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63–013 2011

ADMINISTRATION OF THE FIRST–TIME 

HOMEBUYER TAX CREDIT 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON OVERSIGHT 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

OCTOBER 22, 2009

Serial No. 111–34 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON OVERSIGHT 

JOHN LEWIS, Georgia, Chairman 

XAVIER BECERRA, California 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOHN B. LARSON, Connecticut 

ARTUR DAVIS, Alabama 

DANNY K. DAVIS, Illinois 

BOB ETHERIDGE, North Carolina 

BRIAN HIGGINS, New York 

CHARLES W. BOUSTANY, JR., Louisiana, 

Ranking Member 

DAVID G. REICHERT, Washington 

PETER J. ROSKAM, Illinois 

PAUL RYAN, Wisconsin 

JOHN LINDER, Georgia 

JANICE MAYS, Chief Counsel and Staff Director 

JON TRAUB, Minority Staff Director 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory of October 15, 2010 announcing the hearing ......................................... 2 

WITNESSES 

The Honorable J. Russell George, Inspector General, Treasury Inspector General for Tax Administration ................................................................................ 5 

Linda E. Stiff, Deputy Commissioner for Services and Enforcement, Internal 

Revenue Service ................................................................................................... 25 

James R. White, Director, Tax Issues, Government Accountability Office ......... 35 

SUBMISSIONS FOR THE RECORD 

Georgia Aldridge, Ed.S., NCSP, Statement Letter ............................................... 57 

Jon R. Sias, Statement ............................................................................................ 57 


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(1) 

ADMINISTRATION OF THE FIRST–TIME 

HOMEBUYER CREDIT 

THURSDAY, OCTOBER 22, 2009 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON OVERSIGHT, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:03 a.m. in 1100 

Longworth House Office Building, the Honorable John Lewis 

(Chairman of the Subcommittee) presiding. 

[The advisory of the hearing follows:] 


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HEARING ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

Lewis Announces Hearing on Administration of 

the First-Time Homebuyer Tax Credit 

October 22, 2009 

House Ways and Means Oversight Subcommittee Chairman John Lewis (D–GA) 

today announced that the Subcommittee on Oversight will hold a hearing on administration of the first-time homebuyer tax credit. The hearing will take place on 

Thursday, October 22, 2009, at 10:00 a.m., in the main Committee hearing 

room, 1100 Longworth House Office Building. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. Any individual or organization not 

scheduled for an oral appearance may submit a written statement for consideration 

by the Subcommittee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

In 2008, the ‘‘Housing and Economic Recovery Act of 2008’’ (Public Law 110–289) 

established a first-time homebuyer tax credit for low- and moderate-income taxpayers of up to $7,500. The tax credit applies to homes purchased after April 8, 

2008, and before July 1, 2009. The credit must be repaid over a 15-year period, and 

repayment is accelerated if the home is sold within such period. 

In 2009, the ‘‘American Recovery and Reinvestment Act of 2009’’ (Public Law 111– 

5) extended and expanded the 2008 first-time homebuyer tax credit for homes purchased between January 1, 2009, and December 1, 2009. The Act increased the maximum tax credit to $8,000. It also waived the repayment requirement unless the 

home ceases to be the taxpayer’s principal residence within a 36-month period following purchase. 

The first-time homebuyer credit is fully refundable, which means that the credit 

will be paid out to eligible taxpayers even if they have no tax liability or the credit 

exceeds the amount of tax due. For homes purchased in 2008, the credit may be 

claimed on the 2008 income tax return. For homes purchased in 2009, the credit 

may be claimed on the 2008 income tax return (original or amended) or the 2009 

income tax return. 

On July 29, 2009, the Internal Revenue Service (IRS) announced its first successful prosecution related to fraud involving the first-time homebuyer credit and 

warned taxpayers to beware of schemes. As of September 30, 2009, the IRS has 

identified 167 criminal schemes involving the credit and opened nearly 107,000 civil 

examinations involving the credit. 

In announcing the hearing, Chairman Lewis said, ‘‘I am pleased that more 

than one million taxpayers claimed the first-time homebuyer credit. However, I am concerned about recent reports that there have been fraudulent 

schemes involving the credit. This hearing will allow the Subcommittee to 

hear what, if any, additional steps should be taken to allow the IRS to 

strike a balance between issuing timely refunds of the homebuyer tax credit and protecting federal revenue.’’ 

FOCUS OF THE HEARING: 

The focus of the hearing is to review the IRS’s administration of the first-time 

homebuyer tax credit. The Subcommittee will examine recent allegations of fraud 

involving the tax credit and consider opportunities to enhance administration during 

the 2010 filing season. 


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DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://democrats.waysandmeans.house.gov, select ‘‘Committee Hearings.’’ Select the 

hearing for which you would like to submit, and click on the link entitled, ‘‘Click 

here to provide a submission for the record.’’ Once you have followed the online instructions, complete all informational forms and click ‘‘submit’’ on the final page. 

ATTACH your submission as a Word or WordPerfect document, in compliance with 

the formatting requirements listed below, by close of business November 5, 2009. 

Finally, please note that due to the change in House mail policy, the U.S. Capitol 

Police will refuse sealed-package deliveries to all House Office Buildings. For questions, or if you encounter technical problems, please call (202) 225–1721. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness.Q04 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://democrats.waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

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*** 

Chairman LEWIS. Good morning. The hearing is now called to 

order. Today’s hearing is on the first-time homebuyer credit. 

Today the Subcommittee will examine the first-time homebuyer 

credit. We need to answer two basic questions. Are people claiming 

the credit who should not and what can be done to stop the abuse. 

The tax credit was created to stimulate the economy and home 

sales. It was estimated that at least 2.2 million households would 

claim about $18 billion of tax credits. To date, about 1.4 million 

households have claimed nearly $10 billion. The majority of these 

households, 60 percent of them, have income below $50,000. 


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To ensure the credit achieved its goals, the Internal Revenue 

Service developed a program to timely process returns and issue refunds for those claiming the credit. I salute this effort. 

I am mindful, however, that this quick response came at a cost. 

The Service processed over one million returns claiming the credit 

before new fraud filters were in place. The result so far is that 

more than 100,000 exams have been opened involving the credit. 

We will hear today that taxpayers claiming the credit include 

those who already owned a home, who had not yet bought a home, 

and who are children, some as young as four years old. 

There are possibly hundreds of millions of dollars that have been 

paid to taxpayers who are not entitled to the credit. We want to 

and we need to stop this fraud and abuse. I look forward to the recommendations of our witnesses. 

At this time, I would like to take a moment to thank the Deputy 

Commissioner, Linda Stiff, previously Acting Commissioner, for her 

outstanding and great service as a public official. 

I understand that you plan to retire in December after 30 great 

years with the Service, and this is your last appearance before the 

Subcommittee. 

We have enjoyed working with you over the years and your retirement will be a great loss, not just to the Committee, the Subcommittee, the Full Committee, to the Congress and to the nation. 

It goes without saying that you will be deeply missed. We wish you 

the very, very best in whatever you decide to do in the days, weeks, 

months and years to come. 

Thank you for your service. 

I am pleased to recognize the distinguished Ranking Member, 

Dr. Boustany, for his opening statement. 

Mr. BOUSTANY. Thank you, Mr. Chairman. Thank you for 

yielding time. I want to thank you for holding this very important 

hearing. 

When the Ways and Means Committee and the Tax Code are 

used for purposes beyond raising the revenues necessary to fund 

the Federal Government, for instance, to pursue social and economic policy goals, the members of this Subcommittee have a very 

important responsibility to conduct oversight of those tax provisions just as the Appropriations Committee in the House conducts 

oversight programs it funds to ensure that precious resources are 

being used effectively and honestly. 

We are holding this hearing today to review the administration 

of the first-time homebuyer tax credit, examine allegations of fraud 

in claiming this refundable credit, and consider possible legislative 

changes to the credit. 

The credit expires at the end of next month and a debate is heating up here in Congress over whether we should extend it, for how 

long, and with what modifications. 

Determining whether or not we should extend the credit is not 

the purpose of this hearing today. Every time Congress creates a 

new refundable credit, meaning that individuals get a check from 

the Government, whether or not they have actual tax liability, the 

incentive for fraud is magnified, as we have seen for example with 

a high percentage of erroneous claims for the earned income tax 


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credit and with recent videos showing ACORN officials advising 

people on how to fraudulently claim refundable child credits. 

Therefore, this Subcommittee has a responsibility to figure out 

how we can minimize the opportunities for fraud and to be good 

stewards of the taxpayers’ money. 

If Congress decides to extend the home buyer tax credit, both 

Chairman Lewis and I believe Congress should consider reasonable 

proposals to reduce fraud and improve the IRS’ ability to administer this credit. 

In addition, given the worsening fiscal crisis our Government 

faces, I believe any extension of the home buyer tax credit should 

be paid for by reducing wasteful spending elsewhere in the budget, 

such as perhaps canceling ineffective stimulus fundings that have 

not yet been spent. 

Finally, I want to share the same sentiments expressed by Chairman Lewis earlier regarding your service to our country, Ms. Stiff. 

Thank you very much. Thirty years of dedicated service to the 

American people is something that is quite remarkable, and we are 

thankful for that service. 

Congratulations on your well deserved retirement. Best of luck in 

your future endeavors. I look forward to hearing your final 

thoughts here today as well as the thoughts of our other witnesses. 

With that, Mr. Chairman, I yield back. 

Chairman LEWIS. Thank you very much, Dr. Boustany, for your 

statement. 

