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twitterFraud could undermine housing tax credit
As Congress considers extending benefit for first-time buyers, troubling report emerges
STEVE MARCUS / LAS VEGAS SUN file
Home prices in Nevada have fallen by more than half to $127,000 from their 2006 peak.
Friday, Oct. 23, 2009 | 2 a.m.
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- Help may bring another bubble (9-22-2009)
- Editorial: Lending a helping hand (9-1-2009)
- Homebuilders seek a little help from their government (8-29-2009)
- Reid: Congress will extend $8,000 home tax credit (8-5-2009)
- Realtors quietly lobbying to extend homebuyer tax credit (7-24-2009)
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Washington — Nevadans have responded to the government’s offer of up to $8,000 in first-time-homebuyer tax credits with gusto, filing more claims and receiving more in tax breaks per capita than residents of any other state.
Nevadans have claimed $146 million in tax breaks from the credit.
But according to new federal reports released Thursday, the program nationwide is littered with potential fraud, threatening its future.
Claims for the tax credit are being filed by those who may not be first-time buyers, those who haven’t yet bought houses, and those who are under 18, according to an inspector general’s report. More than $500 million in claimed credits are being questioned.
The Internal Revenue Service has opened 115 criminal investigations, has frozen more than 110,000 refunds pending further examination and is stepping up audits of questionable claims.
A tax preparer was sentenced to federal prison this week for filing fraudulent returns — the first in connection with housing tax credit fraud.
The findings come at a crucial time for the popular program. Congress is considering extending the tax credit, which expires Nov. 30, and possibly expanding it, to prop up the housing market and nudge along an economic recovery.
Nevada’s real estate and building professionals, and their colleagues nationally, have urged an extension of the credit, believing it has moved inventory and helped to keep plummeting home prices from falling further.
Even as economists have cautioned that continuing the credit could simply reinflate the bubble, Nevada’s elected officials in Washington largely support its extension, believing the situation in Nevada is so dire that the assistance is needed.
The new findings could cool support for a program that already faces questions in Washington.
This week the Housing and Urban Development secretary, Shaun Donovan, declined to say whether the administration would support the extension because it is still weighing the costs. The Government Accountability Office reports that $10 billion had been spent on 1.4 million credits as of late August.
As the economy hit trouble in 2008, Congress passed a $7,500 tax credit for first-time homebuyers as a no-interest, long-term loan to stimulate the housing market. The credit was expanded under the economic recovery act passed in February to $8,000, not as a loan, but a fully refundable credit.
Economists worry that the tax break is going to those who would have purchased homes anyway, and filling homes by vacating others — as renters become buyers — without benefit to the economy as a whole.
Estimates are that more than three-quarters of the expected 1.5 million taxpayers who will have tapped the program would have bought homes even without the tax credit, putting the price to the government at about $43,000 per homebuyer who would not have bought a house without the credit.
The Government Accountability Office reports that 59 percent of those claiming the credit earned less than $50,000 annually and 84 percent went to those earning less than $75,000.
The Treasury Inspector General for Tax Administration raised red flags early, alerting IRS officials that “key controls were missing” as the IRS began handing out the credit.
Inspector General J. Russell George testified before a House Ways and Means subcommittee hearing Thursday that based on his review of the program:
• More than 19,300 tax returns for 2008 had taxpayers claiming the credit for “a home which had not yet been purchased.”
• Nearly 74,000 claims for the credit, totaling more than $500 million, were submitted by taxpayers who may have previously owned homes — including some IRS employees.
• More than 580 taxpayers younger than 18 years old claimed almost $4 million in credits.
The inspector general’s report said 3,200 claims, totaling $20.8 million, were filed by those with individual taxpayer identification numbers often used by resident immigrants. Some of the immigrants may be here illegally; the law specifically forbids them from receiving the credit.
The Internal Revenue Service testified that it has halted refunds in questionable cases and instituted filters to catch claims being filed by those who are underage or had previously owned homes.
