Introduction
The PEER Committee reviewed the Mississippi Home Corporation’s administration of the federal Low-Income Housing Tax Credit Program created by the Tax Reform Act of 1986.
Overview
The Mississippi Home Corporation administers the federal low-income tax credit program in Mississippi. This tax credit program, created in Section 42 of the Internal Revenue Code, allows qualified developers of low-income housing to take a credit on their federal income taxes. In administering this federal program, the Mississippi Home Corporation must devise policies for implementation of the program, evaluate applications for the program, and monitor developer’s compliance with federal and state requirements.
No state or federal agency of government has the authority to oversee effectively the operations of Mississippi’s tax credit program. This is because Congress never established any Internal Revenue Service oversight requirements for the program and the Legislature has never acted to impose on the corporation any of the oversight requirements it usually imposes on state agencies, such as annual audits and ongoing legislative oversight through regular standing committee hearings. The weaknesses cited in this report are directly attributable to the lack of oversight.
The Mississippi Home Corporation’s annually adopted qualified allocation plan does not comply with federal statutory guidelines in that it allows the corporation to amend the plan without first complying with public review and comment procedures and the gubernatorial signature requirement. These failures deny public review of the corporation’s decisions and could jeopardize the validity of tax credits issued under authority of the illegally amended plans. In several instances, the Mississippi Home Corporation’s administration of the tax credit program has not complied with its own annually adopted qualified allocation plans, creating a question regarding fairness of the process by which the program is administered.
The corporation’s program monitoring efforts are in compliance with federal requirements and the program has resulted in the development of housing in areas where there exists a need for new low-income housing. The areas of most chronic need for housing have not, however, received the benefits of new low-income housing developed through the tax credit program.
Recommendations
1. The Legislature should require that the Mississippi Home Corporation make a complete annual report to the Legislature of all tax credit applications made, all granted, and the reasons for granting and denying the applications. This report should also contain an analysis of the number of low-income housing units constructed by county, as well as the total number of housing units and substandard units by county. (The Appendix to this report, page 31, contains proposed legislation concerning the Mississippi Home Corporation.)
2. The Mississippi Home Corporation should comply fully with its own policies and those of the Internal Revenue Service.
3. The Legislative Oversight Committee should request that the Mississippi Home Corporation staff develop an annual options study which apprises the Legislature of the strategies which could be implemented to encourage the development of low-income housing in the areas of the state most difficult to develop.
4. The PEER Committee's Executive Director should forward a copy of this report to the Internal Revenue Service for its review.