Tax Policy:

Costs Associated With Low Income Housing Tax Credit Partnerships

GGD-89-100FS: Published: Jul 10, 1989. Publicly Released: Jul 10, 1989.

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Pursuant to a congressional request, GAO provided information on the various fees and expenses associated with real estate partnerships that use the low income housing tax credit, focusing on the: (1) proportion of equity financing used for fees and expenses which reduce the amount of equity available for actual housing construction and rehabilitation; and (2) fees and expenses of low income housing tax credit partnerships which involve tax exempt organizations.

GAO found that the: (1) 19 publicly offered low income tax credit partnership projects reviewed used a higher average proportion of equity to pay fees and expenses than the 48 residential and commercial investment partnerships; (2) low income partnerships averaged 27 percent of equity for fees and expenses, while the other partnerships averaged about 21 percent; (3) proportion of fees that low income tax credit partnerships spent was within the guidelines that 25 states followed in regulating the offerings; (4) guidelines allowed partnerships carrying a higher proportion of debt to use a higher proportion of equity for fees and expenses; (5) low income partnerships' debts averaged 76.7 percent of equity, while the other 48 partnerships' averaged 39 percent of equity; (6) amount that low income partnerships paid from equity varied from 17 percent to 33.8 percent; and (7) there was no information available on tax exempt organizations' low income housing activities.

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