Audit: $513 mil in IRS homebuyer credits questioned

WASHINGTON - The Internal Revenue Service has paid out more than a half-billion dollars in homebuyer tax credits to people who probably didn't qualify, a government investigator said Friday.

Most of the money - about $326 million - went to more than 47,000 taxpayers who didn't qualify as first-time homebuyers because there was evidence they had already owned homes, said the report by J. Russell George, the Treasury's inspector general for tax administration. Other credits went to prison inmates, taxpayers who bought homes before the credit was enacted and people who did not actually buy homes.

Friday's report is the latest in a series of audits George has conducted on the homebuyer tax credit. It says the agency paid out $513 million in questionable claims for the homebuyer tax credit.

"The IRS has taken positive steps to strengthen controls and help prevent the issuance of inappropriate homebuyer credits," George said. "However, many of the actions occurred after hundreds of thousands of homebuyer credits had already been issued, including fraudulent and erroneous credits totaling millions of dollars."

The popular credit provided up to $8,000 to first-time homebuyers and up to $6,500 to qualified current owners who bought another home during parts of 2009 and 2010.

IRS spokeswoman Michelle Eldridge said the agency worked hard to enforce a complicated tax credit that provided nearly $29 billion to more than 4 million taxpayers. The agency audited nearly 448,000 returns and blocked or denied nearly 426,000 questionable claims, she said.

In all, the agency's enforcement efforts saved more than $1.3 billion and identified more than 200 criminal schemes, she said.

The tax credit for first-time homebuyers was part of the economic-recovery package enacted in 2009. In November 2009, Congress extended the credit and expanded it to longtime owners who bought new homes.

by Stephen Ohlemacher Associated Press Apr. 16, 2011 12:00 AM




Audit: $513 mil in IRS homebuyer credits questioned

Tax credit lets Phoenix pave way to area lending

Phoenix will have access to $53 million in tax credits that it will use to bolster businesses and non-profit organizations in low-income areas.

The New Markets Tax Credit allocation will go to the Phoenix Community Development and Investment Corp., a non-profit started by the city. It, in turn, will work with local banks to make low-cost loans for the purchase, expansion or renovation of commercial and non-profit buildings. The program is operated by the U.S. Department of the Treasury.

Phoenix previously received two tax-credit grants: $170 million in 2002 and $40 million in 2008.


"I'm really glad Phoenix has gotten another round of funding," said Greg Heiland, president of ValuTek, which outfits high-tech clean rooms. "Having products like this makes it more appealing for high-tech businesses and high-end jobs."

ValuTek took advantage of a $4.4 million loan to buy a vacant Motorola building in east Phoenix that had a clean room, enabling the company to customize products for its customers.

"It's given us a competitive advantage in the market," Heiland said.

The loan enabled ValuTek to hire 15 to 20 new employees.

The money has been used for projects as large as the remodeling of Christown Spectrum Mall at 19th Avenue and Bethany Home Road and the expansion of the Phoenix Biomedical Campus downtown. Those projects received loans of $37.5 million and $25 million, respectively.

It also has gone to much-smaller projects, including a $700,000 loan to Desert Taco at 19th and Northern avenues, and a $2.4 million loan to 3-Dawg Real Estate for the purchase of a building near Cave Creek Road and Greenway Parkway.

Several non-profit organizations have taken advantage of the loans, including Arizona Bridge to Independent Living, which borrowed $16 million for a new Disability Empowerment Center. Phil Pangrazio, its executive director, said 11 disability agencies use the new building.

"It's a good deal, it really is," he said of the loan program.

Don Keuth, president of the Phoenix Community Alliance and a member of the Phoenix Community Development and Investment Corp. board, said the corporation has been able to make $276 million in loans, with an economic impact of double or triple that.

Roberto Franco, deputy director of the Phoenix Community and Economic Development Department, is president of the corporation. He said the loans result in several thousand new or retained jobs.

Many of those jobs are in the distressed construction industry; loans supported the building of the downtown Phoenix CityScape, creating an estimated 5,400 positions.

The loans will focus on parts of the city where the poverty rate exceeds 30 percent or the income level is at 60 percent or less of the metro area's norm. That includes a broad swath of central, west and south Phoenix, the Sunnyslope area, the Palomino neighborhood and a large area northeast of Loop 101 and Interstate 17, near Deer Valley Airport.

The loans are issued for seven years.

Several of the loans already have been repaid. If they are repaid early, the money can be reused for additional lending.

by Michael Clancy The Arizona Republic Mar. 12, 2011 12:00 AM





Tax credit lets Phoenix pave way to area lending

Homebuyer tax credit: 950,000 must repay - Sep. 9, 2010

NEW YORK (CNNMoney.com) -- Nearly half of all Americans who claimed the first-time homebuyer tax credit on their 2009 tax returns will have to repay the government.