Now we will hear from our witnesses. I ask that you limit your 

testimony to five minutes. Without objection, your entire statement 

will be included in the record. I thank each of you for being here 

today. 

It is my pleasure to introduce the Inspector General for Tax Administration, the Honorable Russell George. This is your first appearance before the Subcommittee and we welcome you. 

STATEMENT OF J. RUSSELL GEORGE, TREASURY INSPECTOR 

GENERAL FOR TAX ADMINISTRATION 

Mr. GEORGE. Thank you, Mr. Chairman. Chairman Lewis, Dr. 

Boustany, Members of the Subcommittee, thank you for the opportunity to appear before you today to discuss the subject of the Internal Revenue Service’s administration of the first-time homebuyer credit. 

Based on the administration of the credit to date, I am very concerned about the IRS’ ability to effectively administer the credits 

that are claimed before the December 1 deadline, let alone any 

credits that may be claimed within future extended deadlines. 

The original credit was enacted in July of 2008, and my office 

provided our first memorandum to the IRS with recommendations 

on administering the credit on November 25, 2008, which was before the start of the 2009 filing season. 

Despite that effort, several key controls to ensure the accuracy 

of claims for the credit have still not been designed or implemented. 

The President has called on Federal agencies to ensure that Recovery Act funds are used for authorized purposes and that every 

step is taken to prevent instances of fraud, waste, error and abuse. 


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I am very concerned by the findings of our audit, given the 

stakes that are involved. 

The law requires that to claim a credit, a home must first be purchased. However, we identified more than 19,300 electronically 

filed 2008 tax returns on which taxpayers claimed the home buyer 

credit for a home which had not yet been purchased, but alleged 

would be in the future. 

We alerted the IRS of the need to validate claims for the credit 

in the November 2008 memorandum. However, the IRS disagreed 

with our recommendations. 

Had the IRS timely implemented our suggestions to both capture 

and use the purchase date information from the forms taxpayers 

submit in order to claim the credit, these claims would not have 

been paid. 

The amount of the credits inappropriately claimed in this in- stance totaled more than $139 million. We have yet to determine 

the number of paper returns with similar claims. 

To its credit, the IRS has now implemented filters to reject 

claims with future purchase dates. 

IRS management, however, indicated that they had not decided 

whether to go back and review or correct the more than 19,300 

electronically filed returns that were processed before the filters 

were put in place or to identify how many paper filed returns with 

future purchase dates were similarly processed. 

We found that the taxpayers who had indications of prior home 

ownership within the preceding three years were claiming the credit. These indicators included deduction for home mortgage interest, 

real estate taxes, deductible points, and qualified mortgage insurance premiums. 

While these entries indicate home ownership, the homes involved 

may or may not have been the taxpayers’ principal residences. The 

deduction should not automatically disqualify the taxpayers from 

receiving the credit. However, we believe these claims were not 

scrutinized by the IRS. 

The IRS reported that as of May 17, 2009, it had initiated the 

use of filters to identify such taxpayers for examination. Unfortunately, more than 70,000 questionable claims totaling almost half 

a billion dollars were processed by the IRS prior to the initiation 

of its examination filters. 

We reviewed a random sample of these taxpayers. None of the 

accounts had received scrutiny from the IRS relative to their claims 

for the credit. 

In addition, we identified more than 580 taxpayers younger than 

18 who claimed almost $4 million in first-time homebuyer credits, 

the youngest of which were taxpayers who were four years of age. 

Contract law generally exempts children under the age of 18 

from being bound by the terms of a contract. It is highly unlikely 

that these taxpayers would have entered into arm’s length transactions for the purchase of a home. 

We identified more than 3,200 taxpayers claiming the credit totaling over $20.8 million on tax returns filed with individual taxpayer identification numbers of ITINs. An ITIN does not indicate 

that an individual is authorized to live or work in the United 

States. 


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The Recovery Act specifically denies home buyer credit to individuals who are non-resident aliens. 

We also determined that most of the approximately 48,500 taxpayers who purchased a home in 2009 but claimed a credit of 

$7,500 even though they may be entitled to a credit of $8,000, did 

not have their IRS accounts properly coded to indicate that their 

homes were acquired in calendar year 2009. 

Proper coding is significant because it is an indicator that the 

IRS will use to distinguish between taxpayers who must repay the 

credit over 15 years and taxpayers who will not be required to do 

so unless they sell their homes within 36 months. 

Unless the IRS properly codes these accounts, these taxpayers 

may eventually be subject to IRS collection procedures. 

Finally, Mr. Chairman, it is also very troubling that my auditors 

discovered that among those who apparently wrongly claimed the 

credit are a number of Internal Revenue Service employees. These 

cases have been referred to my Office of Investigations for review. 

Mr. Chairman, Members of the Subcommittee, this concludes my 

oral statement. I would be pleased to answer any questions at the 

appropriate time. 

[The prepared statement of J. Russell George follows:] 


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Chairman LEWIS. Thank you very much, Mr. Inspector General. 

It is my pleasure to call on the Deputy Commissioner, Linda 

Stiff. 

STATEMENT OF LINDA STIFF, DEPUTY COMMISSIONER FOR 

SERVICES AND ENFORCEMENT, INTERNAL REVENUE SERVICE 

Ms. STIFF. Chairman Lewis, Ranking Member Boustany, and 

Members of the Subcommittee on Oversight, thank you for this opportunity to testify on the IRS’ efforts to effectively administer the 

American Recovery and Reinvestment Act’s expanded first-time 

homebuyer credit. 

The Service moved aggressively to implement this important program as soon as it was enacted by Congress and signed by the 

President. 

There has been a strong response, as previously noted, to the 

program. Between January 2009 and September 2009, we have 

processed claims for more than 1.5 million individuals or families 

who have purchased homes. 

In administering this program, the IRS has undertaken significant outreach to ensure that taxpayers are aware of the benefit. 

We developed new forms and instructions to allow taxpayers to file 

the claim, and we instituted significant compliance programs to ensure the validity of the claims filed. 

As with any tax credit, the IRS must run a balanced program 

aimed at delivering the benefits that the legislation intended, while 

assuring that appropriate controls are in place to minimize errors 

and fraud. 

The genesis of the credit was the Housing and Economic Recovery Act of 2008. Under that Act, taxpayers who purchased a principal residence after April 2008 and before July 2009 were allowed 

to claim the credit equal to ten percent of the purchase price not 

to exceed $7,500. 

It also was required that taxpayers claiming that credit paid it 

back over a 15 year period beginning two years after the credit was 

claimed. 

With the February passage of the ARRA credit, the amount was 

increased to $8,000 and extended to purchases completed on or 

after January 2009 and before this December. 

Unlike the credit provided for in the 2008 Act, there is no repayment requirement if they retain the residence for three years. 

Taxpayers seeking to claim the ARRA credit may do so on either 

their 2008 or 2009 tax returns. 

The IRS was therefore faced with the administrative challenges 

of implementing two first-time homebuyer credit provisions during 

2009. In response, we developed robust outreach and compliance 

strategies. 

Through a series of expansive outreach efforts, the IRS worked 

to make sure that taxpayers were aware of the expanded credit. 

These efforts included numerous media interviews, press events, 

pod casts, public service announcements, nationwide tax forums, a 

national marketing campaign, expanded use of our web site and 

working with business stakeholders and our partners in the tax 

community. 


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Additionally, the IRS conducted extensive education and outreach activities with the return preparer and practitioner community. We sought to ensure that these individuals understood the eligibility requirements and endeavored to minimize inaccurate 

claims. 

The IRS recognizes that there is the potential for both fraud and 

errors whenever a new refundable tax credit like the first-time 

homebuyer credit is enacted. As we began implementing this credit 

in the days after the Recovery Act legislation was passed, we identified different types of potential errors or fraudulent claims and 

matched our compliance program to those abuses. 

We are and we will continue to vigorously pursue those who file 

fraudulent claims for the credit. It is important to put the administration of this credit in overall context of the tax filing process. The 

expanded credit was made available to taxpayers beginning in February, right in the middle of the filing season, at which time the 

IRS is processing approximately 140 million individual tax returns. 

In addition to developing a form to collect the information pertinent, the IRS took steps to ensure the accuracy of claims. This included compliance checks to identify and select for audit the high 

risk claims and criminal investigations of possible fraudulent activities. 

As with any other compliance program, the IRS is continuously 

refining the steps it takes to detect ineligible filers. The IRS has 

already identified more than 160 potential schemes resulting in 

scores of ongoing criminal investigations. We have selected more 

than 100,000 returns for audit. 

The first-time homebuyer credit has helped more than a million 

American families purchase homes. We cannot let fraudulent activity undermine a program that has benefitted so many. 

Mr. Chairman, the IRS administered the statute as written in a 

responsible way to meet the legislative intent of stimulating the 

economy quickly and providing first-time homebuyer’s with the 

credit promptly. 

We appreciate and we welcome the independent feedback that we 

have received from a number of our stakeholders, including my colleagues from TIGTA and GAO. 

Thank you for the opportunity to testify. I will be happy to respond to any questions, and thank you for your acknowledgement 

and kind words as I approach retirement. 

[The prepared statement of Linda Stiff follows:] 


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Chairman LEWIS. Madam Deputy Commissioner, thank you 

very much for your statement and thank you for being here. As I 

said and the Ranking Member said, this is your last appearance 

before this Committee. Again, we appreciate your work. 

Now it is my pleasure to introduce Mr. Jim White, Director, Tax 

Issues, at the GAO. Thank you for being here, Mr. White. 