Linda Stiff, the IRS deputy commissioner for services and enforcement, testified that 160 potential fraud schemes have been identified and criminal investigations are under way.
The IRS could not immediately say how widespread the potential fraud was in Nevada.
Given the history of rampant mortgage fraud here, abuse of the program seems likely.
Several of Nevada’s lawmakers in Washington remain committed to extending the tax credit, believing it is playing a key role in stopping the slide of Nevada’s troubled housing market and is vital for the state’s recovery.
“This is something we want to get done to help strengthen Nevada’s economy,” said Jon Summers, a spokesman for Senate Majority Leader Harry Reid.
The housing market in Southern Nevada is in considerable flux, with lots of sales activity, but also a continuing wave of foreclosures.
Analysts have divergent views about the state of the Las Vegas-area market, where the median home price has fallen by more than half to $127,000 from its 2006 peak.
With unemployment in Clark County reaching nearly 14 percent, thousands of residents here are unable to make their mortgage payments. September foreclosures were up 5 percent from August.
Michael Helmar, the Nevada analyst for Moody’s Economy.com, said there are simply too many foreclosures flooding the market, which will push prices lower.
Moody’s predicts home prices will decline another 24 percent from mid-2009 to mid-2010.
But one local analyst, Larry Murphy of SalesTraq, disagrees with the dour report and is saying for the first time since the crisis began that he thinks prices have hit bottom — though he says there won’t be upward movement for a year.
“The worst is behind us,” Murphy said. “We can make a strong case that says the Las Vegas housing market has overcorrected.”
Murphy calls the housing tax credit a helpful stimulus but not a long-term solution.
“It’s like a can of Red Bull,” Murphy said.
Democratic Rep. Dina Titus says the tax credit has played a significant role in helping to stabilize housing prices and move homes off the market in her Southern Nevada district, which is among the nation’s hardest hit by the foreclosure crisis.
“Extending this tax credit is an important step in addressing Nevada’s foreclosure crisis and turning the housing market around,” Titus said. The congresswoman is signing on to a bill introduced Thursday by Rep. John Lewis, D-Ga., chairman of the House subcommittee investigating the issue, to tighten oversight.
Lewis’ bill would require those claiming the credit to attach verification of their home purchase with their tax returns, set a minimum age of 18 to claim the credit and give the IRS greater authority to determine eligibility.
“I continue to support extending the tax credit and believe we must increase oversight in order to root out any fraud or abuse that is occurring,” Titus said.
“There is no question that we must do a better job stopping fraud and prosecuting those who break the law,” said David Cherry, spokesman for Democratic Rep. Shelley Berkley. “But the congresswoman is confident that these needed steps can be taken at the same time as Congress moves to extend this tax credit that she so strongly supports.”
Coolican reported from Las Vegas.
Discussion: 16 comments so far…
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don't forget people all these handouts, tax credits, etc will cost you dear in the long run, they have to be recouped somehow... and it will be the average person in the street who will foot the bill
what is it running at now 14 trillion debt
markp you're wrong. We'll just print up more money.... that's the Obama way.
Maybe they'll give Obama an award for the largest deficit spending in history?
For the first time in his life he'll have actually earned something.
Now these cookie cutter homes are getting close to a ballpark figure of what they are actually worth. Don't forget they sit on a postage stamp size lot, are poorly constructed with grade three materials, and are energy deficient in this one of the hottest environments in the country, and still need to com down another sixty thousand or so, seeing that Vegas has nothing to offer in the way of decent income, or public transportation...
And when it is all said and done, it would be the Obama supporters who claimed a tax credit and they'll get away with it. They'll scream racism or blame something or somebody to justify the credit and Obama and clan will force us to pay for this.
Wake up America; if you can't see what these lunatic liberals are doing to America then you're part of the problem, not the solution.