According to a report from the Inspector General for Tax Administration, released to the public Thursday, about 950,000 of the nearly 1.8 million Americans who claimed the tax credit on their 2009 tax returns will have to return the money.

The confusion comes because homebuyers were eligible for two different credits, depending on when their homes were purchased.

Those who bought properties during 2008 were to deduct, dollar for dollar, up to 10% of the home's purchase price or $7,500, whichever was less. The catch: The money was a no-interest loan that had to be repaid within 15 years.

Had they waited to buy until 2009, they could have gotten a much sweeter deal. Congress extended the credit and made it a refund rather than a loan.

Now, the IRS is developing a strategy for separating the 2009 taxpayers who are required to repay the credit from those who are not.

A review by the Inspector General earlier this year found that the IRS could not easily distinguish between home purchases made in 2008 and 2009. That heightened concerns that some claims could be erroneous or even fraudulent, that buyers could, for example, claim their purchase came later than it actually occurred.

Thursday's release reported that 73,000 claims, more than 4% of the 1.8 million homebuyers who received the credit, had incorrect purchase dates recorded by the IRS.

Some of the inaccuracies counted against the taxpayers, Nearly 60,000 were listed as purchasing in 2008 (meaning they had to repay the credit) or had no purchase dates at all, rather than their correct 2009 purchase dates, which would free them of the obligation to pay it back.

It is also taking a look at all those deceased taxpayers who received credits.

The inspector general reported that 1,326 single people listed as dead by the Social Security Administration claimed more than $10 million in credits. The IRS threw out 528 of those 1,326 claims, saving $4 million.

by Les Christie CNNMoney.com September 9, 2010

Homebuyer tax credit: 950,000 must repay - Sep. 9, 2010

Homebuilding forecast muted despite tax credit

The federal homebuyer tax credit helped new-home sales in metropolitan Phoenix, but it was only a temporary boost.

Real-estate analysts RL Brown and Greg Burger have updated their forecast for homebuilding in the region during 2010. Despite increases in new-home sales during the months before the tax credit's June 30 deadline, the publishers of the "Phoenix Housing Market Letter" aren't changing their earlier forecast for area homebuilding. The pair still expect 8,500 single-family permits for new homes in metro Phoenix this year.

That level of new-home permits would make it the slowest year for housing construction in the Phoenix area for decades. Last year, there were 12,500 housing permits issued in metro Phoenix.

Through the first half of this year, 4,118 homebuilding permits were issued in the area. That includes the increase in new-home sales from the tax credit. Permits dropped to 583 in June, the lowest monthly level so far this year.

Burger said resales must fall greatly in metro Phoenix for homebuilding to really climb.

"There's not much more room for builders to bring new-home prices down to compete with the foreclosures being resold by lenders," he said.

The median price of a new home is now $195,736, compared with $214,000 at the beginning of the year.

To survive Phoenix's housing crash, builders have cut costs and home prices to compete with foreclosures. If resales' prices continue to fall because of foreclosures, it will make it even tougher for the new-home market to compete. New-home lot prices have already begun to climb in some areas, where buyer demand is strongest. Prices in parts of Gilbert and Chandler have tripled in the past few years.

Brown and Burger expect the new-home market to improve. Their forecast is for a 45 to 50 percent increase in homebuilding in 2011. By 2012, they see homebuilding permits exceeding 20,000.

by Catherine Reagor The Arizona Republic Aug. 11, 2010 12:00 AM




Homebuilding forecast muted despite tax credit

Tax credit’s end slicing housing demand - Phoenix Business Journal

by Mike Sunucks Phoenix Business Journal July 2, 2010

Greg Swann fears that expiration of federal home buyer tax credits will deal another blow to Phoenix’s already staggering housing market.

Swann, a principal with Bloodhound Realty in Phoenix, said ending the $8,000 credit could push down already low prices, and cut into demand impacting the housing food chain of agents, lenders, title companies, appraisers and contractors.

“I could see a huge drop in demand in our vendors’ markets — inspectors, handymen, etc.,” Swann said.

The credits — $8,000 for first-time buyers and $6,500 repeat buyers were extended from Dec. 30 to May 1, but pending sales had until June 30 to close in order to qualify for the breaks.

The credits helped propel home sales nationally and in underwater markets, such as Phoenix. There are efforts in Congress to extend the tax credit closing deadline until Sept. 30. But even if the closing deadline is extended, new sales won’t qualify for the tax break.

