The IRS recently completed its Audit Technique Guide (attached), which was first released in draft form in December 2014 and then revised based on public comments. The “ATG” (in IRS parlance) is intended to provide guidance to IRS examiners who are auditing owners of Section 42 properties and is therefore a valuable tool for determining potential pitfalls in such investments.
The ATG does not replace the Form 8823 Guide, which focuses on noncompliance issues and is intended for use by state tax credit agencies. The ATG can also be helpful for developing a basic familiarity with the Low Income Housing Credit because it begins with an overview of the LIHTC program and includes (in Appendix A) a compilation of Section 42 terminology. Some of the issues discussed in the ATG are sure to be the subject of discussion in the years to come – and the positions taken on some issues do not necessarily reflect established law – but it still provides a useful guide to the IRS’ position on a variety of issues and an overview of the LIHTC program.
The ATG may be found here.