Clarification on State or Local Fair Housing Law and IRS Violations

Q The last issue of the Insider seemed to indicate that a violation of state or local fair housing law may result in noncompliance reported with IRS Form 8823 (see “Comply with State, Local Fair Housing Laws that Go Beyond Federal Law.”) Will additional types of housing discrimination beyond those covered by the federal Fair Housing Act (FHA) be reported to the IRS?

A No. Special thanks to tax credit consultant A.J. Johnson for clarifying this oversight. “Only violations of the Fair Housing Act may result in an 8823. This is due to the fact that the program provides federal tax credits,” says Johnson. However, it’s possible that violation of a state or local fair housing law may result in noncompliance with some state tax credits, Johnson notes.

Item 11 on IRS Form 8823 (Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition), which is the form the state housing agency uses to report noncompliance to the IRS, lists the main ways you can violate the tax credit law. These federal violations are sometimes called IRS violations. And a federal FHA violation would be reported under Item 11h, which requires that “all units in the building must be for use by the general public.”