STATEMENT OF JAMES R. WHITE, DIRECTOR, TAX ISSUES, 

GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. WHITE. Mr. Chairman and Members of the Subcommittee, 

I am pleased to be here to discuss how taxpayers have used the 

first-time homebuyer tax credit as well as the major implementation and compliance challenges faced by the IRS. 

As you know, there are two versions of the credit. The 2008 cred- it was for $7,500 and must be repaid over 15 years in increments 

of $500. The 2009 credit is for $8,000 with no repayment. It was 

enacted in mid-February of this year and made retroactive to January 1. 

We summarized taxpayers’ use of the credit in my statement. 

Table one on page three shows that over 1.4 million taxpayers 

claimed either the 2008 or 2009 credit so far and that the amount 

claimed is almost $10 billion. 

Table one also shows the number of claims for each year, but 

those numbers should be viewed with caution. One reason is that 

some of the 2008 claims will be re-coded as 2009 claims either because the 2009 credit was made retroactive or because of IRS coding errors. 

Further, 2009 is not over and many taxpayers are not expected 

to claim the 2009 credit until they file their tax returns in 2010. 

We expect the 2009 numbers to change significantly. 

Table two on page four shows the income level of people who 

claimed the credit. Based on claims to date, a clear majority, 59 

percent of credit claimants had adjusted gross incomes of less than 

$50,000. Compared to all taxpayers, credit claimants were disproportionately in the income range from $25,000 to $100,000. 

Because purchasing a home is such a major financial commitment, it is not surprising that people with incomes of less than 

$25,000 are under represented, those with incomes above $100,000 

are under represented for a variety of reasons, including income 

caps on eligibility. 

Appendix three on page 11 shows credit claims by state. There 

is considerable variation in state claim rates measured as claims 

per capita. For example, Nevada’s claim rate, the highest, is three 

times higher than New York’s. 

Now I want to discuss implementation and enforcement. IRS had 

to balance quick implementation of the credit with enforcement. 

Despite having to implement many stimulus related tax law 

changes during the filing season, IRS quickly issued the new form 

for claiming the Credit Form 5405, communicated with taxpayers 

through a wide variety of media, and made necessary computer 

programming changes. 

IRS does face significant challenges ensuring compliance with 

the credit’s complex rules. To determine eligibility, IRS must 

among other things determine that taxpayers have not owned a 


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house in the previous three years and verify the closing date of the 

purchase. 

IRS must also enforce the 15-year payback provision for the 2008 

credit, which is important because the amount to be repaid is on 

the order of $7 billion, and IRS must also enforce the recapture 

provisions of the 2009 credit. 

One reason compliance is a challenge is that IRS did not require 

substantiation through supplemental documentation provided by 

taxpayers or third parties to validate the information on the 5405. 

IRS officials said they do not have the ability to accept supplemental documentation from taxpayers electronically, so requiring 

such documentation could cause more paper filing. 

Further, providing supplemental documentation would be burdensome. IRS has procedures to stop some credit fraud and detect 

some taxpayer mistakes so they can be corrected before refunds are 

issued. As a result of the pre-refund checks, IRS froze 110,000 refunds pending audits, identified 167 criminal schemes, and began 

115 criminal investigations. 

IRS is also conducting post-refund audits but they are done after 

refunds are issued, making it more difficult to recoup the money. 

To reduce reliance on costly and burdensome audits, we suggested in a recent report that Congress consider providing IRS with 

additional legislative authority called Math Error authority, that 

allows IRS to correct obvious errors on tax returns without an 

audit. 

IRS has such authority for some tax provisions but we identified 

two more related to the homebuyer credit where the authority 

could reduce the need for audits. 

One is the 2008 payback provision which could be verified using 

tax return information. The other is the prohibition on claiming 

both the 2008 and 2009 credit, which could also be verified using 

tax return information. 

It is too early to tell whether IRS’ enforcement actions and the 

proposed new math error authorities will be sufficient. Because of 

the complexity of the credit and the multi-year compliance issues, 

continued oversight of IRS’ enforcement effort is warranted. 

Mr. Chairman, this concludes my statement. I would be happy 

to answer questions. 

[The prepared statement of James R. White follows:] 


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Chairman LEWIS. Thank you very much, Mr. White, for your 

statement. 

At this time, we will open the hearing for questions. I ask that 

each member follow the five minute rule. If the witnesses will respond with short answers, all members should have the opportunity to ask questions. 

Mr. George, you mentioned that 600 children received a credit. 

Do you think it would help the administration of the credit if there 

was an age limit? 

Mr. GEORGE. Yes, there is no question that would be helpful. 

Let me also add that there may be instances when someone under 

the age of 18 legitimately is purchasing a home, an emancipated 

youth, for example, but nonetheless, there is precedent for income 

levels or requirements in other refundable credit instances. 

I believe the EITC has an income/age requirement for certain individuals seeking that credit. 

Once again, sir, yes. 

Chairman LEWIS. Mr. George, how would you deal with the case 

of a child four years old, maybe five, six, seven, eight, nine or ten? 

I do not think a child that young is going to be filing a form. 

Should not the guardians or the parents be held liable/responsible? 

Mr. GEORGE. Again, without having completed our review, and 

obviously the IRS has not completed theirs yet, I cannot speak definitively, but there is no question that most indications are that 

the parent is attempting to bypass the income limitations for seeking the credit by attributing the home purchase to a minor. 

Some form of action would seem appropriate in terms of the 

adult who actually signs on behalf of the child. 

Chairman LEWIS. Mr. White, what is the most important tool 

we can give the IRS now to help with the credit? 

Mr. WHITE. One thing that would help ensure compliance is the 

additional math error authority that I discussed. The advantage of 

this is it shifts at least some of the compliance efforts from postrefund auditing to pre-refund compliance checks. It is also less burdensome for the taxpayer. 

Some errors can be identified as clear cut unambiguous errors 

and IRS can correct those without the need for back and forth correspondence with the taxpayer. IRS would correct the error and notify the taxpayer that the error has been corrected. 

There are two cases we found where such math error authority, 

we think, would be useful to IRS, where they don’t have the math 

error authority right now that are in my statement. 

Chairman LEWIS. Thank you. Commissioner Stiff, I intend to introduce a bill to help with administration of this credit. Will any 

of the following help the IRS? Mr. White just mentioned math error 

authority. Would that help? 

Ms. STIFF. Yes, sir. We specifically would like to have math 

error authority based on indications of prior year home ownership. 

Secondly, we would like a requirement that the HUD–1 document 

be attached with the filing of the return and that additionally, a 

failure to do so or an inaccurate or incomplete, that we would have 

math error authority to disallow it as we process the return. 

Chairman LEWIS. What about adding an age limit? 

Ms. STIFF. Absolutely. 


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Chairman LEWIS. What about requiring people to prove they 

purchased the home? 

Ms. STIFF. Yes, sir. That goes back to what I was suggesting by 

asking them to include the HUD–1 or another legal settlement document that would allow us to math error it and catch it up front. 

Chairman LEWIS. What about increasing the number of electronic returns? 

Ms. STIFF. Yes, sir. That certainly facilitates our compliance efforts. 

Chairman LEWIS. Thank you very much. Now I will turn to the 

Ranking Member, Mr. Boustany, for his questions. 

Mr. BOUSTANY. Thank you, Mr. Chairman. Commissioner Stiff, 

your testimony concedes there is potential for both fraud and errors 

whenever a new refundable tax credit like the homebuyer tax credit is enacted. 

I believe this is an acknowledgement that refundable tax credits 

pose a higher risk for fraud than other types of tax credits. Is that 

your understanding? 

Ms. STIFF. Yes, sir. Based on experience with refundable credits, 

any time there is an opportunity to receive cash back, it tends to 

attract people that might have an intent to defraud the Government. Then you have another segment which is perhaps the largest 

where there is just simply inadvertent errors due to the complexity 

that Mr. White outlined in his testimony. 

Mr. BOUSTANY. Thank you. The Chairman started mentioning 

some remedies and additional tools that you may need. I just want 

to get a clarification. Initially, IRS did not feel that the HUD–1 

form was necessary or it was going to impose an additional paperwork burden? 

Ms. STIFF. Let me clarify. We could have required the HUD–1 

document, but it would not impact our compliance efforts because 

we did not have math error authority. 

If there was something in question on that document, we would 

still have to go through the audit process that we are going 

through today. We created a form, the 5405, that asks taxpayers 

to provide some of that as the formal part of processing the tax return, and a failure to do that did allow us to math error on that 

basis. 

Granted, that was not as robust, but we felt like it was a reasonable alternative to get some of that stopped before it ever went out 

the door. 

Mr. BOUSTANY. You need additional statutory authority now 

for the math error authority? 

Ms. STIFF. Right. If you get the form, we need the ability to disallow on that basis because without it, we find ourselves where we 

are today. 

Mr. BOUSTANY. Finally, IRS is generally much more successful 

at identifying errors and fraud and so forth when there is third 

party reporting. I think the statistics are pretty clear on this. 

Given that the homebuyer credit has imposed serious auditing 

difficulties, I want to explore some of the options with third party 

verification. I would invite the entire panel to comment on this. 


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How would you see this playing out? What types of statutory authority should we consider to help you with that tool of third party 

verification? 

Ms. STIFF. I think my best recommendation is the one we just 

discussed, requiring the attachment of the HUD–1 document or an 

alternative legal settlement document, and then math error authority. 

