Coalition of Housing Groups Battles Ruling by Tax Agency

TAX WATCH

Some nonprofit organizations that give down-payment assistance to home buyers are fighting an IRS ruling that says they may lose their tax-exempt status if the money for down payments is provided by the sellers of the homes.

An alliance of down-payment assistance groups, including AmeriDream in Gaithersburg, Md., and Nehemiah Corporation in Sacramento, say the IRS ruling will make it hard for them to carry out their mission of helping low-income Americans buy homes.

The alliance, called Support Downpayment Assistance, has asked the Treasury Department to suspend the ruling to give charities time to make their concerns known to the IRS. It is also asking groups to contact their members of Congress to voice their opposition.

Sean Kevelighan, a Treasury Department spokesman, said his agency supports the IRS ruling, which was approved by Treasury’s Office of Tax Policy. The Treasury Department has not delayed the ruling, which took effect last month.

The IRS said last month in Revenue Ruling 2006-27 that when homeowners and builders give money to down-payment assistance organizations on the condition that the groups funnel the cash to people buying the homes they are selling, the sellers are gaining an unfair charitable advantage. However, the IRS said, organizations can qualify for charity status if they help needy people make a down payment and if the money comes from donors who do not gain financially by helping people with mortgage payments (The Chronicle, May 18). Revenue rulings from the IRS are designed to help the public by stating the government’s official position on aspects of tax law.

Opponents of the ruling say it is a striking reversal of IRS policy. They say they described their seller-financed down-payment programs when they applied to the IRS for charity status and were granted a tax exemption.

“The rule is inconsistent with national housing policy and with the IRS’s own prior determinations,” wrote the alliance’s chairwoman, Ann Ashburn, in a letter to the Treasury Department.