Article | What's the deal with the new 8823 Guide?

The 8823 Guide is a document used throughout the LIHTC industry. Its primary purpose is to provide state LIHTC agencies instructions on evaluating and reporting compliance with Section 42 through the mechanism of IRS Form 8823. For a few years now, the industry has been aware that the IRS plans to revise the 8823 Guide, and the IRS asked for feedback last year. Once the comment period was complete, we were then informed that the revision of the Guide would likely not be seen until later in 2024. With this context, it was a surprise to find that a new Guide was issued in January, much sooner than anticipated for the coming total revision. Upon reading the newly released Guide, however, it has become obvious that this is not the anticipated new edition. Rather, it just takes the existing 2011 edition with some minor changes.

What has Changed?

• Pages 17, and 26-33 are primarily where changes appear. 
• It is a new format to match other IRS publications. References will now work differently.
• The Guide is now identified as IRS Publication 5913.
• There is at least one place where instructions on how to complete the document itself are included. For instance, section I. A (1) on page 17 says "Describe the issue, industry or entity and provides an overview and general information on unique business practices." This has nothing to do with that section or the LIHTC and appears to be directions included in a document template used to transfer the form to the new format. Likely this was inadvertently left in from a template.
• The sample 8823 form and IRS instructions in Exhibit 1-2 have been updated to use the current version of the form and instructions. Interestingly, the instructions are the only place the Average Income Test minimum set-aside shows up in the new guide. They do not appear in a keyword search of the new Guide because the new 8823 and instructions that are included are just pictures of these documents and are not searchable.
• Exhibit 1-3 provides the current version of the IRS Noncompliance Notification Letter, Letter 3464 (SC/CG) that the IRS sends informing owners of noncompliance.

What is NOT included?

The following changes since the last 2011 Guide revision are NOT found in the Guide. We will look to the revision expected later in 2024 for these. 

• Changes found in Change 4 of the HUD Handbook 4350.3.
• Changes related to the revision of the Treas. Reg. 1.42-10 utility allowance regulations (2019).
• Changes related to the revision of the Treas. Reg. 1.42-5 inspection regulations (2019 with 2020 follow-up revisions). 
• Changes related to the Average Income Test and related Treas. Reg. 1.42-19 (AIT), 1.42-19T (AIT reporting), and 1.42-15 (Available Unit Rule) (2022).
• Provisions resulting from the Housing Opportunities Through Modernization Act - HOTMA (2016, as regulated in 2023 and effective 1/1/24).

HOTMA is on the mind of the industry, as one of the most massive changes in the history of affordable housing. Initially, we thought that a HOTMA provision on how foster household members are treated was reflected in the new Guide, but a little research reminded us that it was a provision in HOTMA that is the same as a former version of the HUD Handbook (Change 3, 2009). It is there because the 8823 Guide is so old that it reflects a policy from 15 years ago that HUD has returned to in HOTMA!

What a year! A new 8823 Guide! HOTMA! Two Major New HUD updates in one week! ... and then there is NSPIRE!

So much to discuss this year at the 2024 Compliance Summit. Please Join us ... the discussion won't be the same without you! Get more information HERE or by clicking the image below.