Mr. WHITE. We talked about math error authority but in terms 

of third parties, one alternative that at least is an option, I am not 

recommending this, but it is an option, is instead of having the 

HUD–1 submitted by the taxpayer, who in cases of fraud might be 

able to submit a phony HUD–1, to have it submitted by the settlement agent. 

There is a tradeoff there because that would impose burden on 

settlement agents who would have to submit that form and IRS 

would have to develop a procedure for processing those. 

Mr. BOUSTANY. Thank you. Mr. George. 

Mr. GEORGE. I would simply note that we have discovered that 

third party reporting in the context of wages results in almost a 

98-percent compliance rate. We strongly advocate that. 

In this instance, whether or not you actually have a third party 

reporting the information, as long as you require the taxpayer to 

have the information, we believe it would serve as a deterrent on 

whether or not again they are ultimately required to submit it to 

the IRS, somewhat akin to charitable contributions when taxpayers 

are required to receive something in writing from the charities they 

donate to. 

Mr. BOUSTANY. Is it the consensus of the panel that there 

should be some third party verification mechanism, just for clarification? 

Mr. GEORGE. Let me answer only by saying the Secretary of the 

Treasury has given the tax policy authority within the Department 

to the Office of Tax Policy, but with that said, I think it would be 

helpful. 

Mr. BOUSTANY. Thank you. 

Mr. WHITE. I guess I would just repeat, we have not done an 

analysis of the tradeoffs there. There are some tradeoffs. It would 

be a burden imposed on closing agents. This would be something 

entirely new for them to have to submit a form to IRS. 

Mr. BOUSTANY. Commissioner Stiff, do you want to add anything to that? 

Ms. STIFF. Just to restate what I said before. I would neither 

promote involving the people closing the mortgages to do it so 

much as I would ask that taxpayers be required to provide the documentation with us because I believe that will get us a long way 

to where we all want to end up. 

Mr. BOUSTANY. Thank you. I will yield back. 

Chairman LEWIS. Now we turn to Mr. Pascrell for his questions. 

Mr. PASCRELL. Thank you, Mr. Chairman. Thank you all for 

being here and your service to this nation. 

We tried in February to deal with a growing problem, which 

seems to have subsided somewhat. Very concerned, and this is not 

what we are talking about today, but the foreclosures in this country are devastating. That, to me, would be a priority. 


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If I have to make priorities in a limited budget, it would seem 

to me that we want to keep people in their homes and then secondly, we would want to encourage people to buy new homes because of that ripple effect in the economy. 

If I have to make a judgment, if I have to establish priorities, 

and that is what the Congress is all about—I was hoping we would 

talk about foreclosures today but this is the subject at hand. 

I wanted to ask you a question, Ms. Stiff. Are you saying you 

could not do more to review these applications for credit mainly because of a manpower situation? You mentioned it started right in 

the tax season, I think you said February or March. 

Or is it a statutory factor that is preventing you from going a 

step further? These are very disturbing things to all of us when we 

read about taxpayers’ money, particularly in this atmosphere, 

going out the window and unretrievable to some degree. 

What is the main problem? Manpower? 

Ms. STIFF. Let me say it is a combination of things. It was that 

we were in the middle of the filing season. The credit was passed 

on February 17. Taxpayers were filing their tax returns. The next 

day, they could start filing the claims. 

Secondly, it was the need to get appropriate compliance filters in 

place that would enable us in that real time window to begin to detect questionable returns. 

Mr. PASCRELL. Did the Treasury, did the Administration alert 

you to the fact that this legislation, which was part of the February 

legislation, was going to be implemented? 

What kind of discussions did you have with the Administration 

before this even happened? 

Ms. STIFF. Let me say this. We generally do not enact or implement or reprogram our systems until we have legislation that is 

enacted because you are in the middle of a filing season, and our 

programming was designed for the credit that was passed the prior 

July. 

It required two different programmings in place. We tried to 

make those decisions in a responsible way so that we are not 

poised for one thing and then it does not happen on this day and 

taxpayers are held up in the system. 

The second thing is it would have required us to take—you had 

1.1 million taxpayers that filed for this credit from February to 

May. You would have had to take every one of those out of the 

processing stream and make a contact with each and every one of 

those if you wanted to do that before they got their credit. 

Mr. PASCRELL. What added measures are in place or about to 

be put in place to protect the taxpayers’ money? 

Ms. STIFF. Every one of the 1.5 million claims that have been 

filed are being reviewed through a set of filters and the high risk 

ones are being pursued as a part of the audit process. 

For next year, we have that robust process in place as we go in 

for the taxpayers who are actually going to file the claim on their 

2009 return as opposed to the 2008 return, and I think we are 

poised to administer that in a way that will enable us to catch 

more of it as it is going through in real time. 


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I think with the legislative tools that we have talked about earlier that will only enhance in strong measure our ability to do just 

that. 

Mr. PASCRELL. Thank you. Mr. White, what grade would you 

give IRS in reference to this particular program? How would you 

grade them? 

Mr. WHITE. I do not have a specific grade. As I said, IRS quickly 

implemented the credit and it was a challenging credit to implement. There were two versions of the credit, and they are both very 

complicated credits. 

There are a lot of rules and a lot of exceptions to the rules. It 

wa a challenge to implement. 

I think the strategy of trying to shift as much of the compliance 

checks to the pre-refund stage and doing that in an automated way 

is a good strategy because audits are labor intensive to do and they 

are burdensome on taxpayers. 

Mr. PASCRELL. Do you consider—does the GAO look at the effectiveness of this program? 

Mr. WHITE. We have not assessed the effectiveness of IRS’ compliance efforts. 

Mr. PASCRELL. Would you do that? 

Mr. WHITE. We can do that; yes. 

Mr. PASCRELL. I think it would be significant because we would 

like to know if we are spending our money in the right ways. We 

want to encourage first-time homebuyers. There is no question 

about it. We can do that successfully or we can do it unsuccessfully. 

The IRS has to be tipped off by the Administration as to where 

we are going so they can establish this. We are flying by the seat 

of our pants. That is exactly what we are doing. That is why a lot 

of folks are taking advantage illegally of this program. That is why. 

It is not the IRS’ problem. It is the Administration’s problem. 

Mr. Chairman, I would hope you will look into that. 

Chairman LEWIS. Thank you very much. We all will look into 

it, not just the Chair. Thank you very much for your question. 

We turn to Mr. Reichert for his questions. 

Mr. REICHERT. Thank you, Mr. Chairman. First, I would like 

to go to Mr. George. You mentioned in your statement that you recommended a set of filters to the IRS which they refused to implement. 

Could you just give me a short list of some of the filters? 

Mr. GEORGE. One was an age filter. Even with that in place, 

would they have caught all of the examples that I cited in my testimony, the answer is no. 

In addition to the age filter, we would have recommended that 

they look at—bear with me one second. 

[Pause.] 

Mr. GEORGE. Let me supply that, a list of the filters for the 

record, if I may, sir. 

Mr. REICHERT. Great. Thank you. 

[The information follows:] 

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Testimony By Georgia Aldridge, Ed.S., NCSP, Letter 

Georgia Aldridge, Ed.S., NCSP, Letter 

Dear Chairman Lewis, 

As a 20-year resident of the ethnically diverse area of Southern Queens, New 

York, a School Psychologist by profession, a wife and mother, who until now could 

not afford to purchase a home due to the unreasonable cost of houses in this area 

(prices increased by the $50,000 per year at regular intervals in the past few years 

until the average cost of 2–3 bedroom capes was $350–$400K), and the related costs 

of a down payment, closing, searching, 

who did not even hear of the poorly advertised Tax Credit until completing tax 

forms in March of this fiscal year 2009, and then as an educator could not begin 

to act on the possibility of purchase until July, when school is out, and then as a 

potential First Time Home Buyer on a shoe string budget with no real estate or 

legal connections, could not begin a search until considerable time was spent learning about the process, 

who with pre-approvals, excellent credit rating, and qualified real estate agent finally in hand, began in earnest a search at the beginning of September, only to find 

that the available price range in nearby areas was often filled with sales that were 

‘‘Short Sales’’ subject to lengthy bank approvals or foreclosures with the seller or 

his agent requiring particular kinds of mortgages and monies at offer, all requiring 

additional time and arrangements, 

who in order to garner the down payment, must request a distribution from a retirement account that will ‘‘increase’’ the income level for that fiscal year, 

therefore, who will no longer be able to consider purchasing a home, since under 

the current constraints of the First Time Home Buyers Tax Credit (2009) and under 

the general timetable and purchasing conditions found in this geographical area, the 

deadline of a November 31 Closing is not reachable, and since the Tax Credit would 

not be available to offset the higher taxes that would ensue because of the ‘‘increased’’ income, purchasing a home would again become unaffordable, 

who has not received any individual benefits yet from any of the Economic Recovery Acts, by virtue of exclusion from Wall Street, only living in its shadow, or from 

the banking industry, only being subject to its apparent usury, and from any unfortunate lower socio-economic group, only serving such at work, and church, and in 

neighborhood, and of being Middle America in an Urban setting (yes, we do exist), 

I am requesting the relevant Committees of Congress to consider another extension and modification of ARRA of 2009 ‘‘First Time Home Buyer’s Tax Credit’’ 

through December 31, 2010 to allow the momentum toward the American Dream 

and economic stimulation to continue. 

