By Vanessa Albert Lowry, Esq. and Carla Young, Esq.
Greenberg Traurig, LLP, Philadelphia, PA and Tysons Corner, VA
On June 15, 2011, the IRS released a revised Form 8703 Annual Certification of a Residential Rental Project. The annual filing of this Form has been required since 1986 of operators of multi-family housing projects financed with tax-exempt bonds issued under §142(d) of the Internal Revenue Code of 1986, as amended.
The new version of Form 8703 is considerably more detailed than the prior version. Four new questions were added as a result of changes made by the Housing Assistance Tax Act of 2008 (commonly referred to as HERA). The new questions are designed for projects that are entirely low-income. Operators of these projects will no longer have to answer the questions requiring calculation of percentage of low-income occupancy. However, operators of projects that are not entirely low income will have to answer these new questions as well as the old questions. In addition, a section about the bonds used to finance the project was added so that the Information Return 8038 for the related bonds could be located and cross-checked more easily by the IRS.
Failure to file Form 8703 annually does not affect the tax-exemption of the related bond financing, but does subject the operator of the financed project to a monetary penalty ($100 per failure to file). Also, when a §142(d) bond issue financing a project is audited, one of the standard questions asks the project owner or operator to produce copies of filed 8703s. The failure to file can cause problems on audit because such failure can cause the IRS to raise questions about actual low income set aside compliance by the owner, which may, in turn, if the questions raised are not adequately answered, adversely affect the tax-exemption of the related bonds.
©2011 Greenberg Traurig, LLP
For more information, in the BNA Tax Management Portfolios, see Milder and Borod, 584 T.M., Rehabilitation Tax Credit and Low-Income Housing Tax Credit, and Maule, 597 T.M., Tax Incentives for Economically Distressed Areas, and in Tax Practice Series, see ¶3150, The Low-Income Housing Credit.p>
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