The low-income housing tax credit is now the largest federal program used to fund the development and rehabilitation of housing for low-income households. Under this program, states are authorized to allocate federal tax credits as an incentive to the private sector to develop rental housing for low-income households. The tax credits may be taken annually for 10 years by investors in qualified low-income housing projects to offset federal income taxes. If all the credits authorized over a 10-year period were awarded by the states to completed housing projects and used by investors, the annual cost would be more than $3 billion. This report discusses the characteristics of the residents and properties that have benefited from tax credits and assesses the controls the Internal Revenue Service and the states have in place to ensure that (1) state priority housing needs are met; (2) housing project costs, including tax credit costs, are reasonable; and (3) states and project owners comply with program requirements. GAO summarized this report in testimony before Congress; see: Tax Credits: Opportunities to Improve Oversight of the Low-Income Housing Program, by James R. White, Associate Director for Tax Policy and Administration Issues, before the Subcommittee on Oversight, House Committee on Ways and Means (GAO/T-GGD/RCED-97-149, Apr. 23).

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