I propose, in order to reduce temptation to make fraudulent claims and to modulate the impact on the U.S. Government’s Revenues, the tax credit not be refundable, and for it to appear as a ‘‘Tax Credit,’’ not a ‘‘Payment’’ within the Income Tax 

structure. I am asking for you therefore to consider a higher income eligibility structure in order for the FTHB of all tax brackets to realize some relief from taxes. I 

am proposing that the total possible amount of ‘pre-tax credit’ be raised to the 

amount of the down payment up to $20,000. I am not asking the U.S. government 

for money-as some have; I am asking you for a tax break on the earnings my family 

has honestly made so that I can use that money to invest in America by purchasing 

a home in my own community. 

I sincerely thank you for this opportunity to be heard. 

Regards, 

Mrs. Georgia R. Aldridge 

f 

Testimony By Jon R. Sias, Statement 

Statement of Jon R. Sias 

Thousands of borrowers who purchased under the 2008 program guidelines remain under the onus of repayment. Certain Committee text suggests the repayment 

dictated under 2008 guidelines were waived when the 2009 language and changes 

were adopted. Americans are certainly entitled to a clear delineation of this policy. 

Nothing bespeaks the value of extending the FTBTC than the strong success of 

the ‘‘C4C’’ program. In both cases financial transactions are driven down to the local 

level where the exchange of dollars for services ripples along the entire economic 

tendon. As successful as the FTBTC is, it stands in the shadow of the full-stride 

success it could be. 


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Thousands of new buyer/borrowers would purchase first time homes, removing 

them from the large and growing glut of available inventory . . . if a portion of the 

tax credit were monetized in the form of a 3.5% grant to cover FHA minimum down 

payment guidelines. 

The infrastructure to make this happen is already in place, however much of it 

was designed and implemented using a neighborhood specific outcome approach. 

Going forward, rather than targeting specific neighborhoods, the target must be 

local economies and the philosophic stronghold in the value of home ownership. 

f 

Mr. REICHERT. Commissioner Stiff, what is your date of retirement? 

Ms. STIFF. November 30. 

Mr. REICHERT. I have been in your position as the Sheriff in 

Seattle testifying to our County Council, and sometimes it is uncomfortable. Since you are retiring, we can ask pretty blunt questions and hope you might feel free to be as open as you can since 

you will be soon leaving. 

What do you think the impact has been to the extent that say 

homebuyers and home builders in my district, they benefitted from 

this, and because of the fraud, to what extent do you believe this 

fraudulent use of tax credits are undermining the credit’s goal of 

stabilizing the housing market? 

Ms. STIFF. I cannot, I am not an economist. I cannot assess the 

impact. I know 1.5 million taxpayers and their families, as noted 

earlier, received the benefit of the credit. 

I also want to add as a matter of record that these numbers that 

we have been throwing around as potentially questionable are 

not—a determination has not been made that those taxpayers are 

not eligible for that credit. 

We found in our early audits in many instances they actually 

were eligible and what they had were other errors in the way they 

reported or how they reflected it on their return, so the tax might 

have been different, but their eligibility for the credit is sometimes 

not in question, despite having not passed a filter. 

Mr. REICHERT. As an old cop, I do not know the financial terms 

for what you deal with, but it seems to me prevention really should 

be the focus. I disagree with Mr. Pascrell just a little bit in that 

I think it is an IRS problem. 

I think it also is an Administration problem, and I think you 

need more resources. It is obvious to us you have kind of skirted 

that issue just a little bit. 

When you look at 1.5 million claims that you have to process, 

167 schemes and scams that you are trying to investigate, another 

115 investigations that you are involved in, and you are not requiring the supplemental documentation up front to screen some of 

these things so you do not have to conduct investigations and uncover scams and schemes, to assign more personnel, it seems to me 

you need more resources, more personnel, or you need to develop 

a program that is able to allow these supplemental documents to 

be reviewed. 

Ms. STIFF. I think your point goes to exactly what Chairman 

Lewis was proposing, that with the additional authorities, we will 

be able to front-end load a lot of our compliance and enforcement 

efforts, and additionally, I cannot resist the opportunity to pitch for 


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the passage of the 2010 budget which will allow us to continue our 

efforts. 

Mr. REICHERT. How many agents or investigators do you have 

assigned to 160 scams and schemes? 

Ms. STIFF. I would have to get back to you with that number. 

Mr. REICHERT. Can you estimate it for me? Mr. George, do you 

know the number? 

Mr. GEORGE. I do not have that number. I just want to point 

out that to your question about filters, it is really common sense 

because one of the recommendations was that we simply have the 

IRS transcribe the information that they requested from taxpayers 

on the Form 5405 so that people could determine what it is that 

the taxpayers are reporting, and that was not being done. 

Mr. REICHERT. You have experience with tax credit before, and 

this should be one that you should have been able to implement 

using some of your past practices and policies and then implement, 

of course, new ones to accommodate this specific issue. 

How much more manpower/personnel do you need? How many 

more people do you need? This is an unfunded mandate, as far as 

I see it. 

Ms. STIFF. I believe that with the legislative tools that we have 

requested and with the passage of the 2010 budget, I believe we 

are poised to execute this with that. 

Mr. REICHERT. You believe the next Commissioner coming in 

is going to be just fine with the situation the way it exists now? 

Ms. STIFF. I think with the assistance of the new tools we have 

requested we are going to be positioned to responsibly deal with 

this on the front-end. I just need to say this again, the fact that 

it was not stopped on the front-end does not mean we are not addressing each and every one of those—— 

Mr. REICHERT. I have one last question. It is very troubling to 

hear IRS agents actually have applied for these credits illegally. 

How do you intend to hold those people accountable? 

Ms. STIFF. We have an employee tax compliance program that 

we use year in and year out, day in and day out. The fact is there 

has been indications—— 

Mr. REICHERT. If there is wrongdoing discovered, what happens? 

Ms. STIFF. It will depend upon the facts and circumstances specific to each case, just as it would with any other taxpayer. 

Mr. REICHERT. Do you know the numbers of your members 

that are involved in this? 

Ms. STIFF. I do not. I think that the numbers Mr. George referred to earlier were numbers where there were questionable 

things on the face of the return. I do not believe there have been 

any numbers established that something was done incorrectly. 

Those are ongoing audits, the same as what we are talking about 

with the other 100,000. 

Mr. REICHERT. Thank you, Mr. Chairman. 

Chairman LEWIS. Thank you. Now we turn to Mr. Etheridge for 

his questions. 

Mr. ETHERIDGE. Thank you, Mr. Chairman. Thank you, Chairman Lewis. Let me thank each of our panelists here this morning 

for testifying. 


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I do not need to remind you the recession has hit all sectors of 

our economy but really the housing industry has been hit especially 

hard and their troubles continue. 

As a result, the first-time homebuyers tax credit really has 

helped to some extent lessen that sting in real estate companies, 

for home builders and the supply chain. We should not forget that 

this helps millions of people, consumers, purchase a home for the 

first time. 

Granted, we are beginning to learn that any time you put something out there, there are more crooks than cops. We just have to 

work to make it happen. 

As Congress considers extending or expanding this tax credit, we 

should make sure that this valuable economic tool is not only used 

wisely but that fraud and abuse are stamped out. That hurts every 

program and it really hurts a program that is meant to help people. 

Mr. White, you suggested that there are simple tools that the 

IRS could use to stop errors and fraud. Would it really be as simple 

as checking filings against the previous years’ returns? 

How much delay would this add to the processing of returns, if 

any? How does the so-called math error authority compare to the 

screening Mr. George described earlier? In that, can you give us examples of how that would help? 

Mr. WHITE. The math error authority that I was discussing applies to specific cases. It clearly does not prevent all fraud. There 

still would be a need for some post-refund check, but to the extent 

that the checking can be done in an automated way before a refund 

is issued, IRS does those checks very quickly as part of their normal processing of tax returns. They do not slow down refunds. It 

is all computerized done in an automated fashion. 

In addition to being low cost for IRS, it is also much less burdensome for the taxpayer. The IRS does not have to correspond with 

taxpayers. 

Mr. ETHERIDGE. It is all done in-house? 

Mr. WHITE. It is done in-house. Taxpayers do not have to struggle trying to figure out what the notice means that they get from 

IRS. 

I think in general, there is some agreement here about the advantage of these kinds of pre-refund automated checks to the extent they can be used and reduce the need for audits done. After 

the refund goes out the door, those audits are labor intensive and 

involve interaction with the taxpayer. 

Mr. ETHERIDGE. If I am following you correctly, what you are 

suggesting is sort of like when you have health care. Do a little 

preventive on the front side to save a major cost on the back side. 

You can go through the audit process, you have a lot of manpower, 

you have a lot of expense that you could have prevented had you 

done the pre-audit before. 

Mr. WHITE. Yes. 

Mr. ETHERIDGE. You are saying number one, that should not 

slow it down? 

Mr. WHITE. It does not slow it down right now. IRS has this 

system in place now and it is all automated and invisible to the 

taxpayer and happens very quickly. 


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Mr. ETHERIDGE. Ms. Stiff, let me ask you two questions. Is it 

your opinion that we could process this if we were to do it on the 

front side, we would then allay the fraud and abuse on the back 

side? I am not asking do we need people to follow up, obviously. 

Can we reduce the errors substantially, which is where we are 

right now? 

Ms. STIFF. I think with the proposed legislative tools that we 

talked about, which includes a requirement that if you are under 

18, that we will automatically preclude it coming in the door. You 

can come in and make a case later. 

If you have to attach the HUD–1 or a legal settlement document 

and a failure to do so, we will preclude you in the systemic way 

that Mr. White described, and lastly, we screen you out and do it 

systemically if there is prior indications of home ownership. Again, 

not precluding you from making a case, but stopping it before it 

goes. 

Mr. ETHERIDGE. That would mean you would have to come in 

and make a case if you are an exception. 

