
- Impose penalties, including credit disallowance or fines.
Uncorrected issues can result in full credit recapture plus interest. However, timely corrections often limit damage, as agencies report resolutions. Industry reports note variations in agency practices—some file for all issues, others only uncorrected ones—highlighting the need for proactive compliance.
Best Practices for LIHTC Compliance and Avoiding Form 8823 Filings
- Annual Certifications: Submit complete owner certifications on time.
- Record-Keeping: Maintain detailed tenant files for at least six years.
- Training: Use resources like the National Council of State Housing Agencies (NCSHA) guide.
- Monitoring Partnerships: Work closely with your state HCA; many offer compliance workshops.
- Software Tools: Leverage LIHTC management software for rent and income tracking.
States like Connecticut contract third parties for monitoring, underscoring the importance of preparation.
Example of a Low-Income Housing Tax Credit project, illustrating the affordable housing supported by the program.
Frequently Asked Questions (FAQs) About IRS Form 8823
1. What happens if noncompliance is corrected before the deadline?
The agency still files Form 8823 but notes the correction, minimizing IRS scrutiny.
2. Can owners file Form 8823 themselves?
No—only state agencies file it. Owners report via self-certifications.
3. How does Form 8823 relate to other IRS forms?
It complements Form 8609 (allocation) and Form 8586 (claiming credits).
4. Where can I download the latest Form 8823?
From the IRS website at irs.gov/forms-pubs, or state agency portals.
5. Is there a guide for Form 8823?
Yes, the IRS Audit Technique Guide provides detailed examples and is available via NCSHA or state resources.
Conclusion: Staying Compliant in the LIHTC Landscape
IRS Form 8823 plays a pivotal role in safeguarding the LIHTC program’s mission to provide affordable housing. By understanding its requirements and prioritizing compliance, stakeholders can avoid costly pitfalls and contribute to sustainable low-income communities. For the most current advice, consult your state HCA or a tax professional, as program nuances evolve.
This guide is based on trusted sources including IRS publications, state compliance manuals, and industry analyses as of February 2026. Always verify with official IRS updates for any changes.