Swann said he expects inventory to increase once the tax credit fully expires and has been advising investors to stay on the sidelines.

“I personally do a lot of work with

investors, and I advised them to stand down until the tax credit lapsed, both times. For the homes I’m most interested in for investors, inventories are going up and prices are going down,” Swann said.

Eric Wright, a senior loan officer with CNN Mortgage in Scottsdale, said home buyer tax credits account for about 20 percent of his business and that the extra money encouraged home sales.

“I didn’t see that the tax credit actually created any buyers,” he said. “However, it did give would-be buyers motivation to purchase sooner.”

Wright hopes low interest rates and bargain prices will keep buyers in the Phoenix marketplace.

“I have seen very little drop-off in loan applications. The exceptionally low interest rates have many people still in the market, tax credit or not,” he said.

But national home sales figures aren’t optimistic.

New home sales slumped in May, both in the West and nationwide with the expiration of the tax credits. Sales of new houses in 13 Western states, including Arizona, fell 53 percent in May from the previous month, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

Nationally, the decline was 33 percent. May’s numbers were the worst since the U.S. government began tracking sales data in 1963.

Swann said he doesn’t expect to see much improvement on Phoenix home prices pulled down by foreclosures, short sales and oversupplies of homes.

“We are overbuilt, and the population is essentially static. Until metropolitan Phoenix starts growing again, nothing else that happens will make much difference. In the meantime, there are excellent opportunities available for all-cash or well-qualified buyers,” Swann said.

Some brokerages are trying to boost demand in the post-tax credit marketplace. Coldwell Banker is offering an $8,000 credit to all home buyers for purchases through July 31.

Wright said other agents and loan officers are trying to stay in touch with clients, new and old.

“Both real estate agents and loan officers are continuing to network and are maintaining relationships with past clients. I have also seen an increase in the use of social networking sites to stay top of mind with potential clients,” Wright said.




Tax credit’s end slicing housing demand - Phoenix Business Journal

Senate OKs extension of homebuyer tax credit

by Andrew Taylor Associated Press Jun. 17, 2010 12:00 AM

WASHINGTON - The Senate on Wednesday approved a plan to give homebuyers an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring.

The move by Senate Majority Leader Harry Reid would give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.

The proposal, approved by a 60-37 vote, would only allow people who already have signed contracts to finish at the later date. About 180,000 homebuyers who already signed purchase agreements would otherwise miss the deadline.

Reid, D-Nev., added the proposal to a bill extending jobless benefits through the end of November. Nevada has the nation's highest foreclosure rate, and Reid is facing a tough re-election campaign.

First-time buyers were eligible for a tax credit of up to $8,000. Current owners who bought and moved into another home could qualify for a credit of up to $6,500.

The $140 million cost of the measure would be financed by denying businesses the ability to deduct from their taxes punitive damages paid when losing lawsuits or judgments.



Senate OKs extension of home credit

Homebuyer Tax Credit Closing Deadline May Be Extended - US News and World Report

by Luke Mullins US News and World Reports June 14, 2010

With the deadline to qualify for Uncle Sam's homebuyer tax credit quickly approaching, Congressional lawmakers are trying to provide additional time for consumers scrambling to close transactions.

Last week, three U.S. Senators offered an amendment to a tax extension bill that would push back the date by which homebuyers need to complete their transactions in order to remain eligible for the federal tax perk. Under the terms of the measure, the original June 30 deadline to close transactions would be extended to September 30.

The extra time, however, would only apply to buyers who already have a sales contract. It would not open the door to additional buyers. "All [the measure] does is take the existing law and scratch out June 30 and put in September 30," says Lucien Salvant, a spokesman for the National Association of Realtors (NAR). The measure was introduced by Nevada Democrat Harry Reid, Georgia Republican Johnny Isakson, and Connecticut Democrat Chris Dodd.

The tax credit, which was extended and expanded in November, provides up to $8,000 for qualified home buyers who signed a sales contract by the end of April and complete their transaction by the end of June. The legislation was designed to prod jittery home buyers off the sidelines and help mop up the glut of unsold inventory that is dragging down home prices.

On top of lower prices and cheap mortgage rates, the credit has helped stimulate buyer demand. Existing home sales increased 7 percent in March and 8 percent in April as the contract-signing deadline approached. But this increase in sales has, in some cases, overwhelmed the real estate industry's capacity, thereby lengthening the time is takes to complete a transaction, Salvant says. Meanwhile, many first-time buyers are purchasing distressed properties—such as foreclosures or short sales—which often take longer to complete. These delays could prevent as many as 180,000 home buyers who signed a contract by April 30 from completing their transactions by June 30, NAR says.