America can't afford the Democrats and what they've been doing to us for years and the present speed on which they're desecrating America, it only years away before we are known as America the cesspool. We're heading down a road where our credit worthiness means nothing and we'll be ripe for the picking; when this occurs, we'll be so weak we can't afford to defend our lands. It's only a matter of time if we allow these lunatics to continue to erode our lands, morals and values, and who seek nothing more than too destroy America from within.
The IRS doesn't require any proof anyone even bought a home to claim the credit. The credit is not even against taxes paid or owed, if you don't owe any, they send you a check.
This was written to promote fraud. Buy a 150,000 dollar home with 3.5% down (about 5,000) with FHA and get a check for $3,000 cash from our taxes. Here we go again and you get the bill.
It looks like the ACORN counselors have been plying their trade again.
its2hot, the first-time homebuyers tax credit originated during the Bush administration.
http://realestatehomesutah.com/utah_real...
What do you expect when the people designing the program are CROOKS & SCAMMERS?
Like I say, Don't buy these cheap peice of crap homes! they are not worth anything. If a two billion dollar skyscraper fountainbleau tower is right now worth zero, how can any of these homes have any worth whatsoever!!!
Fogcity, like I said, when it is all said and done, it would be the Obama supporters who claimed a tax credit and they'll get away with it. They'll scream racism or blame something or somebody to justify the credit and Obama and clan will force us to pay for this.
its2hot, you have no basis for saying that the benefit of the tax credit was for Obama supporters. Please provide proof. ITs too bad you constantly make assertions with underlying facts to support them. It will always be categorized asd hot air until you can provide level-headed observations for a change.
Kill this tax credit. It never fails that when we try to help people you have scum coming out of the woodwork to take advantage of the system. I am tired of my money paying for this.
There is no such thing as "my tax dollars" or taxpayers' money.
They took that! Once you pay your taxes it is the governments money.
Great Story.
"...Nevadans have claimed in tax breaks from the credit...."
"...Claims for the tax credit are being filed by those who may not be first-time buyers, those who haven't yet bought houses, and those who are under 18, according to an inspector general's report. More than $500 million in claimed credits are being questioned...."
Here's my rewrite:
"...Claims for the tax credit are being filed by those in Nevada who own at least 3 debt-laden single family dwellings used as rentals, still own 2 over-priced negative net-worth unrented condos, behind on at least 1 dilapadated Las Vegas townhome, have gambling debts exceeding their gross income, have been out of work for at least a year, use their unemployment debit card for online casino gambling, those under 18, children not even born yet, the legally dead, all illegal aliens, shady-broker types who inflate the market prices, shady bank executives who help inflate market prices, elected government officials collecting shady contributions, shady contributors to elected government officials, welfare cases, bankruptcy cases, meth heads, the usual Nevada tax cheats, and all well-known casino slot and video poker cheats out of jail, according to an inspector general's detailed report written about this unabated phony housing flim-flam universally known to be coming eventually, anyway. However, that didn't stop the usual elected Politicos from claiming the "credit" for passing this open mosh pit of abuse, according to footnotes buried deep in the inspector general's report. More than $500 million in claimed credits are now being questioned according to federal investigators, of which all $146 million federal tax credits claimed by Nevadans will be judged as only just that, a "claim"...."
(And the Feds ACTUALLY allowed Nevadans to file for "credit"..? Really...?)
__
Dear SUN,
Please be welcome to make use of my editorial and reporting skills, anytime.
Yours truly.
A TOTALLY unmanageable program, totally...There are still too many scammers out there still pulling people in with this housing crisis.It's a disgrace what people are doing on the backs of all tax payers.
Many of the programs out there were needed to stabilize the banking system and the economy. Without that life support everything would have been so much worse. Possibly catastrophic. Many economists and politicians who were against life support now agree it was necessary.
The patient is now stabilized. Time to cut off the feeding tubes and get him out of bed. Wall Street and the bankers are back to stealing at will and getting bonuses for it. The in over their heads consumers are looking for a free payday so they can get back to living above their means. Time to take away the crutches and let the pain begin. Far too many people have not learned their lesson and it's about time they did.