Ms. STIFF. Right. 

Mr. ETHERIDGE. Let me follow that up with another question. 

How successful do you think your outreach efforts were? It was estimated about 2.2 million would be used and 1.5 million so far to 

date. 

What do you think can be done better to make sure that people 

who could benefit, number one, are aware, and number two, coming back to my first question, to reduce any fraud and abuse in 

that process? 

All of us lose when we are trying to do good and there are plenty 

of people out there figuring out how to take advantage of the system. 

Ms. STIFF. We and others around the country as a result of 

their own vested interests, there was expansive outreach and education for taxpayers, for consumers, regarding the credit. 

I think that speaks to the fact that we have had 1.5 million, 

which I think actually exceeded what was originally estimated to 

occur this year, so I think we are going to have to continue that 

education campaign going into this next filing season because the 

Act provides eligibility on the returns that are filed next year. 

I think the other thing with the passage of the new legislative 

tools that there will be an education and outreach campaign with 

preparers and taxpayers as to what is going to be required and 

what they are going to need to do to be able to meet the eligibility 

requirements. 

I think as a result of our criminal investigative activities that is 

also going to serve both as an education and deterrent. I do not 

know if you saw yesterday, we had a sentencing of 30 months for 

a preparer that was involved in bad acts regarding the credit. I 

think those things start to give momentum and create awareness. 

Mr. ETHERIDGE. I could not agree more. Publicity on that always helps. I can assure you some people are getting the word out. 

I was home this weekend. A car passed me with a great big sign 

on the side and one on the back, and it says ‘‘Ask me how to get 

$8,000.’’ 


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Mr. Chairman, it did not take me long to realize it was a real 

estate agent. He did a pretty good job of advertising. He or she. I 

am not sure which it was. 

Thank you, Mr. Chairman. I yield back. 

Chairman LEWIS. Thank you very much. I just want to remind 

members we are operating on the five minutes rule, trying to get 

an opportunity for all the members to have an opportunity to ask 

questions. 

Now I turn to Mr. Davis for his questioning. 

Mr. DAVIS of Illinois. Thank you very much, Mr. Chairman. Let 

me thank all three of the witnesses. 

Inspector General George, let me go to you first and go back to 

the point that there were suggestions and recommendations and 

concerns made by your office to the IRS that went unheeded, and 

I guess in some instances, perhaps even disagreed with. 

Do you have any indication of why there might not have been the 

follow up or the follow through if the advice was not taken, why 

it was not taken? 

Mr. GEORGE. You know, while I am going to most likely yield 

to Linda to give a definitive response, I have to say at the outset 

that the IRS has been very responsive to most recommendations. 

I would say over 98 to 99 percent of the audit recommendations 

that we provided to them have been agreed with and implemented 

in one form or another. 

In this instance, again, Linda can speak for herself, they have to 

do a cost/benefit analysis at times. While I understand on one level 

why they need to make those determinations, given the fiduciary 

responsibility that they have to the American people, to the American taxpayer, there are times when whether or not it might be expensive to implement a particular procedure, they have an obligation to do so, and especially when the stakes are as high as they 

are in this instance with billions of dollars at stake, we believe 

every action that could have been taken should have been taken. 

Mr. DAVIS of Illinois. Let me just ask you, Commissioner Stiff, 

what your reaction is to that question relative to taking the advice. 

Ms. STIFF. I will echo what Mr. George said here. We take very 

seriously any recommendation that TIGTA offers us regarding any 

program. 

In this instance, and I will say I have to leave it to others to 

judge, we evaluated all the options available to us, we were in the 

middle of a filing season. If we had required the HUD–1 documentation, which is the point of disagreement, we would not have 

been able to not process the claim or not allow the claim. 

We would have had to engage in an audit in each and every one 

of those situations the same as we are today. 

Had we been loaded with more information going into that, we 

made a decision that since we did not have statutory math error 

authority to use that information to make a decision whether to 

process it or not, that we created a schedule and got some of that 

information there and were able to use the failure to comply with 

that as a screen for filtering returns. 

Lastly, requiring the HUD–1 documentation, another factor was 

it would have meant the 1.5 million taxpayers who filed that would 


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not have been able to have easily filed electronically or get their 

refunds, those that were entitled to it, as quickly as they did. 

In looking at the full range of factors that we were considering, 

we made a decision that I still think is the right one at this time. 

I advocate for the additional legislative authority because I think 

that would be the breaking point in terms of how we use it going 

forward. 

Mr. DAVIS of Illinois. Mr. White, you acknowledged that the Internal Revenue Service moved quickly to implement the program. 

Do you think that perhaps had there been some additional preplanning, that might have helped, or does it really look like they 

may have needed additional resources to do a more effective job? 

Mr. WHITE. It is clear that they did not have the legislative authority needed to do as many of the pre-refund checks that I have 

been talking about, as they actually could do. That would make a 

difference. 

Mr. DAVIS of Illinois. You indicated also in your report that if 

they had the authority to do math error corrections, tell us how 

that could actually reduce these instances of fraud and abuse? 

Mr. WHITE. For example, if IRS had the authority to check prior 

years’ returns, they could easily tell from that whether taxpayers 

had a requirement to pay back in the $500 increments the 2008 

credit. 

They could also check whether taxpayers were claiming both 

credits. You are not allowed to claim the 2008 and the 2009 credit. 

You can only claim one. 

IRS did not have the legal authority to use math error authority 

to correct situations where taxpayers were making multiple claims. 

They needed legal authority to do that. 

Those are two cases that we found. 

Mr. DAVIS of Illinois. Let me just say it has always been my experience that the Internal Revenue Service was pretty tough. It 

seemed to me that in this instance, a little bit of that toughness 

was not there. Maybe it has to revert back to the times I have appeared before them. 

Thank you very much. 

Chairman LEWIS. Thank you. I now turn to Mr. Higgins for his 

questions. 

Mr. HIGGINS. Thank you, Mr. Chairman. 

First of all, I just want to make it very clear that this is a good 

program. It should be extended. 1.4 million households have 

claimed nearly $10 billion in credit. Over half of those have incomes under $50,000. 

While fraud is always going to be part of this, it should not be 

accepted. I would hope the IRS would embrace the Inspector General’s report toward the goal of significantly reducing and ideally 

eliminating fraud altogether. 

I am just curious. If there is fraudulent claims or questionable 

claims, as you had characterized them, I presume that is true with 

any of the tax credit programs. 

How does this program compare in terms of the percentage of 

likely fraud versus that of let’s say the earned income tax credit? 

Anybody. 


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Ms. STIFF. I would answer and have to be candid with you, I 

am not trying to be evasive, but I think it is too early to know that. 

We need to finish the audits we have underway and be able to see 

how much of that actually winds up that we do not allow versus 

how many is allowed. It is just too soon after the passage of the 

program and the time it takes to do the enforcement efforts to have 

an answer to know what that is going to be and then compare it 

to another program. 

I think we are several months away from being able to give you 

a definitive answer there. 

Mr. HIGGINS. Let me put it to you another way. What would 

be a program that has been longer in duration, like the earned income tax credit, what is the percentage of fraud associated with 

that? 

Ms. STIFF. I don’t know off the top of my head what the percentage of fraud is because we use fraud as that which meets a criminal standard, and then we have a number of questionable erroneous claims that are disallowed each year. 

I can get you a percentage or maybe one of these gentlemen 

know. I do not know off the top of my head. 

Mr. GEORGE. I do not know the percentage. I know that it is 

estimated that it is between 10 and $12 billion each year on the 

earned income tax credit that is inappropriately or improperly paid 

out. 

Mr. HIGGINS. 10 or $12 billion. 

Mr. GEORGE. Correct. 

Mr. WHITE. Mr. Higgins, if I could add, your questions highlight, I think, a point about the cost of doing audits to ensure compliance with the first-time homebuyer credit. If IRS does more 

homebuyer audits, it is able to do less audits on other provisions 

of the Code. That highlights the importance of shifting as much of 

the compliance checking again to these up front automated procedures so that IRS does not have to shift resources from auditing 

other tax provisions into auditing this one. 

Mr. HIGGINS. Got it. Just in conclusion, Mr. Chairman, I just 

wanted to again make very clear that I think the objective of the 

program has been met. Perhaps not to the exact numbers anticipated before its enactment, but it is a good program. 

I want to be sure that the 70,000 questionable claims representing half a billion dollars, which is very, very significant, do 

not serve to undermine those 1.4 million who have benefitted from 

this program. 

By extension, it has helped this economy at least in terms of 

staving off a deeper and longer recession. 

Thank you, Mr. Chairman. 

Chairman LEWIS. Thank you. Now we turn to Mr. Kind for your 

questions. 

Mr. KIND. Thank you, Mr. Chairman. I want to thank our witnesses for your testimony today, and just to dove tail into what Mr. 

Higgins was concluding upon, as we in Congress are deliberating 

on possibly extending the first-time homebuyer tax credit, there is 

a lot of information that we are going to have to digest, including 

this, what you guys are involved with right now. 


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If there is a problem, we need to clean it up, especially if we are 

going to extending the program, so that we are more accountable 

and more responsible to the American taxpayer ultimately. 

I am still trying to wrap my head around what exactly is going 

on here. Commissioner Stiff, let me start with you. Maybe you can 

help clarify some things. 

Of the questionable claims that have been submitted already, do 

you have any indication or have you broken down what percentage 

of that is a clear case of criminal intent to defraud or just mistakes 

being made, harmless errors that you are detecting now that we 

need to intercept? 