"These are not buyers who just entered into the market," NAR President Vicki Cox Golder said in a statement Friday. "These are buyers who previously met all the qualifications for the tax credit, but find themselves at the mercy of a work-flow jam with the lenders or other delays and might not be able to complete the purchase of their homes."

Keith Gumbinger of HSH.com called such an extension sensible. "The systems which make up mortgage lending are clogged," Gumbinger says. "It's reasonable to ask for an extension of that if the delays are not the fault of the purchaser."

Since the measure does not open the door to additional buyers, Celia Chen of Moody's Analytics said it would have little impact on the housing market outlook. "It's just going to spread the sales later into the year," she said. "It's not going to change the actual number of homes that are sold."

The enactment of the measure isn't a done deal. Members of Congress will only turn their attention to the tax extension bill—to which this measure it attached—once they complete work on the contentions financial reform bill, Salvant says. Still, Salvant remains hopeful that the measure will become law before June 30.


Homebuyer Tax Credit Closing Deadline May Be Extended - US News and World Report

Getaway buyers lift housing

Getaway buyers lift housing

by J. Craig Anderson The Arizona Republic Mar. 20, 2010 12:00 AM

Extending the federal income-tax rebate for first-time homebuyers hasn't done much to boost Valley home sales since the rebate's original cutoff in November, leading some local homebuilders and analysts to think the overtime might have been overkill.

Still, they say something even better is happening: Homebuyers, especially seasonal residents from outside Arizona, appear to be regaining confidence in the Valley's new-home market.

David Kitnick is one of several local builders who said the past two months have produced more sales than any comparable period in the past two years, something driven by out-of-state buyers.

"Other builders will tell you that over the last 60 days there's been a firming of prices," said Kitnick, founder of luxury-home builder Rosewood Homes in Scottsdale. "Prices have actually gone up in the past 60 days."

While a handful of buyers have mentioned the tax rebate, he said, most said they are planning to keep their original homes in the Pacific Northwest, the Midwest or Canada and use the Arizona property as a winter getaway.

"Over the last 60 days, almost three-fourths of our homebuyers have been from out of state," said Kitnick, who has subdivisions in Scottsdale, Goodyear and Peoria.

The promise of a federal income-tax credit has enticed some residents to go house hunting, local real-estate experts said, but it appears that most of the serious rebate seekers bought in September or October, before the tax credit"s initial deadline of Nov. 30.

Congress extended the federal income-tax rebate of up to $8,000 for new homebuyers and

added a second rebate of up to $6,500 for existing homeowners

who have lived in their home for at least five years.

While the new-buyer rebate applies to new and used homes alike, existing homeowners must purchase a new home to qualify.

The extended deadline requires homebuyers to open escrow by April 30 and close by June 30.

New-home sales have climbed slowly and steadily since the beginning of the year, which is more likely an indication of rising consumer confidence, word of mouth about the affordability of Phoenix-area homes, and a seasonal buying pattern that crests in the summer and bottoms in winter, said Jim Belfiore, a Phoenix real-estate analyst who specializes in the new-home market.

The recent trend is nothing like the short-term boost homebuilders saw in late summer and fall 2009, which built to a crescendo in October and then fell off dramatically, said Belfiore, president of Belfiore Real Estate Consulting.

"A real slowdown occurred in November of last year," he said, evidence that the initial deadline spurred a number of ambivalent would-be homebuyers into the market.

Now, with six weeks of eligibility left to claim the rebate, sales are up from a year ago but following a more typical pattern of gradual increases as the Valley shifts into home-buying season, Belfiore said.

Lori Tuter, sales manager of the Dolce Vita manufactured-home community in Apache Junction, said the addition of a $6,500 tax rebate for existing homeowners has helped her business in the past few months.

Dolce Vita, a 55-and-older community, does a lot of business with part-time residents, most of whom already own a home.

"Previously, it (the tax credit) didn't really apply to our residents," Tuter said.

Still, because buyers claim the tax credit directly and not through a homebuilder, she said it's difficult to know how many people are actually using it. She said there is a way dual residents can claim the tax credit, but it involves changing their permanent residency and might not be worth it to some buyers.

"We've definitely had some increased traffic coming in because of it," she said.

In general, Belfiore said homebuilders are probably feeling more confident this year even if sales are up only slightly from what they were expecting, because most are operating with less overhead and building smaller, less expensive homes.

He predicts a moderate increase in new-home permits compared with 2009, going from last year's 8,650 permits to 13,200 permits.

"That's not a huge increase, but it will feel better than it actually is," he said.