Ms. STIFF. A couple ways to slice that. We have had indications 

on 115 cases of potential schemes involving about 8,000 taxpayers 

and tax returns that are currently under criminal investigation. It 

remains to be seen whether indeed that is the case. 

Mr. KIND. How many schemes did you say? 

Ms. STIFF. We have identified, I think, potentially over 160 and 

we have 115 currently under investigation. 

Mr. KIND. Of those, how many individual claims are involved? 

Ms. STIFF. A little more than 8,000 on the 115. On the audits, 

we have the 106,000 or so under exam. We have closed so few, that 

to somehow extrapolate that and project it onto the whole, I think, 

would be doing a disservice. 

Mr. KIND. I am a little more confused because somewhere I received some information that of the 167 schemes that you have detected, it could be as high as 25,000 different returns that might 

be involved. Does that number ring any bells? 

Ms. STIFF. Actually, it does. There are 8,000 where we had clear 

enough indications of being a part of the fraudulent activity that 

we stopped the processing and did not let the money go out of the 

167. The difference is in that 106,000 we are looking at and it remains to be seen. The indications were not clear enough to characterize it as fraud. 

Mr. KIND. Of those that you stopped the process, that you were 

able to intercept, did you initiate criminal investigations or any 

type of criminal proceedings? 

Ms. STIFF. They are part of the investigation of the scheme 

itself because one of the first things that we look to is were they 

taken advantage of as part of the scheme or were they part of the 

scheme. That determination has not been made yet. 

Mr. KIND. How are these schemes set up? Are individual tax 

preparers involved with it or the real estate agents? Is it those who 

are purchasing the home? 

Ms. STIFF. I would have to get back to you to give you a complete answer. I know the ones that I am most familiar with have 

involved preparers. 

Mr. KIND. That would be helpful. If we knew where the problem 

existed, we would probably have a better idea where we need to 

concentrate resources and attention to. 

Ms. STIFF. We are looking at that because that is what we are 

going to want to do this next filing season. 

Mr. KIND. The audits that you have already initiated, what form 

are they taking? Are those written audits? 


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Ms. STIFF. They are. We send a letter to each of the taxpayers 

and we tell them there appears to be a question with what they 

filed and we ask them to provide the documentation needed to validate it, and the taxpayers—the ones that have it all right there, 

they get right back to you, and those who do not, you are in a dialogue over a period of days and weeks and months in some instances trying to get it all finalized. 

Mr. KIND. Would I be safe here in assuming that the vast majority of the problem cases that lie out there that we are now detecting and trying to take action on are a result of just innocent 

errors, just making mistakes in filing? 

Ms. STIFF. Based on what we have seen thus far, I would say 

the indication suggests that, but it is too early for me to weigh in 

and say it is more one thing than the other. 

Mr. KIND. Right. What you are doing right now as far as intercepting some of the claims that have been submitted or anything 

else, is this going to impede or slow down the closing date process 

because we are bumping up against the end of November and there 

is a lot of concern that those purchasing a home for the first time 

will not be able to get in under the deadline? 

Ms. STIFF. Our investigation should not slow down their ability 

to qualify. It may slow down their ability to receive their funds. 

Mr. KIND. It should not hinder the ability of the closing date. 

Ms. STIFF. If they closed and they are eligible, they can claim 

it. If we have a question, we will resolve that after the fact. 

Mr. KIND. I want to ask a more general question. You touched 

upon it. I think it was with Mr. Etheridge. What is the turn around 

time at the IRS when we do enact a new law as far as updating 

the database or the filters that you have to install? Where is the 

state of technology and your ability to adjust on the dime what we 

are asking you to do? 

Ms. STIFF. The state of our technology is improving, as you 

know. We appreciate the support we have had to continue to focus 

on that. We are reaching a point in some instances, we can say 

weeks, and in other instances, we need months lead time. 

I think the reason we were able to do this as quickly as we did, 

admittedly not as quickly as it perhaps warranted, but it was a 

matter of weeks, was the fact that it was similar enough to other 

things that we had experience with that we were able to kind of 

jump start our effort to get the technology lined up. 

Mr. KIND. Not to be presumptuous, but since you are looking at 

a pending retirement, is this a legitimate area that the Committee 

needs to have a little more focus on, helping the IRS be able to 

make the adjustments you have to make in light of new tax 

changes that we are doing here? 

We are going to have some tax extenders, some measures that 

we are going to have to deal with at the end of this year because 

they are expiring. Usually, we sit around and wait until the 11th 

hour to do these things, and it puts you in a real box then. 

Is this a major issue that we have to be a little more focused on? 

Ms. STIFF. Yes, I think based on our experience in the last few 

years, I think you all have a good understanding of the challenges 

that late legislation proposes, and you have our commitment that 

we will continue to be responsive and implement in a responsible 


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manner, regardless of whatever situation you find yourselves in 

with the passage of law. 

Mr. KIND. If we do not see you before, we wish you a very happy 

retirement and we thank you for your service. 

Ms. STIFF. Thank you. 

Mr. KIND. Thank you. 

Chairman LEWIS. Thank you. Do you have any evidence—when 

we think of schemes and fraud, sometimes we think of people getting together, people conspiring to do something. Do you have any 

evidence where there have been groups getting together to take advantage? 

Mr. GEORGE. Mr. Chairman, I would note that the report that 

we released today is an interim report. In our next report, we are 

specifically looking at that issue to determine whether there are related party transactions or claims by multiple parties for the same 

property. That is something that we will be able to address in the 

subsequent report. 

Chairman LEWIS. I think we would be interested in seeing that 

report. If we are going to extend this effort, we need to know. 

We now turn to Mr. Becerra for his questions. 

Mr. BECERRA. Mr. Chairman, thank you very much. Thank you 

for holding this hearing. Thank you to all the witnesses for their 

testimony. 

Ms. Stiff, we wish you very well and we thank you for all your 

years of service to the people of this country. 

Ms. STIFF. Thank you. 

Mr. BECERRA. From what I understand, and I missed some of 

the hearing, but from what I understand, there seems to be consensus that we should have math authority extended to the IRS, 

math error authority, third party verification, some type of age 

limit. 

Ms. Stiff, all that is going to require you to have a lot of very 

good people doing a lot of extremely diligent work to make sure 

this tax credit is being used by those who qualify for it. 

You are also having to do quite a few audits just to take care of 

the normal stream of activity from people who file their taxes, 130 

to 150 million in America file their taxes. 

I know you sometimes have to rely on the marching orders you 

get from above or from down the street at the White House and 

OMB, the Office of Management and Budget, in terms of what you 

can do and say about what you need. 

I do not see how you do all this work well without having the 

resources to actually do the checks, the audits, the follow through, 

so that we can come back and say it really looks like we should 

extend this homebuyer tax credit to more Americans because we 

are still in a very difficult economic time, there is still a lot of families that would like to get into their first home, but if we continue 

to have errors or fraud in a system like this, we cannot sell this 

to the American public because we are running these deficits that 

are very large. 

I ask you this, and maybe you have a little bit more freedom as 

you are getting ready to exit the doors of the Service, are you able 

with the resources or the new authority we give you to fully examine this tax credit so that when you come back again, we will not 


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find a situation where a four year old applied for a first-time homebuyer tax credit? 

Ms. STIFF. You did miss earlier. I will restate what I said. 

Mr. BECERRA. I heard what you said. 

Ms. STIFF. We need the legislative authorities that we have 

talked about, that you outlined. We need the passage of the fiscal 

year 2010 budget. 

Can I sit here and assure you that there will be absolutely no 

errors or no fraud under any circumstances? I suspect not. Experience would say I would be foolish to do that. 

I stand here to tell you that I believe with the legislative authority, I believe with the passage of the 2010 budget that we stand 

ready to handle the work that you have put in front of us. 

Mr. BECERRA. Let me ask it a different way. Let me go to door 

number two. Do you right now have personnel at the IRS who are 

sitting around twiddling their thumbs because they do not have 

enough to do? 

Ms. STIFF. Absolutely not. 

Mr. BECERRA. Do you now have personnel who are handling a 

workload that is greater than it was for people working at the IRS 

say ten years ago? 

Ms. STIFF. I think the work available to the Agency has expanded. 

Mr. BECERRA. Would you say the workload of the Agency is 

growing or diminishing? 

Ms. STIFF. I would say the workload is growing based on the 

taxpayer base growing, but I would also say that the Agency has 

become much more efficient and productive in getting the work 

done. I do not think it requires the same level of people because 

we have found smarter ways to do work. 

Mr. BECERRA. Productivity helps us manage an ever increasing 

load of work in the IRS? 

Ms. STIFF. Yes, it does. 

Mr. BECERRA. I know, Mr. George, you would like to jump in 

on this but before you do, let me ask this. Ms. Stiff, I think you 

actually have some phenomenal people at the IRS. I think we place 

such burdens on them, emotional burdens on them because of the 

work that they do, and it is so easy to attack an IRS worker because they are coming after our money. 

At some point, I think it is unfair to us to expect the IRS to 

produce good results, to perform well, unless you have the ability 

to reward your workers for what they do. If we continue to rely on 

productivity increases only, I think we are going to diminish the 

public support for the work that we do to have a voluntary tax 

compliance system. 

I know you are shackled. I know you cannot say much more. I 

think you sort of answered my question to door number two by telling me that your workers do not twiddle their thumbs and they become very productive. 

We are about, I think, to give you more authority to do a better 

job of tracking. You have over 100,000 cases that you now have to 

examine that you did not have a year ago. You have some criminal 

prosecutions that you are going to engage in that you did not have 


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a year ago. That is a lot of new work on top of all the extra work 

that is coming in because of the regular flow of activity. 

I hope, Mr. Chairman, we are able to move forward to do what 

we need to do to give you the ability to produce so when you give 

us numbers, we will be happy, and then we can make decisions on 

a program like the first-time homebuyer tax credit that are based 

on its effectiveness, not on whether there was fraud in the system. 

I know Mr. George wanted to say something, Mr. Chairman. 

Mr. GEORGE. Ever so briefly, Mr. Chairman, with your permission. Every year my office is required to list the top ten management performance challenges confronting the IRS for the upcoming 

fiscal year. Repeatedly, year after year, human capital has been 

foremost on that list or towards the top of that list. 

It is a Government-wide problem as we recognize, but given the 

technical nature of the subject matters being handled by the IRS, 

this is of utmost importance, sir. 

Mr. BECERRA. Thank you. Mr. White, I do not know if you want 

to add anything. You have a chance to examine the IRS and its 

working’s. You do not get paid by the Commissioner, although you 

still get paid by the Government. 

Mr. WHITE. Yes. I would just add that the work we have done 

over the last 15 years clearly shows the IRS has made substantial 

improvements in terms of the quality of service they are providing 

to taxpayers and in terms of their productivity. 

Things like their ability to answer telephone calls and provide 

correct answers to taxpayers, their ability to more quickly turn 

around refunds, get those checks out to taxpayers faster, they 

made substantial strides over time. 

Mr. BECERRA. Thank you. Thank you, Mr. Chairman. 

Chairman LEWIS. Thank you very much. Now we turn to Mr. 

Crowley for his questions. 

Mr. CROWLEY. I thank the Chairman and the Committee for allowing me an opportunity to be here today, not as a member of the 

Subcommittee, as I once was, Mr. Chairman, and took a lot of decision making for me to not be on this Committee again. Hopefully, 

that is not held against me personally. 

Chairman LEWIS. Mr. Crowley, thank you for sitting in. You are 

a member of the Full Committee and we miss you being here but 

we feel very lucky and very blessed to have your presence here 

today. You are welcome to sit in at any time. 

Mr. CROWLEY. Mr. Chairman, would that compliment come out 

of my time or your time? 

[Laughter.] 

Chairman LEWIS. My time. 

Mr. CROWLEY. Thank you, Mr. Chairman. 

Thank you for your testimony today. I just have a couple of questions. There is a great deal of discussion as mentioned before in 

terms of even just piggy backing Mr. Becerra, about extending the 

first-time homebuyer tax credit. 

How can Congress again further help simplify the administration 

of this or any other tax credit that we may or may not put into law 

in the future? Is there any advice that the IRS can give us on that? 


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Ms. STIFF. A couple of things. They are going to ring familiar 

because they are along the themes that we have discussed here 

today. 

With any refundable credit, to the extent that we have third 

party reporting, to the extent that the eligibility requirements are 

not complex, I think it enhances the chances that credit will be administered in the way and received in the way that the Congress 

intends. 

Mr. GEORGE. Mr. Crowley, this is going to be an extraordinarily 

difficult effort on the part of the IRS when you have two different 

classes of recipients of this credit. Again, those who received it in 

2008 who will be required to repay this over the course of 15 years, 

and then those who received it under the Recovery Act who are not 

required to repay it unless they sell the home within 36 months. 

Keep in mind that statutorily the IRS only has authority to go 

back 10 years. How they are going to figure this out and especially 

as we noted in our written testimony and in my oral testimony, 

that they are not coding some of these taxpayer accounts accordingly. 

This is truly going to be a challenge. 

Mr. CROWLEY. Bureaucratic nightmare. 

Mr. GEORGE. It will be, sir. 

Mr. CROWLEY. Thank you. Ms. Stiff, you discussed the need for 

the IRS to receive statutory authority for math error authority. 

Could you tell me about math error authority and how it would assist the IRS? Just give me a little insight into that. 

Ms. STIFF. When we have math error authority, as we process, 

we receive your tax return, as it actually goes through our systemic 

processing, the system can be programmed and coded to detect 

those conditions or the existence of those conditions or the lack of 

those conditions, and stop the refund related to those conditions 

from being issued before it ever goes out the door. 

Without that, we have to go through a full audit and assess the 

refund under the statutory deficiency laws. 

Mr. CROWLEY. So you do not add more to the bureaucracy, so 

to speak, in retrieving that back. 

Ms. STIFF. Right. 

Mr. CROWLEY. Does anyone else want to comment on that? 

[No response.] 

Mr. CROWLEY. I have been given some statistics here about a 

break down by state per capita and their use of the first-time 

homebuyer tax credit. It seems to be benefitting states that are 

hardest hit by the real estate bubble. 

Is there any documentation of the type of taxpayer that is filing 

for this credit or the types of homes they may be buying? For instance, do you see a tendency towards buying foreclosed properties 

going on in some states? Properties that are really being done for 

speculative purposes, albeit they may be holding on to the properties for more than 36 months, but to take advantage of the tax 

credit? 

Just looking at my home state of New York, for instance, we are 

number 49, so 50,500 homes purchased in a state of 19.5 million 

people, in comparison to say New Jersey, 30,000 in a state of 8 milVerDate Nov 24 2008 22:58 Jul 06, 2011 Jkt 063013 PO 00000 Frm 00074 Fmt 6633 Sfmt 6602 I:WAYS\OUT\63013.XXX 63013

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lion people. I can go on. It is kind of interesting. Just looking at 

Utah, almost 20,000 in a state of 2.5 million people. 

Can anyone comment on that? 

Mr. WHITE. Yes. First of all, we did not have information about 

the type of house that was being purchased. We did have some information about income levels. For example, about 59 percent of 

taxpayers had incomes under $50,000 who made use of the tax 

credit. 

We did do a little bit of comparison with a list of states. One 

comparison we looked at was state foreclosure rates. We did find 

a pretty high correlation between states with high foreclosure 

rates—we did this comparison for 2008—for states that had high 

foreclosure rates in 2008, there was a correlation with the take up 

rates for the credit. Beyond that, we have not been able to do any 

analysis. 

Mr. CROWLEY. Does anyone else have a concern—not concern. 

I guess we have a concern or I have a concern that maybe some 

of these homes that were purchased would have been purchased 

because they were in foreclosure. A concern that maybe some of 

this would have happened anyway. That is what I am trying to get 

at. 

I think this overall is a very good program, and quite frankly, I 

would support the extension of the program and maybe even possibly the expansion of the program beyond first-time homebuyers. 

I think as Mr. Higgins has mentioned as well, I think this has 

helped in many ways to spur growth in our economy in many, 

many ways. 

I do have concerns about this being taken advantage of, especially if we were to extend this beyond first-time homebuyers. 

Again, even with the income limits, you could still have abuse of 

purchasing of homes that otherwise would have been sold anyway 

because they had been de-valued so much. 

Does anyone else have that concern or that observation? 

Mr. WHITE. That is one of the fundamental questions about the 

effectiveness of the credit, what fraction of these homes would have 

been purchased anyway, what fraction of these home buyers making use of the credit would have purchased anyway as opposed to 

stimulating completely new purchases. 

I do not have an answer to that question. That is the ultimate 

question about the effectiveness. 

Mr. CROWLEY. Thank you all for your testimony. Thank you, 

Mr. Chairman. 

Chairman LEWIS. Thank you very much. I believe the gentleman from California, Mr. Becerra, has one last question. 

Mr. BECERRA. Thank you, Mr. Chairman. Just a quick question. Any time someone prepares a form, tax form, for the actual 

filer, that preparer has to identify himself or herself on the form, 

I believe. Is that correct? 

Ms. STIFF. They should. 

Mr. BECERRA. Is it possible for the IRS to tell us, and perhaps 

Mr. George, you already know this, if we have a breakdown of the 

number of filings for this tax credit that were prepared by someone 

other than the filer who bought the home? 


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Mr. GEORGE. Actually, that is a good question. I do not have 

that information. 

Mr. BECERRA. Ms. Stiff. 

Ms. STIFF. I do not have it off the top of my head, but that is 

certainly information we can get. 

Mr. BECERRA. Can we get that for the Committee? 

Ms. STIFF. Sure. I think as you know, we are working on a preparer study and hoping to have recommendations by the end of the 

year. I know some of what we have learned here will certainly 

bleed into that. 

Mr. BECERRA. That is precisely the reason for asking. If you 

could share that with us, that would help us as we prepare to take 

on the issue along with the IRS on how to deal with the various 

tax preparers who are out there in this country. 

Mr. GEORGE. If I may, Mr. Becerra, somewhat related issue. I 

do not know whether it is within the jurisdiction of this Committee, 

but if the HUD–1 form which is a document that taxpayers have 

completed, if it had an unique identification number or the use of 

a Social Security number on it, that would assist the IRS greatly 

in terms of matching the types of information that would determine 

whether or not this is a valid claim that the taxpayer is seeking. 

Mr. BECERRA. That is an excellent point. Thank you for that. 

Thank you, Mr. Chairman. 

Chairman LEWIS. Thank you very much. Let me thank the witnesses for their testimony. The Subcommittee appreciates your 

views. I want to thank the members for being here. 

Madam Deputy Commissioner, again, we wish you well and 

much success in your future. 

If there is any other business to come before the Subcommittee. 

[No response.] 

Chairman LEWIS. There being none, the hearing is now adjourned. 

[Whereupon, at 11:34 a.m., the subcommittee recessed.] 

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